Articles of Association

The articles of association contain the standing rules of a company: what it is called, where it is registered, what shares it has and how it takes decisions. Later decisions of the board and the shareholders are measured against them. National law decides what happens to a decision that conflicts with them.

The usual contents fall into three groups. One describes the company itself, with its name, registered office, purpose and share capital. One describes the shares: the classes, the rights attached to each class and any limits on transferring them. One describes the company's bodies, meaning how directors are appointed and removed, what they may decide alone and how shareholders vote. National company law sets the minimum content and fills the gaps where the articles are silent.

The name differs by country. Statutes, bylaws and constitution are all in use, and some legal systems split the content between two documents. EU texts use neutral wording. The EU Anti-Money Laundering Regulation lists the "instrument of constitution, and the statutes if they are contained in a separate instrument" as part of the basic information on a legal entity (Article 2(1)(33)).

That depends on the country where the company is registered. Article 25 of the eIDAS Regulation says that an electronic signature cannot be denied legal effect or refused as evidence solely because it is electronic, and it gives a qualified electronic signature the equivalent legal effect of a handwritten one. Article 2(3) leaves national rules on form intact, and company formation is an area where such rules are common. Some countries involve a notary or a register procedure when articles are adopted or amended.

EU company law has moved towards online procedures. Directive (EU) 2019/1151 on digital tools in company law requires member states to make online company formation and online filing possible.

Three questions settle a given case. What form does national law require for the founding articles? What form does it require for an amendment, which is usually a shareholders' decision followed by registration? What does the register's online procedure accept as identification and as a signature?

The articles show rights of control that a list of shareholders cannot. The EU Anti-Money Laundering Regulation defines a beneficial owner as a natural person who has an ownership interest in a company or controls it, through ownership or by other means (Article 51). An ownership interest means 25% or more of the shares or voting rights, held directly or indirectly (Article 52(1)). Article 53(4) names "provisions in the articles of association" among the other means through which control may be exercised.

The provisions to read are those on share classes and appointments. Article 53(3) says that control always includes a majority of the voting rights, the right to appoint or remove a majority of the board, relevant veto or decision rights attached to a share, and decisions on the distribution of profit. Each of these can be written into the articles. Suppose a founder holds 10% of the shares, in a class that carries the right to appoint three of the five directors. On the share count she falls below the threshold. On the articles she controls the board.

This is why Article 20(1)(b) asks a firm to understand the ownership and control structure of its client, not only to collect a list of owners.

Partly. The articles set out how the company is represented, for example whether one director may sign alone or two must sign together. They do not usually name the people in office. Those names come from the company register or from the resolutions that appointed them.

A firm needs both. Article 22(1)(b) requires the names of the legal representatives of a legal entity. Article 20(1)(i) requires the firm to verify that the person acting for the client is authorised, and to identify that person and verify their identity. Reading the representation rule in the articles against the current register entry answers the authority question for a director. Anyone else who signs needs a further document, such as a board resolution or a power of attorney.

Articles may also limit what directors can do without shareholder approval. Whether such a limit affects an outsider who did not know of it is a question of company law, which differs by company type and country.

The version in force on the date the firm relied on it, with a note of where it came from. Articles change. A copy handed over by the client may predate an amendment, so a copy taken from the company register, or a certified copy, is safer. Record the date on which it was obtained.

Where the articles were collected in customer due diligence, Article 77 applies. An obliged entity keeps a copy of the documents and information obtained for five years from the end of the business relationship. After that the personal data must be deleted, unless another law requires it to be kept for longer. In a client relationship that lasts for years, ask at each review whether the articles have been amended.

The regulation applies from 10 July 2027 (Article 90). Until then, the national laws that implement the EU anti-money laundering directives apply.