Every UK company must have Articles of Association: the rulebook that governs how it is run, how decisions are made and what happens to its shares. Many companies start life on the standard Model Articles because they are quick and free. That can work for a sole owner, but once a company has two or more shareholders, or expects to bring in investors or employees, off-the-shelf Articles rarely reflect what the owners have actually agreed. This guide explains where the Model Articles fall short and which provisions are worth tailoring.
In brief
- Articles are a public document filed at Companies House, and they bind the company and every shareholder.
- The Model Articles give every share equal rights and say nothing about pre-emption on transfer, leavers, drag along or tag along.
- Tailored Articles can create share classes, protect minority shareholders and control who can become a shareholder.
- Changing the Articles later normally needs a special resolution, which means at least 75% of the votes.
- Articles work best alongside a private shareholders’ agreement.
On this page
- What Articles of Association do
- Where the Model Articles fall short
- Share classes, voting and dividends
- Directors and decision-making
- Controlling who owns shares
- Exits: drag along, tag along and leavers
- Disputes and deadlock
- Articles or a shareholders’ agreement?
- Changing your Articles
- Frequently asked questions
What Articles of Association do
Articles of Association are a company’s constitution. Under section 33 of the Companies Act 2006 they take effect as a contract between the company and each shareholder, and between the shareholders themselves, so they matter as much to the owners as they do to the directors. They are filed at Companies House when the company is incorporated, and anyone can read them on the public register.
If a company is incorporated without its own Articles, the Model Articles in the Companies (Model Articles) Regulations 2008 apply automatically. They are a sensible starting point, but they were written to suit any company, not yours.
Where the Model Articles fall short
For a company with several owners, the gaps in the Model Articles tend to show up at the worst possible moment: when someone wants to leave, when a sale is on the table or when the owners fall out. The Model Articles for private companies:
- treat every share the same, with one vote per share on a poll or written resolution and equal dividends
- contain no pre-emption rights on a transfer, so the other shareholders have no automatic right to buy first
- say nothing about what happens to shares when a shareholder leaves the business, dies or is sequestrated
- include no drag along or tag along rights for a sale of the company
- give no individual shareholder the right to appoint a director
- set out no process for breaking deadlock between equal shareholders
The only real control over who becomes a shareholder is that the directors may refuse to register a transfer. That is a blunt tool, and where the directors and the shareholders are the same people, it rarely helps when they disagree.
Share classes, voting and dividends
Tailored Articles can create different classes of share, such as A ordinary and B ordinary shares, and set out the rights attached to each. This is how companies keep control with the founders while rewarding investors or staff, or pay dividends to some shareholders without paying the same to everyone. Common variations include:
- Voting and non-voting shares, often used when employees are given a stake in the business
- Separate dividend rights for each class, so the directors can declare different dividends on different classes
- Enhanced voting rights on particular matters, such as a sale of the company or the issue of new shares
- Different rights to capital on a sale or winding up
Share classes need careful drafting. Rights attached to a class can usually only be varied with the consent of that class, and badly drafted classes can cause tax problems as well as legal ones. Our guide to paying dividends covers the rules on declaring them, and if you are setting up a new company, our business formation and structuring solicitors can build the right share structure in from day one.
Directors and decision-making
Directors run the company day to day, while shareholders make certain key decisions by resolution, either at a general meeting or by written resolution. Most decisions need an ordinary resolution, which is a simple majority. Changing the Articles, changing the company name or disapplying pre-emption rights needs a special resolution of at least 75%.
Tailored Articles can adapt this to suit your company. They can give a shareholder the right to appoint and remove its own director, which is common where an investor or one branch of a family holds a significant stake. They can also list reserved matters that need a particular shareholder’s consent or a higher majority, such as borrowing above a set limit, issuing new shares or selling the business.
Some rights are fixed by statute whatever the Articles say. For example, shareholders have a statutory right under section 168 of the Companies Act 2006 to remove a director by ordinary resolution at a general meeting, and that cannot be done by written resolution.
Controlling who owns shares
Most owner-managed companies want a say in who their co-owners are. Two types of pre-emption right help with this.
- Pre-emption on allotment. When a company issues new shares for cash, the Companies Act 2006 requires them to be offered first to existing shareholders in proportion to their holdings. A private company can exclude or disapply this right, and many do so without realising, so check that your Articles protect existing shareholders from dilution in the way you intend.
- Pre-emption on transfer. There is no statutory right of first refusal when a shareholder sells. If you want a selling shareholder to offer their shares to the others, or to the company, before selling to an outsider, the Articles or a shareholders’ agreement must say so, and must also say how the price is set.
Articles can also allow permitted transfers that skip the pre-emption process, such as transfers to family members or family trusts. They can require shares to be offered for sale when set events happen, known as compulsory transfer events. Common examples are a shareholder leaving employment, sequestration (bankruptcy), a corporate shareholder going into liquidation, and death, where the shares would otherwise pass to the shareholder’s executor.
Exits: drag along, tag along and leavers
Shareholders come and go over the life of a company. Clear exit provisions protect both the person leaving and the people who remain.
| Provision | What it does |
|---|---|
| Drag along | Lets a majority (for example, holders of 75% of the shares) who agree to sell the whole company require the minority to sell on the same terms, so a buyer can acquire 100%. |
| Tag along | Protects minority shareholders by giving them the right to sell their shares on the same terms if a majority holder sells control. |
| Good leaver | Sets the price for a departing shareholder who leaves for an accepted reason, such as retirement or ill health. Usually market value. |
| Bad leaver | Sets a lower price, often the lower of market value and what they paid, for someone who is dismissed for misconduct or joins a competitor. |
Without leaver provisions, a shareholder who resigns to join a rival can usually keep their shares, along with their vote and their share of future dividends and sale proceeds. Planning for these events is a key part of business succession planning and makes a future sale of the business or management buyout far smoother. If a sale is likely, our article on asset sales and share sales explains the main routes.
Disputes and deadlock
Disagreements between shareholders are common, particularly in family companies and 50/50 businesses. Minority shareholders can feel shut out of decisions, and equal shareholders can find the company unable to act at all.
Articles can set out in advance how deadlock will be broken, for example by referring the issue to mediation, giving the chair a casting vote at board meetings, or using a buy-sell mechanism that lets one shareholder buy the other out. Agreed rules cost far less than a dispute after the event. Where things have already broken down, read our guide to how shareholder disputes are resolved in Scotland or speak to our shareholder dispute solicitors.
Articles or a shareholders’ agreement?
Articles and a shareholders’ agreement work best together. The main differences are:
| Articles of Association | Shareholders’ agreement | |
|---|---|---|
| Public or private? | Public, filed at Companies House | Private between the parties |
| Who is bound? | The company and all current and future shareholders | Only those who sign it, so new shareholders sign a deed of adherence |
| How is it changed? | Special resolution (75%) | Usually unanimous agreement of the parties |
| Best used for | Share rights, transfers, leaver, drag along and tag along provisions | Reserved matters, restrictive covenants, funding and confidential commercial terms |
As a rule of thumb, anything that must bind future shareholders automatically belongs in the Articles, while confidential or personal commitments belong in the agreement. The two documents must be consistent, and the agreement should say which prevails if they ever conflict.
Changing your Articles
Articles can be amended or replaced at any time by special resolution under section 21 of the Companies Act 2006. That means at least 75% of the votes cast at a general meeting, or 75% of the total voting rights of eligible members on a written resolution. A copy of the amended Articles must be filed at Companies House within 15 days.
The 75% threshold cuts both ways. A shareholder with more than 25% can block changes, while a majority with 75% or more can change the rules unless particular provisions are entrenched. That is why it pays to get the Articles right before new shareholders join, rather than trying to fix them later. Our guide to choosing a legal structure for a new business covers the decisions that come before this.
Frequently asked questions
Does every company need Articles of Association?
Yes. Every company limited by shares must have Articles. If you do not register your own on incorporation, the Model Articles apply automatically.
Can different shareholders receive different dividends?
Only if they hold different classes of share with separate dividend rights. With a single class of ordinary shares, dividends must be paid in proportion to each shareholding.
Are Articles of Association confidential?
No. Articles are filed at Companies House and anyone can view them. Commercially sensitive terms are usually better placed in a shareholders’ agreement, which stays private.
What happens to a shareholder’s shares when they die?
Unless the Articles say otherwise, the shares pass to the shareholder’s executor and then to whoever inherits them. Tailored Articles can require the shares to be offered to the other shareholders instead, and the purchase is often funded by life insurance.
Can we keep the Model Articles and just add some provisions?
Yes. Many companies adopt the Model Articles with bespoke additions rather than a completely new document. What matters is that the additions properly cover share classes, transfers and exits and do not conflict with the rest of the Articles.
Need your Articles reviewed?
Our business solicitors draft and review Articles of Association and shareholders’ agreements for companies across Scotland, from two founders setting up to family businesses bringing in the next generation. Call 0141 471 9166 or book a free consultation.
Related services and guides
This guide reflects the Companies Act 2006 and Scots law as at October 2026. It is general information rather than legal advice on your company, so please speak to us before relying on it.