It must be specified action. Article 4 lets members direct particular steps, such as not proceeding with a named acquisition. It does not transfer general management to the members. It is not retrospective. Article 4(2) protects things already done, such as a contract signed the day before. It cannot override the Act. A direction to pay a dividend the company cannot lawfully pay fails, because section 830 permits distributions only out of profits available for the purpose. The members' power is "subject to the articles", and the articles themselves operate within the Act. Directors still owe duties to the company. Section 170(1) makes the general duties owed to the company, and section 172(3) makes the duty to promote success subject to any rule requiring directors to consider creditors' interests. Outsiders are protected. Section 40(3)(a) treats limitations deriving from a resolution of the company as limitations under the constitution, which a person dealing with the company in good faith may ignore under section 40(1). If directors breach a direction and sign a contract, the contract usually stands, and the directors face the consequences under section 40(5). The articles may differ. Article 4 is a default. Bespoke articles may remove it, change the majority or add reserved decisions, so check the company's actual articles.

Can shareholders instruct the directors

Q: What else can shareholders do if they disagree with the board?

Remove directors. An ordinary resolution at a meeting removes a director under section 168, notwithstanding any agreement with them, with special notice given at least 28 days before the meeting (section 312). It cannot be done by written resolution (section 288(2)). See removing a director. Change the articles. A special resolution under section 21 can add decisions that need shareholder consent. Use a shareholders' agreement. Investors often negotiate consent rights over particular decisions; these bind the parties contractually. Petition the court. A member can petition under section 994 where the company's affairs are conducted in a manner unfairly prejudicial to members' interests; see minority shareholder protection. The choice is often arithmetic. A holder of 51% can remove the board but cannot pass an article 4 direction alone; a holder of 75% can do both.

Q: How does this work in practice?

Illustration only. Birch Ltd uses the model articles. Its two directors hold 20% of the shares; three outside shareholders hold 80%. The board plans to open an office overseas, which the outside shareholders oppose. The outside shareholders, holding well over 5%, require the company to circulate a written resolution: "That, as a special resolution, the directors are directed not to enter into any lease or employment contract for an office outside the United Kingdom." Members holding 80% sign within 28 days, so the resolution passes as a special resolution and is filed at Companies House within 15 days. A lease the directors had already signed before the resolution passed is unaffected under article 4(2). The direction stops the employment contracts that had not yet been signed. If the outside shareholders had held 60%, they could not pass the direction, but they could remove the directors at a meeting.

Q: What mistakes come up most often?

Using an ordinary resolution. Under the model articles, a simple majority cannot bind the board on a management decision. Vague wording. Article 4 requires specified action; a resolution "to run the company more carefully" achieves nothing. Not filing the resolution. Section 30 applies to every special resolution, including a direction. Expecting it to unwind past acts. Article 4(2) protects earlier decisions. Directing something unlawful. A direction cannot authorise an unlawful dividend or other breach of the Act. Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant's fees with Solar Protect. Read how our cover works or get a quote.

Only in the way the articles allow. Under article 4 of the model articles, shareholders may by special resolution direct the directors to take, or refrain from taking, specified action; a simple majority cannot. A direction does not invalidate anything the directors did before it was passed, cannot require the directors to break the law, and does not affect outsiders who deal with the company in good faith.

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Why can’t shareholders simply tell the board what to do?

Because the articles hand management to the directors. Article 3 of the model articles for private companies limited by shares provides that, subject to the articles, the directors are responsible for the management of the company’s business and may exercise all its powers. Once the articles give power to the board, shareholders cannot take it back by an ordinary vote on a particular decision. Their routes are to use a power the articles keep for them, change the articles, or change the board.

Older companies on the 1985 Table A have the same structure: regulation 70 gives management to the directors “subject to … any directions given by special resolution”. See Table A articles for older companies.

How does the reserve power work?

Model article 4 reads:

“(1) The shareholders may, by special resolution, direct the directors to take, or refrain from taking, specified action.”
“(2) No such special resolution invalidates anything which the directors have done before the passing of the resolution.”

A special resolution needs at least 75% of the votes (section 283). In a private company it can be passed as a written resolution, counting 75% of the total voting rights of eligible members, or at a general meeting on at least 14 days’ notice (section 307(1)). A written resolution passed as a special resolution must state that it was proposed as one (section 283(3)). The mechanics are in written resolutions.

Because it is a special resolution, the direction becomes part of the company’s constitution: section 17 includes resolutions to which Chapter 3 of Part 3 applies, and section 29(1)(a) applies that Chapter to every special resolution. It follows that:

a copy must be sent to Companies House within 15 days, and failure is an offence (section 30); and
the directors’ duty under section 171(a) to act in accordance with the constitution covers the direction.

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Who can propose a direction?

The board will rarely propose a resolution directing itself, so the members usually start the process:

Written resolution. Members holding 5% of the voting rights, or a lower percentage set by the articles, can require the company to circulate a written resolution with a statement of up to 1,000 words (section 292).
General meeting. Members holding at least 5% of the paid up voting capital can require the directors to call a meeting (section 303). The directors must call it within 21 days and hold it within 28 days of the notice (section 304). See requisitioning a general meeting.

In both cases the company need not act on a resolution that would be ineffective, is defamatory, or is frivolous or vexatious (sections 292(2) and 303(5)).

What are the limits?

It must be specified action. Article 4 lets members direct particular steps, such as not proceeding with a named acquisition. It does not transfer general management to the members.
It is not retrospective. Article 4(2) protects things already done, such as a contract signed the day before.
It cannot override the Act. A direction to pay a dividend the company cannot lawfully pay fails, because section 830 permits distributions only out of profits available for the purpose. The members’ power is “subject to the articles”, and the articles themselves operate within the Act.
Directors still owe duties to the company. Section 170(1) makes the general duties owed to the company, and section 172(3) makes the duty to promote success subject to any rule requiring directors to consider creditors’ interests.
Outsiders are protected. Section 40(3)(a) treats limitations deriving from a resolution of the company as limitations under the constitution, which a person dealing with the company in good faith may ignore under section 40(1). If directors breach a direction and sign a contract, the contract usually stands, and the directors face the consequences under section 40(5).
The articles may differ. Article 4 is a default. Bespoke articles may remove it, change the majority or add reserved decisions, so check the company’s actual articles.

What about a majority shareholder who gives informal instructions?

Informal pressure is not a direction under article 4, and the directors are not bound by it. There is also a risk for the shareholder. Section 251 defines a shadow director as a person in accordance with whose directions or instructions the directors are accustomed to act, and the general duties apply to shadow directors where they are capable of applying (section 170(5)). Advice given in a professional capacity is excluded, and a parent company is not treated as a shadow director of its subsidiary for the general duties merely because the subsidiary’s directors follow its instructions (section 251(2) and (3)). See shadow and de facto directors.

What else can shareholders do if they disagree with the board?

Remove directors. An ordinary resolution at a meeting removes a director under section 168, notwithstanding any agreement with them, with special notice given at least 28 days before the meeting (section 312). It cannot be done by written resolution (section 288(2)). See removing a director.
Change the articles. A special resolution under section 21 can add decisions that need shareholder consent.
Use a shareholders’ agreement. Investors often negotiate consent rights over particular decisions; these bind the parties contractually.
Petition the court. A member can petition under section 994 where the company’s affairs are conducted in a manner unfairly prejudicial to members’ interests; see minority shareholder protection.

The choice is often arithmetic. A holder of 51% can remove the board but cannot pass an article 4 direction alone; a holder of 75% can do both.

How does this work in practice?

Illustration only. Birch Ltd uses the model articles. Its two directors hold 20% of the shares; three outside shareholders hold 80%. The board plans to open an office overseas, which the outside shareholders oppose.

The outside shareholders, holding well over 5%, require the company to circulate a written resolution: “That, as a special resolution, the directors are directed not to enter into any lease or employment contract for an office outside the United Kingdom.”
Members holding 80% sign within 28 days, so the resolution passes as a special resolution and is filed at Companies House within 15 days.
A lease the directors had already signed before the resolution passed is unaffected under article 4(2). The direction stops the employment contracts that had not yet been signed.

If the outside shareholders had held 60%, they could not pass the direction, but they could remove the directors at a meeting.

What mistakes come up most often?

Using an ordinary resolution. Under the model articles, a simple majority cannot bind the board on a management decision.
Vague wording. Article 4 requires specified action; a resolution “to run the company more carefully” achieves nothing.
Not filing the resolution. Section 30 applies to every special resolution, including a direction.
Expecting it to unwind past acts. Article 4(2) protects earlier decisions.
Directing something unlawful. A direction cannot authorise an unlawful dividend or other breach of the Act.

Company directors can protect the business against the cost of an HMRC check with tax investigation insurance, which pays up to £100,000 of accountant’s fees with Solar Protect. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.