Memorandum And Articles of Association

Article Written By: netlawman

The company memorandum of association defines the powers and objects of the limited liability company which the subscribers to the memorandum association wish the company to trade under. For example, a memorandum of association must contain following:

(a) The Name of the Company

The name of the company with Limited as the last word

(b) The Objective Clause

It generally defines the purpose for which the company was formed and what it shall in fact do in the way of its business. This statement will effectively determine what shall be the powers of the company. The objects clause also has a negative effect in that it will limit and restrict the powers of the company from doing things not authorised by the objects clause. Thus, a professional advice is necessary in devising objective clause to include clauses like

• Power to invest company money

• The power to receive money on deposit, to lend money and to guarantee the performance of contracts

• To pay for property and remunerate persons by cash or otherwise

• Power to act as or employ agents.

(b) The Memorandum must also include a declaration as to liability

In the case of a limited liability company the company memorandum of association must contain a statement that the liability of the members is limited.

(d) A Capital Clause

For a company limited by shares the amount of share capital the company proposes and the division into shares of fixed amount.

(e) The Association Clause

The founding members declare that they wish to be formed into a company and agree to take shares. The names and addresses of the founding members are listed in one column and a corresponding column will list the number of shares they each hold.

Historically, a company's memorandum of association contained an objects clause, which limited its capacity to act. When the first limited companies were incorporated, the objects clause had to be widely drafted so as not to restrict the board of directors in their day to day trading.

The memorandum no longer restricts what a company is permitted to do. Since 1 October 2009, if a company's constitution contains any restrictions on the objects at all, those restrictions will form part of the articles of association.

The Companies Act 2006 relaxed the rules even further, removing the need for an objects clause at all. Companies incorporated on and after 1 October 2009 without an objects clause are deemed to have unrestricted objects. Existing companies may take advantage of this change by passing a special resolution to remove their objects clause.

Net Lawman has a fully up-to-date team of Solicitors and Barristers which will provide you all sort of documents with up-to-date law.

The articles of association are chosen by the members and form a contract between the company and its members. They help to ensure the company s business runs as smoothly and efficiently as possible and will set out how the company will make decisions and include various matters connected with the shares. Every company is required to have articles by law and the articles are legally binding on the company and all of its members.

The Companies Act 2006, which received Royal Assent on 8 November 2006 and was fully implemented on 1 October 2009, provides for a new form of model articles of association for companies incorporated in the United Kingdom.

• interpretation and limitation of liability

• directors' powers and responsibilities

• decision-making by directors

• appointment of directors

• shares

• dividends and other distributions

• capitalisation of profits

• organisation of general meetings

• voting at general meetings

• administrative arrangements

• directors indemnity and insurance.

If the members decide to draw up their own rules they should consider whether they need to take legal or other professional advice and have bespoke or tailor-made articles drawn up for their company.

Once your company is incorporated, you must notify Companies House every time your company makes changes to its articles. You and your company may commit an offence if you do not do so. A copy of the special resolution making the change must be delivered to Companies House within 15 days of being passed. You must also deliver a copy of the amended articles to Companies House within 15 days.

Your company can choose to adopt articles which include provisions that are entrenched, meaning that the company can only repeal or amend these provisions if certain conditions are me. However, to include such articles, a professional advice and drafting is necassay.

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