Currently a company's Memorandum sets out constitutional information as well as the objects of the company. Its Articles are an agreement among its members as to how the company should be run.
Your company was incorporated under the Companies Act 1985 that prescribed a set of model articles known as Table A, which you may have adopted (to some extent) as your articles. Under the 2006 Act, the Secretary of State has the power to prescribe model articles for different types of companies.
New model articles are likely to be less complex than the existing Table A because the underlying rationale of the new legislation simplifies procedures for private companies. As a result of this deregulation, provisions within a company's articles dealing with the holding of AGMs, and the appointment of a company secretary may be inappropriate going forward. Companies may also wish to reflect shortened notice periods for special resolutions and an increased ability to use electronic means to communicate with shareholders. For existing companies there will be no enforced change, although many companies are likely to review their articles so that their provisions reflect up to date practice. Others may adopt the new model Articles in place of existing ones.
Under the 1985 Act, a company had to set out its objects in its memorandum. Under the 2006 Act, a company's memorandum will be a simplified document and restrictions (if any) on its objects will be contained in its articles. Existing companies may want to review restrictions to ensure that, if appropriate, these are set out in its articles. Alternatively, if having unrestricted objects is desirable, previous restrictions can be tidied up by amending by special resolution.
In light of this, before the full provisions of the 2006 Act come into effect, companies have a good opportunity to do some housekeeping in relation to their Memoranda and Articles to ensure that they reflect current practice and take full advantage of de-regulation for private companies.
George Boyle is a partner specialising in corporate finance with the commercial law firm Shepherd and Wedderburn
0141 566 8515