Articles of Association (UK)

Also called: UK Articles, Articles, Articles of Association

TL;DR

UK company's constitutional document at Companies House setting share rights, transfer restrictions, board powers, drag/tag and decision thresholds.

In the UK, the Articles of Association are the binding constitutional document for the company, equivalent to a US Certificate of Incorporation plus stockholders' agreement combined. They set out the share classes and rights (preference, ordinary, growth shares), pre-emption rules on new issues and transfers, drag-along and tag-along rights, board composition, and decision-making thresholds requiring investor consent.

At every priced round, the Articles are amended and a new version is filed at Companies House. Investors negotiate hard on which 'reserved matters' require their consent, the size and weighting of any anti-dilution protection, and the exact mechanics of drag-along (typically 50%+ of preference holders consenting). Because the Articles are public, sensitive economic terms (like the size of a liquidation preference multiple) sit there for any future investor or competitor to read.

Worked example

A UK Series A's Articles are restated to introduce a single class of Series A preference shares with a 1× non-participating liquidation preference, weighted-average anti-dilution, drag-along triggered at 50% of preference plus 50% of ordinary, and 14 reserved matters requiring Series A consent, filed at Companies House on closing.

Common pitfalls

•Adopting the unmodified UK 'model articles' for a venture round, they lack drag, tag, anti-dilution, and reserved matters and will be replaced anyway at the term sheet stage.
•Letting the Articles diverge from the shareholders' agreement so that the two contradict each other on key questions.
•Filing materially negotiated terms (large liquidation preferences) in the public Articles that you'd rather have kept private.

When this shows up in a pitch deck

Not in the deck, but referenced in the term sheet's 'definitive documents' section and surfaced in due diligence.

Related terms

Term Sheet

A non-binding document outlining the principal terms of a proposed financing, used to align investor and founder before legal documents are drafted.

Drag-Along Rights

A provision allowing majority shareholders to force minority shareholders to participate in an approved sale of the company on the same terms.

Tag-Along Rights

The right of minority shareholders to join a sale by majority shareholders on the same terms, preventing 'cherry-picking' liquidity.

Anti-Dilution (Weighted Average)

A standard anti-dilution provision that adjusts a prior preferred holder's conversion price using a formula weighted by the size of the down round.

Liquidation Preference

The right of preferred shareholders to be paid a defined amount before common shareholders receive any proceeds in a liquidation event.

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