Articles of association—provisions for entrenchment

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Articles of association—provisions for entrenchment
  • What are 'provisions for entrenchment'?
  • Why use provisions for entrenchment?
  • Drafting entrenched provisions
  • When can provisions for entrenchment be made?
  • Companies House filings
  • Variation of class rights and entrenchment
  • Companies incorporated before 1 October 2009

Articles of association—provisions for entrenchment

What are 'provisions for entrenchment'?

The usual way to amend a company's articles of association is by way of special resolution. However, it is possible to entrench provisions in the articles so that they can only be amended if certain conditions are met or certain procedures are followed. These conditions or procedures are known as 'provisions for entrenchment'. The particular article which cannot be varied without meeting the required provisions is known as an 'entrenched provision'.

The conditions to be met or procedures to be followed are usually made more restrictive than those required to pass a special resolution, but it is not possible to make a provision entirely unalterable. The Companies Act 2006 (CA 2006) makes clear that provisions for entrenchment do not prevent amendment of the company's articles by agreement of all the members of the company, or by order of a court or other authority having power to alter the company's articles. This effectively prohibits absolute entrenchment. However, if particularly difficult conditions or procedures are imposed, it may well be the case that the articles subject to provisions for entrenchment are virtually unalterable.

Entrenchment provisions usually take the form of consents from specific shareholders, but they may also take the form of external (regulatory

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