articles of association of a private limited company constitute mandatory
documentation, but we rarely think about its existence or contents on a daily
basis. And yet, it is one of the most important documents of a private limited
company, providing information about the management of the company, its shares,
financial year, and much more.
articles of association of a private limited company usually come up in
situations where a change is desired in the commercial register. You may find,
unexpectedly, that implementing the desired change is impossible without first
amending the articles of association. For example, you may need to amend the
articles of association when changing the address of the private limited
company, if the current articles of association state the exact address of the
company (without specifying the local government) or if the private limited
company will have its registered office in another local government. An
amendment of the articles of association may also be considered if you want to
increase the share capital by means of a premium, but the current articles of
association do not allow for a premium, or to create other reserves, but the
articles of association do not provide for the creation of other reserves.
a situation where the articles of association of a private limited company have
not been amended for many years, they may also need to be amended or revised to
bring them up-to-date with legislation. For example, subsection 169 (2) of the
current Commercial Code stipulates that each one cent of a share shall grant
one vote unless the articles of association prescribe otherwise. Under the
previous rules, each one euro of a share granted one vote. If the articles of
association are missing this information, you may therefore end up with an
incorrect number of votes based on the minutes of the shareholders’ meeting or
a resolution. Subsection 149 (6) of the current Commercial Code also allows for
the waiver of the notarised form of transfer of shares in a private limited
company to be included in the articles of association. However, the latter only
applies if all the shareholders of the private limited company are in favour of
such an amendment of the articles of association and the share capital of the
company is at least 10 000 euros and it is fully paid.
can also happen that you only intend to amend a particular part of the articles
of association, but upon reviewing the new version of the articles of
association, the registrar discovers an error in another part of the articles
of association which was overlooked in previous years.
shareholders’ agreement may be in force in parallel with the articles of
association. Unlike the shareholders’ agreement, the articles of association
are a mandatory document that anyone can see and retrieve and they apply to all
shareholders. A shareholders’ agreement, meanwhile, is a voluntary contract
under the law of obligations which is not public and does not automatically
apply to new shareholders. Even though a shareholders’ agreement allows for a
more detailed regulation of the rights and obligations between the shareholders
and the objectives of the private limited company and it can even be used to
agree on, for example, contractual penalties, it cannot be used to revoke a
shareholders’ resolution. According to subsection 178 (1) of the Commercial
Code, based on an action filed against a private limited company, a court may,
however, revoke a resolution of shareholders which is in conflict with the law
or the articles of association.
This means it is a good idea to review the articles of association of a private limited company in their entirety every now and again, and to amend the articles of association as needed in light of the future plans and needs of the company, to prevent the need for repeated amendments.
If you require further consultation and help in reviewing and amending your articles of association, you can always count on Leinonen’s legal advisers for assistance.
Author: Helen Kaur
Position: Senior Legal Advisor
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