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As a limited company in the UK, your business will need to have a memorandum of association when it is first incorporated at the Companies House. Incorporation is effectively the company formation process. This requires you to submit a number of formal documents so that your company can be registered. One of these documents is a memorandum of association. A company’s memorandum forms part of its overall constitution, alongside the company’s articles of association.
This article will explain:
- what a memorandum of association is;
- what it will include; and
- how it fits into the broader picture in the company formation process.
What is a Memorandum of Association?
A company’s memorandum of association is a formal legal document that you submit to the Companies House as part of the incorporation process.
Within the memorandum document, each of the initial shareholders of the company provide a statement declaring that they agree to form a new company. As part of this, they will also agree to take at least one share out of the company’s share capital. The initial shareholders of a company can include founding members, as well as any guarantors or very early stage investors.
These members are referred to as ‘subscribers’ within the memorandum document. They demonstrate their intention to form the company by signing the document.
What Else Does A Memorandum of Association Contain?
A memorandum of association will also contain the name of the company itself. It can contain a number of further points, such as:
- the address of the company;
- the object for which you have established the company;
- a statement that the liability of each company is limited – making it clear that you have set up a limited company;
- the authorised share capital of the company, alongside the different categories of shares and their nominal value; and
- a clause of association.
Further, your memorandum will typically also include that the Companies Act 2006 will bind your company where applicable. The Companies Act is the main piece of legislation that governs English company law alongside your company’s articles of association.
Any member who is a signatory to the memorandum of association will be a member of the company, unless they decide to leave at a given point. The details of the members of a company are usually described in full within the register of the Companies House. The Companies House is the UK registrar of companies. It keeps a record of details of all incorporated companies in the UK.
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Does It Matter Whether I Register My Company Online or By Post?
In the modern day, many new companies complete the incorporation process online rather than through using physical documents. If you decide to carry out the incorporation process online, you will be able to also complete the memorandum of association online. This will automatically create the relevant legal statement as part of your registration.
If you complete the process by post, however, you will have to complete a template memorandum and post it to the Companies House.
What are Articles of Association?
You will usually create your company’s articles of association alongside the memorandum of association. Together, these two documents form the company’s constitution.
The articles of association have the purpose of governing the rules by which the company operates. This is in contrast to the memorandum of association, which provide a snapshot of the company at registration. In other words, the articles are the company’s rulebook. They usually set out various aspects of the company members’ powers and limitations. Importantly, a company’s articles of association overrule the Companies Act 2006 when it comes to the rules governing the company.
As a result, it is an important document and you should draft it carefully from the outset. If you do wish to amend your articles of association or constitution, you can typically do this through special resolution. A special resolution is a resolution that members with voting rights in your company can pass. To pass a special resolution, at least 75% of the votes must favour the motion. A memorandum of association will generally not need amendment as it is a simple legal statement of intention to incorporate.
Key Takeaways
If you are considering setting up a limited company, you should understand what a company’s constitution is and what it contains. One of the documents within a company’s constitution is the memorandum of association.
A company’s memorandum is a legal statement by its original shareholders. This will state their intention to set up a company and take at least one share from its share capital. A memorandum will be supplemented by a company’s articles of association. The company’s articles will set out the rules under which the company operates.
If you have any questions about your company’s memorandum of association, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A company’s memorandum is a legal statement by its original shareholders (including any founding members), declaring that they intend to set up a company.
The incorporation process is the process by which an individual or group of individuals will set up and register a company, and it involves a number of documents being submitted to the Companies House.
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