Since 2009, new companies can be incorporated by adopting either bespoke Articles or the "Model Articles" which are the standard style provided by the Companies Act 2006. Often in the haste of setting up their new company, in order to get their business going, many founders chose the latter.
Whilst the Model Articles are perfectly sufficient for many of the small businesses for which they were intended, it is vital for them to be reviewed from time to time to ensure that they continue to work for your company as it grows; that they are not overly restrictive or conversely, too lax. The Articles can be changed, but this requires the consent of the shareholders, and in practice this often cannot be given instantly. So, be aware that certain provisions in your Model Articles may pose an obstacle to the efficient running of the business.
For example, the Model Articles say that the quorum for board meetings is two directors. A very plausible and problematic situation would be if a company has just two directors, one of whom wishes to block or delay a proposal. He or she may simply just not turn up to the board meeting called to discuss the proposal. There is nothing that can be done quickly to resolve this, and it could quite possibly hinder the company's development, or even be catastrophically detrimental.
Also, it isn't just the Model Articles which ought to be regularly reviewed; bespoke Articles, which may have worked for a company in its infancy, may not work as it grows and changes.
A good example would be a charity, incorporated as a company limited by Guarantee, which, at its inception, adopted bespoke Articles. The number of Members isn't restricted by the Articles, and no provision has been made for those Members to pay a subscription. Over time, however, the charity grows and finds it has more than 500 Members. Whilst it's positive that the charity has a significant number of Members who have an interest in its work, they have not been required by the Articles to pay a subscription. This poses a huge administrative burden with no contribution to the cost.
So whilst "one size fits all" and "not for Christmas, but for life"…. may be true of some dubious lycra clothing and of our four-legged friends, it definitely does not apply to your Articles of Association.
If you would like a review of your company's Articles, please contact Isla MacLennan.