Is there a need for shareholder protection?
If shareholders are in any doubt as to the answer to this question, then a review of the Company’s Articles of Association will highlight the need for protection to be taken out.
Every company will have a Memorandum and Articles of Association. The Memorandum is an outward looking document stating the Company name, registered office and what it will do. In contrast, the Articles of Association set out the rules for the running of the Company’s internal affairs. They will therefore deal with such issues as transferring and selling shares.
The Companies Act 2006 contains provision for the Secretary of State to prescribe model articles which the company may adopt in whole or part. These model articles are now set out in The Companies (Model Articles) Regulations 2008 but only apply to companies formed on or after 1 October 2009.
For companies formed before this the previous Table A articles set out in the Companies Act 1985 may apply.
How is shareholder protection written?
There are three main methods:
- Own life plan under Business Trust
- Life of another plans
- Company owned plan to effect buy back of shares.