Shareholders` agreements and articles of association are two documents that govern the internal workings of a company. While the articles of association are the legal documents that set out the rules for running the company, the shareholders` agreement is a private contract between the company`s shareholders that regulates their rights and obligations.
In the UK, the Companies Act 2006 sets out the legal requirements for articles of association. However, shareholders are free to enter into a shareholders` agreement that can override or supplement the articles of association to the extent that they are not inconsistent with the law.
So, can a shareholders` agreement override articles UK? The short answer is yes, but it depends on the specific provisions of the shareholders` agreement and the articles of association.
For example, if the articles of association specify that directors can only be removed by a two-thirds majority of shareholders, but the shareholders` agreement provides for a simple majority vote, the shareholders` agreement will override the articles of association. Similarly, if the articles of association require that dividends can only be paid out of profits, but the shareholders` agreement allows for dividends to be paid out of reserves, the shareholders` agreement will prevail.
However, if the shareholders` agreement contains provisions that are inconsistent with the law or the articles of association, those provisions will be unenforceable. For example, if the shareholders` agreement allows for discriminatory treatment of certain shareholders or contains clauses that are contrary to the Companies Act 2006, those provisions will be void.
It`s worth noting that the articles of association will always have precedence over the shareholders` agreement in cases where they conflict. This is because the articles of association are the legal documents that govern the company, and they have been approved by the shareholders and registered with Companies House.
In conclusion, a shareholders` agreement can override articles in the UK to the extent that they are not inconsistent with the law or the articles of association. However, the articles of association will always have precedence in cases where there is a conflict between the two documents. As such, it`s important for companies to ensure that their shareholders` agreement is consistent with the law and the articles of association to avoid any legal disputes down the line.