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Summary Business Law and Practice - Model Articles
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Business Law and Practice - Model Articles
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Model Articles (See also Amending Articles)(WS3 and 4)
MODEL ARTICLE 3: DIRECTORS’ GENERAL AUTHORITY
The directors are responsible for the management of the company’s business, for which
purpose they may exercise all the powers of the company.
MODEL ARTICLE 7: DIRECTORS TO TAKE DECISION COLLECTIVELY
The general rule about decision-making by directors is that any decision of the directors
must be either a majority decision at a meeting or a decision taken in accordance with Article
8 (unanimous decision).
MODEL ARTICLE 9: CALLING A DIRECTORS’ MEETING
Any director may call a directors’ meeting by giving notice of the meeting to the directors or
by authorising the company (if any) to give such notice (it must indicate the proposed date
and time, where it is to take place and if it is anticipated that directors participating in the
meeting will not be in the same place, how it is proposed that they should communicate with
each other during the meeting). It must be given to each director but need not be in writing.
MODEL ARTICLE 11: QUORUM FOR DIRECTORS’ MEETING
At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on,
except a proposal to call another meeting. The quorum for directors’ meetings must never be
less than two.
MODEL ARTICLE 14: CONFLICTS OF INTEREST
If a proposed decision of the directors is concerned with an actual or proposed transaction or
arrangement with the company in which a director is interested, that director is not to be
counted as participating in the decision-making process for quorum or voting purposes.
MODEL ARTICLE 15: RECORDS OF DECISIONS TO BE KEPT
The directors must ensure that the company keeps a record, in writing, for at least 10 years
from the date of the decision recorded, of every unanimous or majority decision taken by the
directors.
MODEL ARTICLE 17: METHODS OF APPOINTING DIRECTORS
Any person who is willing to act as a director, and is permitted by law to do so, may be
appointed to be a director by (a) ordinary resolution or (b) by a decision of the directors.
MODEL ARTICLE 19: DIRECTORS’ REMUNERATION
Directors may undertake any services for the company that the directors decide and are
entitled to such remuneration as the directors determine – (a) for their services to the
company as directors, and (b) for any other service which they undertake for the company. It
may take any form and include any arrangements in connection with the payment of a
pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect
of that director.
MODEL ARTICLE 26(5): SHARE TRANSFERS
The directors may refuse to register the transfer of a share, and if they do so, the instrument
of transfer must be returned to the transferee with the notice of refusal unless they suspect
that the proposed transfer may be fraudulent.
, Unit 3 - Preparatory Tasks – Key Provisions of the Model Articles
In this task, you will review some of the key provisions of the Model Articles for Private
Companies, in order to become familiar with the types of matter with which they deal and their
relationship with the provisions of the Companies Act 2006.
Locate the Model Articles for Private Companies in your Business and Company Legislation
Handbook and briefly review their overall structure by reference to the parts, sub-headings and
article titles. You were asked to read specific articles for your preparation and you will need to
have completed that reading to answer the questions below.
Now consider the following information and answer the questions which follow. Some of the
questions relate to the Model Articles generally and some relate to Auragyn Limited (“Auragyn”), a
private limited company which runs a sports and athletics business. The shareholders of Auragyn,
including their respective shareholdings, and whether they are also directors, are set out in
Document A. Auragyn has no other directors than those listed there.
The articles of Auragyn are set out in Document B below, and, as is common, incorporate
provisions of the Model Articles for Private Companies.
Client is Auragyn Ltd – Private Company
Schedule 1, Companies (Model Articles) Regulations 2008 – Model articles for
private companies limited by shares.
Model Articles are statutory default articles – some companies will just to adopt most
if not all of the Model Articles and include some articles.
Questions
1. What is the purpose of Model Article 1, and how does it work?
Model Article 1 is defined terms provision. One of the defined terms is ordinary
resolution = “ordinary resolution has the meaning given in section 282 of the
Companies Act 2006”. Section 282 of the Companies Act 2006 = ordinary
resolution is a resolution of the shareholders and resolution is passed by simple
majority.
Example – Model Article 17 = methods of appointing directors
(1) Any person who is willing to act as a director, and is permitted
by law to do so, may be appointed to be a director —
(a) by ordinary resolution, or
(b) by a decision of the directors
Having definitions in the articles, create clarity, certainty and consistency.
2. Describe the circumstances in which the shareholders of Auragyn would benefit from
Model Article 2.
Model 2 is liability of members (shareholders). MA2 states that the liability of the
members is limited to the amount, if any, unpaid on the shares held by them.
From the facts, all the shares have been issued fully paid, so Auragyns
shareholders would have no further payment to make to the company.
Note if the company were to go insolvent, then the shareholders would lose their
investment.
3. How are the provisions of sections 3(1) and 17 of the Companies Act 2006
relevant to Model Article 2?
Relevant provisions:
Section 3(1) CA 2006 - A company is a “limited company” if the liability of its
members is limited by its constitution (articles). It may be limited by shares or
limited by guarantee.
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