The 2006 Constitutional Rules The articles – plus any resolutions and agreements affecting the company constitution such as those amending the articles or otherwise binding all members - are the “company’s constitution” – section 17 CA 2006. The articles have to be in a single document and divided into numbered paragraphs and must be registered unless model articles are used – section 18. The Models will be prescribed by the DTI under power in section 19 and they apply on default if no articles are registered or the registered articles do not exclude or modify the model articles applicable to that company – section 20. This is similar to the Table A system pre-2006 except that more models are to be drafted including one for “owner managed” companies. See
For the purpose of the module this year we will refer to the 1985 version of Table A. Amendment of the Articles is by special resolution but, as almost everything that would currently be in the memorandum will be in the articles under the 2006 regime, there is greater clarity and uniformity about this. The exceptions to the simple amendment of articles by 75% majority, is in the case of a charity in which case the permission of the Charities Commission is needed too – section 21. This is the same as now.
The 2006 Act allows for “provision for entrenchment” so as to specify in the articles – either on registration or later by unanimous decision of all the members – that certain parts of the articles can be amended or repealed only if certain conditions are met but this will never prevent amendment by agreement of all the company’s members – section 22.
This might be used to prevent change by less than a very high percentage of members to protect a particular group although another way of achieving this is to have different classes of share and then a special majority of members holding that class of share will be needed for change. If the company is structured as a co-operative or for some other special purpose or function, this power may be useful.
However, a company set up to provide benefit to the community can be registered as a Community Interest Company (CIC) in which case the CIC regulator - http://www.cicregulator.gov.uk/ - can prevent change. If a company meets the definition of a charity it can register with the Charity Commission who can then prevent change - http://www.charity-commission.gov.uk/ . So the use made of the general Companies Act 2006 entrenchment power may be more limited. The entrenchment and any later change in it must be registered with the Registrar of Companies – sections 23 and 24.
Under previous company law it was possible to entrench provisions so that they could not even be changed by unanimous agreement of the members using section 17 of the 1985 Act. This will no longer be possible. Section 28 of the 2006 Act provides that the Memoranda of Association of existing companies (where entrenchment in existing companies is likely to be found) are to be regarded as part of their articles except so far as they contain information also to be found in the “post-2006” memorandum of association. This clause also applies the new entrenchment rules to existing companies.