The memorandum of association and the articles of association are pre-requisites to forming a company in the UK and is prescribed under the Companies Act 2006.
Memorandum of Association
A memorandum of association (MoA) is a legal document that defines the relationship between a company and its shareholders. In the UK, the MoA is required by law in order to incorporate a company. The MoA must be filed with Companies House, the UK’s registry of businesses. The MoA sets out the company’s name, registered address, and objects, which are the activities that the company is authorised to carry out.
The MoA also specifies the amount of money that each shareholder has invested in the company. In order to make changes to the MoA, a special resolution must be passed by the shareholders. The MoA can be thought of as the foundation stone of a company, and it is important to ensure that it accurately reflects the wishes of the shareholders.
The MoA is an important document because it shows that the company has been correctly incorporated and that it is operating within the law. Shareholders and directors can be held liable for the company’s actions if they are not named in the MoA. Furthermore, the MoA can be used as evidence in court if there is a dispute between the company and its shareholders or directors. Therefore, it is essential that all UK companies have a correctly drafted MoA.
Articles of Association
The articles of association for UK companies are a set of rules that govern how the company is run. They set out the rights and responsibilities of the shareholders, directors, and employees. The articles also define the powers of the board of directors and the procedures for making decisions. The articles of association are an important part of the company’s constitution and must be followed by all members of the company.
The articles of association are an important part of the company’s constitution and must be followed by all members of the company. They help to ensure that the company is run democratically and that decisions are made in a fair and transparent way. They also help to protect the rights of shareholders, directors, and employees.
The article of association must be approved by a majority of shareholders before it can come into effect, and it can only be amended with the consent of all shareholders.
The Companies Act 2006 sets out the rules for how a company’s articles of association should be written. Standard articles are suitable for most companies, but bespoke articles may be necessary if the company has special requirements.
The core elements that the articles should cover include:
- Liability of members;
- Directors’ powers and responsibilities;
- Directors’ meetings, voting, delegation to others and conflicts of interest;
- Retaining records of directors’ decisions;
- Appointment and removal of directors;
- Dividends and other distributions to members;
- Means of communication;
- Directors’ indemnity and insurance.
This is not an exhaustive list.
The articles of association for UK companies should be reviewed at least once every five years. This ensures that the company is up to date with the latest changes in the law and that its shareholders are aware of their rights and duties. The process of review also allows the company to make any necessary changes to its own internal rules. Reviewing the articles of association is an important part of good corporate governance. It helps to protect shareholders from unfair treatment and ensures that the company is run in a way that is compliant with the law.
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