Articles of association and bylaws

1. Core idea and who it's for#

Every company has a constitution: the rules that bind the company and every shareholder, now and in the future.

• India and the UK: the articles of association (with the memorandum in India), filed publicly.
• US (Delaware): a public certificate of incorporation, which holds the share classes and investor rights, plus private bylaws for how meetings, directors and officers work.

The shareholders' agreement (4.06) is a private contract among the people who sign it. The constitution binds everyone, including future shareholders who never signed. That makes it the place for the rules that must hold no matter who owns the shares:

• share classes and their rights;
• transfer restrictions;
• pre-emption;
• board appointment rights;
• leaver provisions;
• in India, investor veto rights.

Most founders start with a standard template and only think about the constitution again when an investor's lawyer rewrites it. That is fine, as long as you understand three things: what the template allows, how the constitution is changed, and which provisions protect you.

Who it's for: founders at incorporation (4.01) and at the first priced round, when the constitution is usually replaced.

The one-line rule: start with a clean, standard template, replace it with investor-grade articles or a charter at the first round, and make sure the constitution and shareholders' agreement say the same thing.

2. Evidence#

India#

• Templates: model articles are set out in Schedule I of the Companies Act 2013. Table F applies to a company limited by shares.
• Amending: under section 14, a company changes its articles by special resolution, filing form MGT-14 with the registrar within 30 days. That right cannot be removed by contract. Common reasons for an amendment include adding investor rights from a shareholders' agreement (board seats, vetoes and transfer restrictions), and enabling ESOPs, buybacks or preference shares.
• Entrenchment: section 5(3) lets the articles say that specified provisions can only be changed under stricter conditions than a special resolution. In a private company, entrenchment can be added only at incorporation or with the agreement of all members. One commentator gives an example of why investors care: without entrenchment, a 10% investor's affirmative rights could be removed by the other 90% passing a special resolution.
• Mirroring: because of V.B. Rangaraj (4.06), investor rights must be in the articles to bind the company.

UK#

• Default: under the Companies Act 2006, the government's Model Articles apply by default if you don't file your own.
• Binding effect: under section 33, the articles are an enforceable contract between the company and each shareholder.
• Amending: a special resolution with 75% approval, filed at Companies House within 15 days. Provisions can be entrenched so they need more than 75%.
• In practice: most start-ups begin with the Model Articles, and adopt bespoke venture articles, usually based on the BVCA models, at the first institutional round.

US (Delaware)#

• Two documents: the certificate of incorporation is public and sets a fixed number of authorised shares. Changing it needs a board resolution and, typically, approval from a majority of the outstanding stock under DGCL section 242.
• Bylaws: private, and usually amendable by the board without a shareholder vote. There is no default template, so you must adopt your own.
• Investor rights: preferred stock rights, including protective provisions, sit in the restated certificate filed at the first priced round.

3. Method#

Step 1: At incorporation, start clean#

• India: use Table F-based articles with a few additions:

UK:
US:

• transfer restrictions suitable for a private company, and the founders' reversevesting and leaver mechanics (3.06, 3.12);
• board-appointment rights;
• a power to issue ESOPs and preference shares;
• enough authorised capital, set out in the memorandum.
• UK: use the Model Articles, amended with:
  • founder leaver provisions;
  • pre-emption on transfers;
  • a power to allot shares without a fresh resolution each time, within limits.
• US: use a standard startup certificate, with enough authorised shares (often 10 million or more of common stock), and standard bylaws allowing written consent and remote meetings.

Step 2: At the first priced round, replace rather than patch#

Investors' counsel will usually propose a restated charter (US) or new articles (India, UK). Check that the new constitution:

1. Matches the shareholders' agreement word for word on transfer restrictions, reserved matters, board composition, pre-emption, drag-along and tag-along, and leaver terms (4.06).
2. Sets out the new share class correctly: preference amount, conversion, anti-dilution, voting and dividends.
3. Allows an ESOP pool, with the right authorised capital (5.01).
4. Protects founders as well as investors. Any investor-friendly entrenchment should be matched by protection for founder rights, such as founder board seats, and pay attention to how drag-along thresholds count founder shares.
5. Has any entrenchment agreed by everyone (in India) and filed correctly.

Step 3: File and keep records#

• India: pass the special resolution (and any unanimous consent for entrenchment) and file MGT-14 within 30 days. Update the memorandum if authorised capital changes (SH-7).
• UK: pass the special resolution (a written resolution needs 75% of all voting rights) and file the articles and resolution within 15 days. File share allotments on form SH01.
• US: board approval, then stockholder consent. File the certificate of amendment or restated certificate in Delaware before the closing.
• All countries: keep a single current, consolidated copy of the constitution in the data room.

Worked example (illustrative)#

A UK quantum-software company has two founders and is raising a £1.5 million seed round, partly from SEIS and EIS angels and partly from a VC.

• Starting point: Model Articles, with leaver provisions added at incorporation.
• At seed: the VC's counsel proposes BVCA-based articles. The founders' counsel checks three points:

1. The share class used by SEIS and EIS investors has no preferential right to assets, so their relief is protected.
2. Good and bad leaver definitions match the shareholders' agreement and the 2025 BVCA position (resignation isn't automatically bad).
3. The drag-along threshold counts founder votes, and an entrenched clause protects each founder's right to appoint a director while they hold at least 10%.

• Filing: the special resolution passes by written resolution and is filed within 15 days, with the SH01 for the new shares.

4. India, US and UK differences#

Delaware franchise tax tip: Delaware's default "authorised shares" method can produce a very large franchise tax bill for startups with many authorised shares. Most startups use the "assumed par value capital" method, which usually gives a small bill. Check this every year (4.18).

5. Scripts, mistakes and related playbooks#

Scripts#

To investors' counsel:

"Please send the new articles alongside the shareholders' agreement, with a table showing where each right appears in both. We want them to match exactly."

Asking for balanced entrenchment:

"If the investor veto rights are entrenched, we'd like the founder board-appointment right entrenched too, while each founder holds at least 10%."

To your company secretary or accountant:

"After closing, please file MGT-14 and SH-7 within the deadlines, and send us the consolidated articles for the data room."

Common mistakes#

1. Leaving investor rights out of the Indian articles, which makes them hard to enforce.
2. Too little authorised capital or too few authorised shares, forcing an amendment before each issue.
3. Patching old articles instead of adopting a clean restated set at the first round.
4. One-sided entrenchment that protects investors but not founders.
5. Late filings, which bring fines, and an out-of-date public record that confuses diligence.
6. Delaware franchise tax shock from not using the assumed par value method.
7. SEIS and EIS problems from preferential rights on shares UK investors use for relief.

Related playbooks#

• 3.06 Founder vesting, cliffs and acceleration
• 3.12 Co-founder breakups: buybacks and good/bad leaver terms
• 4.02 Choosing an entity
• 4.06 Shareholder agreement basics
• 4.18 Compliance calendar
• 5.01 ESOP pool sizing

Sources#

• Taxmann, Articles of association under the Companies Act 2013
• The Classic Partners, Alteration of articles (section 14)
• iPleaders, Alteration of articles and entrenchment
• TaxGuru, Entrenchment under section 5 and affirmative rights example
• Your Company Formations, Articles of association explained
• LegalVision UK, Changing company articles
• Queen Mary qLegal, Model articles of association
• Stripe, Certificate of amendment
• Terms.law, Corporate bylaws explained

This playbook is general information, not legal advice. Have your constitution drafted or reviewed by a lawyer, especially at a funding round. Last checked November 2026.