When are bespoke articles beneficial?

  • Articles of association bind the start-up company itself (including the directors) and all the shareholders (current and future).
  • The articles can be tailored to suit the specific objectives of the company.
  • Provides for rights pertaining to different classes of shares.
  • Can be drafted to give greater protection to shareholders and often underpin the rights and responsibilities set out in the founders' agreement.

Documentation

  • Articles of association.
  • Board minutes.
  • Shareholder resolutions.

How can we help?

  • We can draft bespoke articles of association which include:
    • vesting provisions;
    • drag along rights; and
    • tag along rights.           
  • Vesting provisions work so that the company can get back some of the equity initially granted to a founder/employee if that person does not fulfil his or her expected contribution to the company.
  • Drag along rights provide that, if the majority shareholders sell their stake, the minority shareholders can be forced to join the deal on the same conditions at the same price. This protects the majority shareholders, and any subsequent purchaser who will invariably want to acquire 100% of the company.
  • Tag along rights (also known as piggyback rights) provide that, if majority shareholders sell their stake, the minority holders have the right to join the deal and sell their stake on the same conditions and at the same price which apply to the majority shareholder(s). This right protects minority shareholder.

Typical legal fees: £1,000- £1,500