Incorporation & Articles of Association. Why these matter

Why The Good Stream puts its Articles of Association at the heart of its governance & decision making.

After months of thought we are now a registered UK business. As part of the start-up process we decided to write bespoke Articles of Association [Articles].

A set of well considered Articles are one of the foundational governance and decision making guides for businesses and organisations. A rule book of sorts (although written in legalese)

In UK law there are very few options for incorporation of a new UK company;

Reference taken from GOV.uk website.

Private company limited by shares: This company has a share capital and the liability of each member is limited to the amount, if any, unpaid on their shares. A private company cannot offer its shares for sale to the general public.
Private company limited by guarantee: This company does not have a share capital and its members are guarantors rather than shareholders. The members’ liability is limited to the amount they agree to contribute to the company’s assets if it is wound up.
Private unlimited company: An unlimited company may or may not have a share capital but there is no limit to the members’ liability.
Public limited company: A public company has a share capital and limits the liability of each member to the amount unpaid on their shares. It may offer its shares for sale to the general public and may be quoted on the stock exchange. There is further information about public companies.

In a recent research paper by Re-generate.org they identified four core areas that are ‘holding back’ purpose led businesses. Number 2 on the list in their finding was ‘incorporation’ – In the UK “It is not clear how a company can be legally set up in a manner consistent with being purpose-driven”. For this reason we spent a lot of time researching and considering what type of incorporation we would use and our Articles.

We chose to be a Private Company Limited by Guarantee

The Good Stream is, fundamentally, a network of people, businesses, organisations and ideas for the present and future benefit of all. It was not conceived as a monetary value creation and extraction shareholding business, although we have no intrinsic objection to this in principle. As we say, we are ‘changing the nature of business for good’. A business focussed on transformation and one that will need a network, one that draws on the source of many streams of expertise. An expertise that is bigger than the activity of one individual or one business as we work toward our purpose, where profit is made to further the goals of our business purpose.

“Our purpose is to make doing good with business fundamental by creating a meaningful blueprint that transforms the working world for the good of future life on earth.”

This is why we chose to be Private Company Limited by Guarantee. For this reason our Articles are a little unusual. They have been written to be one of the guiding documents for our multi-stakeholder governance. This governance considers that our actions do not stop at the boundary of our business, we recognise that we will impact our business community, the society and planet we live within and depend on.

A (simplified) governance map. All decisions flow through 3 spheres of consideration – Our purpose, Articles and Charter

How much time and consideration do they need?

I hazard a guess that a lot, if not most, start-ups spend very little time considering their Articles. From personal experience, when my last business was incorporated in 2009, we spent the minimum time and cost on them, seeing them as purely a necessity for getting ‘registered’. Only a few tweaks here and there to satisfy some shareholder questions. We certainly didn’t hold them in high regard for future governance and decision making. Then along came B-Corp for Double Retail. A core part of the certification process demanded changes to the companies Articles. Sadly, this was the first time I had re-read Double’s Articles in 10 years.

In B Corporations words;

Certified B Corporations are legally required to consider the impact of their decisions on all their stakeholders. B Corps make this legal change by updating their Articles of Association, reincorporating as benefit companies and benefit corporations, or making other structural changes.

This extra consideration led me to think deeply about The Good Stream Articles. How can we write them to ‘lock-in’ our business purpose and ensure they don’t end up archived in the bottom drawer, never to be looked at again?

Model Articles +

We have used a mixture of UK Gov. model articles and resources we found online. There are very few resources to go to to add the layers of consideration and principles we desired. The one we did find, Purposely, helps write in your company purpose into a Company Limited by Shares Articles of Association through a simple questionnaire process. By putting these two documents together (removing reference to shareholders) and adding better business principles and future employee oversight of director decisions, amongst lots of other little tweaks, we came to our final Articles.

How much did it cost?

Perhaps the more important question is; what basis for ‘locking-in’ our purpose would we use day-to-day and into the future if we didn’t have this document to check our decisions and actions? I am not saying ours are perfect, but they are essential. The real cost would be to not consider them carefully and use them day-to-day as a constant guide for now and future generations of stakeholders.

We believe a carefully considered set of Articles are one of the core foundation stones of doing good with business.

Incorporation & Articles of Association. Why these matter

We chose to be a Private Company Limited by Guarantee

How much time and consideration do they need?

Model Articles +

How much did it cost?

Further reading 📖

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Incorporation & Articles of Association. Why these matter

We chose to be a Private Company Limited by Guarantee

How much time and consideration do they need?

Model Articles +

How much did it cost?

Further reading 📖

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Let’s talk

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