Draft Articles Of Association

Draft — Articles of Association

When to use this

Use this skill to produce the constitutional document for a new company or to amend the constitutional document of an existing company. The Articles of Association (AoA) — variously called Memorandum and Articles (UK), Statuts (French/Lebanese), Nizam Asasi (Arabic) — is the primary governance document that:

• Creates the company.
• Defines the rights of shareholders.
• Governs the board and its powers.
• Controls how shares are issued and transferred.

In civil-law jurisdictions (Lebanon, KSA, UAE onshore), the AoA is a public document filed with the commercial registrar, typically notarized, and accessible to third parties. In common-law jurisdictions (DIFC, ADGM, UK), the memorandum and articles are filed with the registry.

Required inputs

Optional inputs

• Pre-emption rights mechanism (right of first refusal on transfer)
• Drag-along and tag-along provisions (especially for VC-backed companies)
• Reserved matters requiring supermajority
• Dividend policy
• Quorum and voting thresholds for shareholder meetings
• Deadlock resolution mechanism (for 50/50 JVs)

Document structure

Part 1 — Preliminary

1. Company name — including legal form suffix (LLC, PLC, SAL, Ltd).
2. Registered office — jurisdiction and address (or registered agent reference for free zones).
3. Objects — see note on objects clauses.
4. Liability — members' liability limited to their share capital contribution.
5. Authorized capital — total share capital; currency; par value.

Part 2 — Shares

6. Share classes — rights attaching to each class: voting, dividend, liquidation preference.
7. Issuance of shares — board authority to issue new shares within authorized capital; shareholder approval for issuance beyond authorized capital.
8. Pre-emption rights — existing shareholders' right of first offer on new issuances and on transfers.
9. Transfer restrictions — approval mechanism for transfers; prohibited transferees (competitors, etc.).
10. Drag-along — majority shareholders' right to require minority to sell in an approved exit.
11. Tag-along — minority shareholders' right to join a majority sale on same terms.
12. Share certificates (if applicable).

Part 3 — Directors and officers

13. Board composition — minimum and maximum number; any class-based nomination rights.
14. Appointment and removal — by shareholders in general meeting; by specific shareholder classes.
15. Term — fixed term or until removed.
16. Powers of the board — general management authority; reserved matters requiring shareholder approval.
17. Board meetings — notice, quorum, voting, minutes.
18. Officers — CEO, CFO, Secretary; appointment by board; powers.
19. Conflicts of interest — disclosure obligation; exclusion from vote.
20. Indemnification — scope and limitations.

Part 4 — Shareholder meetings

21. Annual General Meeting — timing, notice period, quorum.
22. Extraordinary General Meeting — triggers; who may convene.
23. Notice — period (minimum varies by jurisdiction); content requirements.
24. Quorum — first call vs second call (civil-law jurisdictions typically have two-call mechanics).
25. Voting — show of hands vs poll; proxy rights; written resolutions.
26. Supermajority matters — items requiring 75% or higher approval (capital reduction, material asset sale, amendment of articles, liquidation).

Part 5 — Financial provisions

27. Financial year — calendar year or specified.
28. Auditors — appointment; mandatory audit threshold.
29. Dividends — board recommendation; shareholder approval; payment mechanics.
30. Reserves — statutory reserve (mandatory in most MENA jurisdictions).

Part 6 — Winding up

31. Voluntary dissolution — shareholder vote threshold.
32. Liquidator appointment.
33. Distribution of assets — after liabilities settled; per class rights.

Jurisdictional notes

UAE (Federal Decree-Law 32/2021 on Commercial Companies)

• LLC: minimum 1 shareholder; maximum 50; no minimum capital (previously AED 150,000); no requirement for UAE national partner in most sectors (significant liberalization post-2020).
• Mandatory statutory reserve: 10% of annual net profit until reserve equals 50% of paid-up capital.
• Objects clause: can be broad; must not violate licensed activities.
• Language: Arabic AoA required for onshore LLCs; dual language (Arabic + English) common; Arabic controls.
• Filing: notarized and filed with the relevant DED (economic department) or free-zone authority.
• PJSC (public joint stock company): minimum 5 founders; minimum AED 30 million capital; more rigorous governance requirements.

UAE Free Zones (DIFC / ADGM)

• English-language AoA.
• DIFC: DIFC Companies Law (DIFC Law 5/2018); DIFC Registrar of Companies.
• ADGM: ADGM Companies Regulations 2020; ADGM Registration Authority.
• Common-law principles govern interpretation; English-style articles acceptable.

KSA (Companies Law — Royal Decree M/132 2022)

• LLC: minimum 1 shareholder; minimum capital SAR 500 for single-member, no minimum for multi-member (recent reform).
• Arabic is the required language; English translation for international parties.
• Notarization: AoA must be notarized and registered with Ministry of Commerce (Mawthq platform).
• Sharia compliance: objects clause must not include prohibited activities; certain financial structures require Islamic finance structuring.
• Foreign ownership: generally 100% foreign ownership now permitted in most sectors under Vision 2030 reforms; sector-specific restrictions remain.

Lebanon (SAL — Société Anonyme Libanaise / SARL)

• SAL: minimum 3 founders for formation; minimum capital LBP (amount periodically updated; effectively modest in USD terms).
• Statuts: in Arabic and French (or Arabic alone); filed with the Commercial Register.
• Notarization: required for SAL formation; notary fees significant.
• SARL (limited liability): fewer formalities; single-member possible; maximum 20 members.
• Mandatory legal reserve: 10% of annual profits until reserve = 50% of capital.

Egypt (Companies Law — Law 159/1981 and Investment Law 72/2017)

• SAE (Société Anonyme) and LLC (LLC under Law 159/1981).
• Minimum capital requirements vary by sector.
• Notarization and filing with GAFI (General Authority for Investment and Free Zones) or commercial register.
• Arabic required; English translation acceptable alongside.

Objects clause — drafting note

Broad objects clause (preferred for most commercial companies): covers all lawful commercial activities; maximum flexibility. Common in common-law jurisdictions: "The Company may carry on any lawful business or activity."

Narrow objects clause (required in some regulated contexts or by local law): lists specific activities. Common in UAE/KSA where the license specifies the permitted activity and the AoA must mirror it.

Risk of narrow objects: any activity outside the stated objects is ultra vires — legally beyond the company's capacity. Err on the side of breadth.

Common mistakes

• Objects too narrow: company outgrows its objects and cannot contract for new activities without an AoA amendment.
• Missing pre-emption rights: without them, a shareholder can transfer to any third party; important for closely-held companies.
• No supermajority for material decisions: if articles are silent, ordinary majority controls everything — including diluting minority shareholders.
• Statutory reserve omitted: mandatory in UAE, KSA, LB, EG; failure to include does not invalidate AoA but creates regulatory non-compliance.
• Conflict between AoA and shareholders' agreement: these must be read together; inconsistencies create legal uncertainty. Always review the SHA when drafting AoA.

Related skills

• [[draft-bylaws]]
• [[draft-board-resolution]]
• [[draft-agm-minutes]]
• [[draft-cap-table-resolution]]
• [[draft-bilingual-ar-en-side-by-side]]