Memorandum and Articles of Association

The Companies Act 2006, which came fully into effect in October 2009, made some changes to the laws behind the creation and formation of companies, as well as their general running. One of these changes was to the role of the Memorandum and Articles of Association which set the rules and structure for limited companies.

 

Articles of Association

A company’s Articles of Association are its rule book. They govern how a company will be run and how decisions will be made. The Articles of Association will cover areas such as:

  • The voting rights of directors and shareholders

  • How shares and dividends will be allocated

  • What the business will do (this is useful for non-profit companies)

  • How internal changes within the company will be made

  • The rights and responsibilities of the directors and shareholders

Articles of Association are designed to be quite flexible. You can write your own from scratch or use model ones provided by Companies House or other organizations. So, for instance, if you want to create a non-profit company you can write into the articles what the company will do with any profits and what the purpose of the company is. However, if your articles of association are found to be incomplete or not properly drafted default model articles will be used instead so it is a process which needs to be done carefully.

When forming a Private Company Limited by Shares we use standard model articles of association. We can alter these for customers if needed. If this is something you would be interested in please call in 01245 492777 to speak to our legal team. 

 

Memorandum of Association

Memorandum of Association used to be one of the main documents used when forming a company but the 2006 Companies Act has reduced the complexity of this document. From October 2009 onwards all new companies only need to include the following:

  • The names of the members of the company

  • The fact that they wish to form a company; and (if that company will have share capital)

  • An agreement to take at least 1 share each

 

Objects – What is the company set-up to do?

Historically, a Company was required to set out its objectives in the Memorandum of Association. For some Companies, this meant a long list of objects as they had to set out every possible avenue of enterprise. Section 31 of the Companies Act 2006 has gone some way to ease this burden. It is now assumed by the act that a company’s objects are unrestricted unless otherwise stated. Companies that are already set-up can choose to change their objects or removing them completely to allow them more freedom.