Articles of Association
Articles of association are the guts of any business carried on through a limited company. In small businesses of one or two close owners, articles of association are often seen as inconsequential and left forever unread. In larger businesses, with multiple owners having stakes of different sizes and kinds expecting of different powers and rewards, the articles of association are extremely important documents requiring considerable skill in the drafting by lawyers and in their interpretation by clients and lawyers alike!
Shareholders must consider in relation to other shareholders both as devil and as advocate, what are my rights, if any:
- to hold office as a director or to participate, in the choosing of one,
- to receive notice of meeting, attend and vote
- to receive dividends or capital on a winding up
- to receive a fair part of sale proceeds on a sale of the company (exit)
- to participate in issues of further shares
- to transfer shares during employment, lifetime and after death
- to retain or forfeit shares following cessation of employment or on death
- to benefit after death.
Business angels, institutional and other investors will pay close attention to the articles of association to ensure the complex system of rights and forfeiture are appropriate to their investment.
If you require complex articles of association to be drawn up then Altmore Business Law is the firm to come to with our years of experience focussing on this category of documentation. Likewise, if you are a manager in a buy-out faced with complex articles of association you must engage us to ensure you understand all the ramifications. Your shares are your financial future – the articles govern what happens to them. The devil is in the detail. The detail is sometime in adjacent documents too eg the investment agreement.
Here are some of the terms that may affect you: founder shares, manager shares, A shares, B shares, C shares, D shares, non-voting shares, weighted voting shares, convertible shares, preference shares, redeemable shares, compulsory transfer, restricted shares, called shares, deemed transfer, drag along, tag along, fair value, employee trust, good leaver, bad leaver, very bad leaver, investor, investor group, loan note, proportionate entitlement, warehouse, preference dividend, cumulative dividend, pre-emption, ratchet, sweet equity and observer.
Typically, complex articles of association arise with:
- Larger corporate joint ventures
- Buy outs
- Larger family companies
- Acquisition target companies
- Angel investments
- Larger family concerns
In addition to or instead of complex articles of associations, the larger family concern during normal life of following a demerger might consider the family charter. Family charters (sometimes called family constitutions or protocols) are statements of intent or agreements entered into by the family members. in relation to a family business. Normally they are either not legally binding at all or only partly legally binding.
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Not only do we offer exceptional service, but also highly competitive fees for our services. Our specialist team members understand and appreciate your concerns and we pride ourselves on providing a comprehensive service of the highest quality, without the price tag of City firms. For an assessment of how our team can help you with your business requirements, contact us today by calling 0845 094 9000 or email firstname.lastname@example.org and we will get back to you right away.