The Companies Act 2006

A Private Company Limited by Shares

Articles of Association of Diagonal Works Limited

(the Company) (Company number 12236772) (https://diagonal.works)

Adopted by special resolution passed on 3rd October 2022.

This version: https://diagonal.works/company/october-2022/articles/

Latest version: https://diagonal.works/company/articles/

1. Purposes

  1. 1.1

    The primary purpose of the Company is to have a material positive impact on society and the environment, taken as a whole. In particular, the Company shall run a business that aims to improve the quality of life of people living or working in cities, through the development of responsible technology.

  2. 1.2

    The company’s secondary and subsidiary purpose is, as a result of the advancement by the company of its primary object, to promote the success of the company for the benefit of its members as a whole.

  3. 1.3

    A director shall have regard (amongst other matters) to:

    1. 1.3.1

      the likely consequences of any decision in the long term,

    2. 1.3.2

      the interests of the Company's employees and contractors,

    3. 1.3.3

      the need to foster the Company's business relationships with suppliers, customers and others,

    4. 1.3.4

      the impact of the Company's operations on the communities and ecosystems it is part of, and the environment,

    5. 1.3.5

      the desirability of the Company maintaining a reputation for high standards of business conduct, and

    6. 1.3.6

      the need to act fairly as between members of the Company,

    (together, the matters referred to above shall be defined for the purposes of this Article as the Stakeholder Interests.

  4. 1.4

    For the purposes of a director’s duty to act in the way he or she considers, in good faith, most likely to promote the success of the Company, a director shall not be required to regard the benefit of any particular Stakeholder Interest or group of Stakeholder Interests as more important than any other.

  5. 1.5

    Nothing in this Article is intended to or shall create or grant any right or any cause of action to, by or for any person (other than the Company).

2. Principles

  1. 2.1

    The directors shall seek, in good faith, to ensure that the Company carries out its business in accordance with the following principles:

    1. 2.1.1

      The Company develops technology that is responsible, meaning the Company develops and deploys technology with a principled and transparent approach to evaluating its downstream effects on society as a whole; the Company is transparent about the ways in with the technology it develops will be monetised over the long term; the company develops and deploys technology with an appropriate level of human oversight and audit; the company neither develops nor deploys technology that contravenes any article of the Universal Declaration of Human Rights.

    2. 2.1.2

      Entrepreneurship and ownership are linked together, meaning the locus of control of the Company remains within the Company (i.e. with the people who run the business); and

    3. 2.1.3

      The earning of profits is a means to the achievement of the purposes of the Company and not an end in itself.

3. Interpretation

  1. 3.1

    The interpretation of these Articles is governed by the provisions set out in Appendix 1 to these Articles.

  2. 3.2

    The Model Articles shall apply to the Company, except in so far as they are modified or excluded by these Articles.

  3. 3.3

    Articles 13, 14 and 24 of the Model Articles shall not apply to the Company.

4. Share classes and Rights attaching to shares

  1. 4.1

    The share capital of the Company shall comprise A Ordinary Shares, B Investment shares and one Guardian share. Subject to any other provisions in these Articles concerning voting rights, shares in the Company shall carry votes as set out below.

    1. 4.2.1

      The A Ordinary Shares shall confer on each holder of A Ordinary Shares the right to receive notice of and to attend, speak and vote at all general meetings of the Company. Each A Ordinary Share shall carry one vote per share.

    2. 4.2.2

      The rights conferred on a holder of A Ordinary Shares shall only apply so long as the holder is employed by, or in a service relationship with, the Company.

    1. 4.3.1

      The B Investment Shares shall not confer on any holder of B Investment Shares the right to receive notice of or to attend, speak or vote at any general meetings of the Company.

    2. 4.3.2

      B Investment Shares shall have no voting rights attached to them, except that the following need the approval of a special resolution of the holders of B Investment shares:

      1. 4.3.2a

        changes to the rights attaching to B Investment shares; and

      2. 4.3.2.b

        the creation of any new classes of shares in the Company.

    3. 4.3.3

      B Investment shares shall be redeemable at the option of the Company, on terms established by the Board at the time of issue.

    1. 4.4.1

      Subject and without prejudice to articles 3.4.3, 25 and 26, the Guardian Share shall not confer on the Guardian Shareholder any right to vote.

    2. 4.4.2

      No more than one Guardian Share may be in issue at any time.

    3. 4.4.3

      No resolution may be passed pursuant to article 4(1) of the Model Articles without the prior written consent of the Guardian Shareholder.

    4. 4.4.4

      The directors must procure that no assets of the company are disposed of outside the ordinary course of the business of the Company without the prior written consent of the Guardian Shareholder.

    5. 4.4.5

      In these Articles, where it is stated that the consent of the Guardian Shareholder is required for a matter, the Guardian Shareholder may only withhold its consent provided it has reasonable grounds for doing so, in line with its responsibility to help the Company to pursue the Purposes set out in Article 1 and in accordance with the principles set out in Article 2.

5. Issue of shares

  1. 5.1

    A Ordinary Shares may be issued only at par and only to persons who are employed by or in a service relationship with the Company, and only with the prior consent in writing of the holders of 75% of the A Ordinary shares.

  2. 5.2

    B Investment Shares may be issued only with the prior consent in writing of the Board and of more than 50% of the holders of B Investment shares.

  3. 5.3

    New shares of any class may only be issued with the written consent of the Guardian shareholder.

6. Pre-emption rights on issue

  1. 6.1

    Sections 561 and 562 of the Act shall not apply to the allotment of A Ordinary Shares or B Investment shares by the Company.

7. Share transfers – general

  1. 7.1

    The Directors shall refuse to register any transfer of Shares made in contravention of the provisions of the Articles but shall not otherwise be entitled to refuse to register any transfer of Shares. The Directors may request the transferor, or the person named as transferee in any transfer lodged for registration, to furnish the company with such information and evidence as the Directors may reasonably think necessary or relevant. Failing such information or evidence being furnished to the satisfaction of the Directors within a period of 20 business days after such request the Directors shall be entitled to refuse to register the transfer in question.

8. Transfers - A Ordinary shares and B Investment shares

  1. 8.1

    A Ordinary Shares may only be transferred for par (nominal) value and only to an employee of the Company or, with the prior consent of the Directors, to a person who has a service relationship with the Company.

  2. 8.2

    B Investment Shares shall be entitled to transfer or transmit B Investment Shares to such persons and at such prices as they see fit.

  3. 8.3

    The Directors may refuse to register the transfer of B Investment shares if it would result in shares being held by a person who is not or is not likely to be, in the directors’ reasonable opinion, supportive of the Purpose of the Company. If they do so refuse, the instrument of transfer must be returned to the transferee with the notice of refusal.

9. Transfers - Guardian Share

  1. 9.1

    Other than in accordance with this Article 9, the holder of the Guardian Share shall not be permitted to transfer such share.

  2. 9.2

    In the event that:

    1. 9.2a

      the Guardian Shareholder informs the Board that it wishes to transfer the Guardian Share; or

    2. 9.2b

      any person becomes entitled to shares in consequence of the administration, receivership or liquidation of the Guardian Shareholder;

    then the Guardian Shareholder or the person so entitled to the Guardian Share (as the case may be) shall be bound to transfer the Guardian Share to such person as the Directors shall direct.

  3. 9.3

    Any transfer directed pursuant to Article 9.2 shall be to an asset-locked organisation and such transferee shall have a purpose which, in the reasonable opinion of the Directors, shall be aligned with the Purpose. On the sale or transfer of the Guardian Share the price for the Guardian Share shall be £1.

10. Share redemption

  1. 10.1

    Subject to the Companies Acts and to any rights attaching to any existing Shares, any Share may be issued which can be redeemed or is liable to be redeemed at the option of the Company. The directors may determine the terms, conditions and manner of redemption of any redeemable Shares which are issued. Such terms and conditions shall apply to the relevant Shares as if the same were set out in these Articles.

  2. 10.2

    A Ordinary and B Investment Shares may be redeemed at any time by a decision of the Board and without the consent of the shareholder if (i) bankruptcy proceedings are initiated against the assets of the shareholder or (ii) the shares are charged or pledged. In addition, A Ordinary Shares may be redeemed by a decision of the board and without the consent of the shareholder or, if the respective shareholder has died or if the shareholder is no longer either in employment or in a service relationship with the Company.

  3. 10.3

    The redemption price in the situations described in Article 10.2 shall be the nominal value of the shares. The procedure to be followed in the redemption shall be decided by the Board.

  4. 10.4

    Within the scope of what is legally permissible under the Companies Act and these Articles, the Company may redeem or acquire its own shares in situations other than those described above.

11. Dividends and Other Distributions

  1. 11.1

    Other than as set out in this Article, Shareholders shall not be entitled to dividends or other distributions, and any profit of the Company shall be reinvested into the Company, invested into projects serving the Purpose or donated to charity. By exception to the foregoing, the Board may decide (subject to the approval of the holders of a majority of the A Ordinary and the holders of a majority of the B Investment shares, and subject to Article 11.2) to:

    1. 11.1a

      implement a profit-related remuneration scheme, which may be paid out in the form of a dividend; and

    2. 11.1b

      pay a dividend to holders of B Investment shares where the board considers in all the circumstances it would be reasonable to do so, bearing in mind in particular the principle set out in Article 2.1.3.

  2. 11.2

    In any one year, profit-related remuneration (whether in the form of dividend or otherwise) to any shareholder shall not exceed 3 times the annual salary of the lowest paid employee of the company;

  3. 11.3

    The Guardian share shall not confer any right to receive any dividend or any other distribution of profits.

12. Purchase of Own Shares

  1. 12.1

    Subject to the Companies Act but without prejudice to any other provision of these Articles, the Company may purchase its own Shares (other than the Guardian Share) with cash up to any amount in a financial year not exceeding the lower of:

    1. 12.1a

      £10,000; and

    2. 12.1b

      the value of 5% of the Company's share capital.

13. Variation of share capital

  1. 13.1

    Whenever the capital of the Company is divided into different classes of Shares, the special rights attached to each class may be modified or abrogated, either with the consent in writing of three quarters of the issued shares of the class, or with the sanction of a special resolution passed at a meeting of the holders, but not otherwise. However, the rights attaching to the Guardian Share may not be modified or abrogated without the prior consent of the Guardian Shareholder.

14. Quorum for Directors’ meetings

  1. 14.1

    The quorum for the transaction of business at a meeting of Directors is any two eligible Directors.

  2. 14.2

    If the total number of Directors in office for the time being is less than the quorum required, the Directors must not take any decision other than a decision:

    1. 14.2a

      to appoint further Directors; or

    2. 14.2b

      to call a general meeting so as to enable the shareholders to appoint further Directors.

15. Directors' conflicts of interest

If a proposed decision of the Directors is concerned with an actual or proposed transaction or arrangement with the Company in which a Director is interested, that Director shall be counted as participating in the decision-making process for quorum or voting purposes, provided that he has declared the nature and extent of such interest as required by the Companies Act.

16. Number of Directors

The Board will consist of a minimum of two Directors.

17. Observer

The Guardian Shareholder shall have the right, by written notice to the Company, to appoint an observer who shall have the right to receive notice of and to attend all board meetings.

18. Removal of Director

  1. 18.1

    The Guardian Shareholder shall have the right to remove, or to require the other Directors to remove, a Director from his or her office as director by notice given to that Director and the other Directors if the Director concerned:

    1. 18.1a

      shall have committed any serious breach or repeated or continued (after warning in writing) any material breach of any of his or her obligations under any agreement between him or her and the company or of any of the statutory or fiduciary obligations to which he is subject as a director of the company; or

    2. 18.1b

      shall have been guilty of conduct tending to bring him or herself and/or the company and/or the Guardian Shareholder into disrepute; or shall have committed any act of gross incompetence or gross misconduct; or

    3. 18.1c

      shall have committed any act of gross incompetence or gross misconduct; or

    4. 18.1d

      shall have committed any criminal offence other than an offence which does not, in the reasonable opinion of the Guardian Shareholder, affect his or her position as a director; or

    5. 18.1e

      shall have been incapacitated from performing all or any of his or her duties as a director by illness or injury for a period exceeding (in total) 26 weeks.

19. Directors’ automatic retirement

A person ceases to be a director as soon as that person no longer holds any A Ordinary Shares.

20. Entrenchment

The following provisions of the Articles and this Article 20 may not be amended or removed unless otherwise agreed in writing by the Guardian Shareholder:

21. Attendance and speaking by non-shareholders

  1. 21.1

    The Guardian Shareholder shall be entitled:

    1. 21.1a

      to receive notice of any General Meeting of the Company, including any separate meeting of any holders of any class of Share.

    2. 21.1b

      to attend any such General Meeting; and

    3. 21.1c

      to speak at any such General Meeting.

  2. 21.2

    The Chair may permit other persons who are not otherwise entitled to attend and speak at a general meeting.

22. Liquidation Preference

  1. 22.1

    On a return of assets on liquidation, capital reduction or otherwise (other than a conversion or purchase of Shares), the assets of the company remaining after the payment of its liabilities may be distributed as follows:

    1. 22.1.1

      firstly, amongst the A Ordinary Shareholders and B Investment Shareholders, on the following basis:

      (i) the amount distributed to B Investment shareholders as a class shall be 20% of the amount distributed to A and B shareholders collectively, so long as there are 400,000 B investment shares in issue.

      (ii) If there are less than 400,000 B Investment shares in issue (for example because some have been redeemed), then the proportional amount distributed to B Investment shareholders shall be reduced accordingly. For example, if there are 300,000 B investment shares in issue, then as a class B Investment shareholders shall receive 15% of the total amount distributed in respect of A Ordinary shares and B Investment shares;

      (iii) If the number of B Investment shares in issue is greater than 400,000, then the proportional amount distributed to B Investment shareholders shall be increased accordingly. For example, if there are 600,000 B investment shares in issue, then as a class B Investment shareholders shall receive 30% of the total amount distributed in respect of A Ordinary shares and B Investment shares;

      (iv) in no event shall the amount distributed to any one Shareholder exceed 3 times the annual salary of the lowest paid employee of the company in the previous year; and

    2. 22.1.2

      secondly, invested in or donated to projects deemed by the Board in its discretion most likely to advance the purposes or donated to charity.

23. Exit

The shareholders and the Directors must procure that no exit event, meaning a Share Sale, Disposal or Listing (together an “Exit”) occurs without, or otherwise than in accordance with, the prior written consent of the Guardian Shareholder. The Guardian Shareholder may refuse to grant its consent or set any conditions it sees fit on the giving of its consent to any Exit, provided such refusal or such conditions can be reasonably justified based on advancing the Company’s Purposes in line with the principles set out in Article 2.

24. The Guardian Share

  1. 24.1

    On any poll on any resolution of the company in general meeting, being a poll the passing of which would be, or would be deemed to be, a variation of the rights attaching to the Guardian Share, the Guardian Shareholder, if it opposes such resolution, shall have the right to cast such number of votes as shall be necessary to defeat the resolution. The following shall be deemed to be a variation of the rights attached to the Guardian Share:

    1. 24.1a

      Any resolution to wind up the company voluntarily;

    2. 24.1b

      Any resolution for reconstruction of the company;

    3. 24.1c

      Any resolution for the disposal of a material part of the business or assets of the company.

25. The Guardian Shareholder power to call General Meetings

  1. 25.1

    The Guardian Shareholder shall be entitled at any time to serve upon the company at its registered office a requisition requiring the directors to convene a General Meeting of the company.

  2. 25.2

    In the event of such requisition being served, within seven days of its receipt the directors shall call such a General Meeting and shall attach to the notice of the meeting, a copy of the requisition. In the event that the directors fail to call a General Meeting within the time specified above, the Guardian Shareholder shall be entitled to call a General Meeting.

26. Accounting information

The directors must permit the Guardian Shareholder and/or its accountants or other representatives, upon giving reasonable notice and during business hours, access to and, at the Guardian Shareholder’s expense, to take copies of, all financial and accounting records, books and documents of the Company. If it reasonably considers that to do so would advance the purpose of the Company, the Guardian Shareholder may disclose any information so obtained to any other person, subject to giving the Directors 10 days prior notice. The Directors may notify the Guardian Shareholder prior to any disclosure that they object to such disclosure, giving reasons. The Guardian Shareholder shall give due consideration to such objections prior to deciding whether to disclose the information or not.

27. Remuneration restrictions

Employees and associates of the company shall receive an appropriate remuneration, which is decided by the Board in consultation with staff. “Appropriate remuneration” means comparable with remuneration paid by other companies of comparable size, type and industry for a comparable position and in line with the principles set out in Article 2. ​Any shareholder who feels that remuneration is not appropriate may raise an objection, and if their objection is not successfully resolved by internal conflict resolution processes, the shareholder may appeal to the Guardian shareholder, whose decision on what constitutes appropriate remuneration shall be final.

28. Electronic Communication

Without prejudice to Article 48 of the Model Articles, notices and any other communications sent or supplied, by or to Shareholders or Directors under these Articles may be sent or supplied by electronic means as defined in section 1168 of the Companies Act (including via a website, chatroom, extranet, intranet, blog, online social network or forum or other similar mechanism duly notified to such Shareholder or Director or by electronic mail to any email address supplied to the Company, its officers or agents in writing by such Shareholders or Directors).

Appendix 1

Interpretation

  1. A

    In these Articles, unless the context otherwise requires:

    A Ordinary Share
    A Ordinary Shares in the Company;
    Board
    the board of Directors of the Company;
    Business Day
    any day (other than a Saturday, Sunday or public holiday in the United Kingdom) on which clearing banks in the City of London are generally open for business;
    B Investment Shares
    B Investment Shares in the Company;
    Companies Act
    the Companies Act 2006;
    Controlling Interest
    means an interest in Shares conferring on the holder or holders control of the company within the meaning of section 1124 of the Corporation Tax Act 2010;
    Directors
    means the directors of the Company from time to time, and Director means any one of them;
    Disposal
    means the disposal by the Company of all, or a substantial part of, its business and assets;
    Exit
    as defined in Article 23;
    Guardian Share
    the Guardian Share of £1 in the Company;
    Guardian Shareholder
    means the Shareholder holding the Guardian Share;
    Listing
    the successful application and admission of all or any of the Shares, or securities representing such Shares to the Official List of the UK Listing Authority or on the AIM market operated by the London Stock Exchange plc, or to any recognised investment exchange (as defined in section 285 of the Financial Services and Markets Act 2000);
    Model Articles
    means the Model articles for private companies limited by shares contained in Schedule 1 of the Companies (Model Articles) Regulations 2008 (SI 2008/3229) as amended prior to the date of adoption of these Articles and for ease of reference annexed as Appendix 2 to these Articles;
    Purposes
    the principal Purposes of the Company as set out in Article 1;
    Shareholders
    means all or any of those persons whose names are entered in the register of members of the Company, and Shareholder shall mean any one of them;
    Shares
    all or any of the shares in the Company;
    Share sale
    means the sale of (or grant of a right to acquire or to dispose of) any Shares (in one transaction or as a series of transactions) which would, if completed, result in the buyer of those Shares (or grantee of that right) and persons acting in concert with him together acquiring a Controlling Interest, except where the shareholders and the proportion of Shares held by each of them following completion of the sale are the same as the shareholders and their shareholdings in the Company immediately before the sale.
  2. B

    Save as otherwise specifically provided in these Articles, words and expressions which have particular meanings in the Model Articles shall have the same meanings in these Articles, subject to which and unless the context otherwise requires, words and expressions which have particular meanings in the Companies Act shall have the same meanings in these Articles.

  3. C

    Headings in these Articles are used for convenience only and shall not affect the construction or interpretation of these Articles.

  4. D

    The singular includes the plural, the masculine includes the feminine and, in each case, vice versa.

Appendix 2

The Model articles for private companies limited by shares contained in Schedule 1 of the Companies (Model Articles) Regulations 2008 (SI 2008/3229) as amended prior to the date of adoption of these Articles form Appendix 2 of this document, and may be explicitly included for ease of reference.