The High Court has had to consider the impact on a company's members of the company filing the wrong version of its articles at Companies House.
A company can usually change its articles by special resolution of its shareholders. The company must then file a copy of the special resolution, with the amended articles, at Companies House.
The claimant was disputing how the company had valued his shares under the compulsory transfer terms in its articles. These compulsory transfer terms were triggered when the claimant stopped being an employee of the group. One of his arguments related to the status of the articles filed at Companies House.
The company had amended its original articles in 1995 and again in 1998. Due to a mistake, the form of articles filed at Companies House in 1998 did not reflect the 1995 amendments. It, therefore, did not include the changes made in 1995 dealing with how to value shares on a compulsory transfer. When the company's solicitor later realised the mistake, a special resolution was sent to all shareholders inviting them to adopt the correct form of the articles. However, the company did not file this version at Companies House.
The claimant argued that the effect of filing the 1998 articles was that they became the true articles of association of the company, despite the fact that the company had mistakenly filed the wrong form.
The court rejected this argument. The articles are what the members have resolved on from time to time. If the members resolve on an amendment by special resolution, the articles, as amended, become the new contract and new articles. Their status as articles does not depend on registration. When the company files a copy of the articles at Companies House, it is fulfilling a statutory obligation. If it files the wrong form of articles, it does not fulfil the statutory obligation, but the articles as adopted by the members remain the articles.
Although decided under the Companies Act 1985, the decision on these facts would have been the same under the Companies Act 2006. However, note that, where the change is to the company's objects, section 31 of the Companies Act 2006 requires the company to give notice (on form CC04) of the change to Companies House. A change to the objects is not effective until the form is on the register at Companies House. There are also special rules which apply to any "entrenched" provisions in the articles.