What are Company Memorandum and Articles of Association?
Under the Companies Act 2006, all companies formed in the UK need a memorandum and articles of association. The rule also applies to companies included in previous Companies Acts.
As a company owner, you should have a company memorandum and articles of association if your business is incorporated.
However, if your business isn't incorporated, you have nothing to worry about until you wish to do so.
The Memorandum lists all the people or initial shareholders during the company's formation. On the other hand, the Articles of Association is a set of rules that outlines how to govern and run a company.
So, as a business owner, why do you need a memorandum and articles of association? This article will discuss these two documents and their purpose and content.
What is The Company Memorandum?
The Memorandum is a one-page document bearing the names of the original members of a limited company. The subscribers sign a memorandum to state their intention to form a company and be part of it.
Before the formation of a company, the format of this legal document should be unaltered. Subscribers' names can't be changed or removed after incorporation. A memorandum is a historical document that will remain the same whether the original members leave the company or new members join.
During company formation, Companies House creates the Memorandum. The document is attached to the articles of association as part of the application to register a company.
A company memorandum is a public document anyone can access online at Companies House. All incorporated companies must have a copy of the Memorandum at their registered office address or SAIL address. These details will be displayed on the company memorandum.
- Registered company name
- Companies Act under which the company is incorporated (Companies Act 2006)
- Date of subscription or incorporation
- Type of company - Limited by shares or by guarantee
- Names and signatures of the founding members
What is The Articles of Association?
Unlike the company memorandum, Articles of Association comprise multiple pages that form the constitution of a limited company. The document is akin to an internal rulebook that outlines the terms a company is structured, governed, and managed.
The Articles of Association can limit the company's power, which is useful if the shareholders and directors disagree. These articles cover the following:
- How decisions must be made
- Directors duties, rights, and members liability
- The powers, duties, responsibilities, and of directors
- Share capital – Issuance and transfer of company shares.
- Profit allocation
- Appointing and removal of directors
- Whether a company needs a secretary
- All administrative matters relevant to the company
Companies House provides model articles PRESCRIBED by the Companies Act 2006. These model articles are in three default versions catering to private companies:
- Shares
- Private companies limited by guarantee
- Public limited companies (PLCs)
Unless a company creates their version of articles, all companies adopt the relevant Model articles from Company House.
The standard articles are simple and only suitable for private limited companies that only issue ordinary shares, some companies limited by guarantee and PLCs.
Small essential companies will find model articles ideal since they don't require specific provisions like those with one director and shareholder.
About Bespoke Articles
Bespoke articles are tailored for companies with several share classes and multiple shareholders. The document is suitable for a company's specific objectives and its members' various rights. They also ensure that all members receive fair treatment by any agreements created by shareholders.
A company can alter the Model articles from Companies House by adding, removing, or changing the provisions. The company must provide Companies House with a copy of the revised articles during incorporation. It's best to have the following in mind.
- A company's articles are public records, meaning anyone can access them.
- After incorporation, a company's articles can be changed after incorporation at a general meeting of the members.
- A copy of the articles remains in the company's registered office or SAIL address.
Form your company with Incorpuk today
At Incorpuk, we will help you file accurate information when you register your company through us. We will help you with incorporation articles, a registered office address, and all you may need to register your company in the UK. Contact our team if you seek any information; we will gladly assist.
Can the Memorandum and Articles of Association Be Changed?
A company's Memorandum can always remain the same.
Although members may come and go, the details must be updated in the company's statutory register of members and on public record. However, the Memorandum remains original as long as the company exists.
The articles can be altered anytime after the formation of a limited company unless ENTRENCHED provisions are in the amended articles. Some changes may be forbidden or require more demanding requirements for approval.
Without limitations, altering the articles can be accomplished through a special resolution requiring a 75% majority vote of members to pass. Members can vote at a general meeting or through a written resolution.
Within 15 days of the resolution, a copy of the articles passed or changed must be updated and filed at Companies House.
Restricted (Entrenched) Articles
After incorporation, companies can add clauses in company articles to restrict the alteration or removal of specific provisions. The move is helpful to companies with more than one owner where minority shareholders hold less than 25% voting rights.
Companies with one or two members with 50% equal shareholdings have no reason to add such clauses.
Changing the articles of most companies is possible by passing a 75% majority vote, which is approved by passing a special resolution.
Further article restrictions beyond this percentage, like a unanimous agreement by all members, must have entrenchment provisions.
Entrenched provisions are under the Companies Act 2006 (Sec. 22) and are set out as follows:
- The provision for entrenchment in a company's articles may specify that provisions of the articles may be amended if conditions are met. Compliance is more restrictive than a special resolution.
- Provision for entrenchment can be included in the company's articles on formation or by an amendment to which all company members must agree.
- Provision for entrenchment isn't a barrier to amending a company's articles by agreement of all the company members. The provision also doesn't prevent amendments to company articles by a court order or any other powerful authority.
- Nothing under this section affects the power of a court or other authority to change a company's articles.
According to the Companies Act 2006, initiating absolute entrenchment of the articles is no longer possible. Provisions can only be restricted conditionally, allowing them to be amended following a particular procedure.
How to Send Company Articles of Association to Companies House
You adopt Model articles when registering a company with Companies House Web Incorporation Service. The incorporation agency doesn't require a copy of Model articles.
However, using a paper application on Companies House form IN01, you can adopt Model or bespoke articles. The customised articles of association are submitted by post, accompanied by the application form. Using Model articles means you don't have to include a copy.
Note: Companies House supplies the Memorandum as part of the incorporation process.
Embracing Entrenched Articles
For any company that wants to embrace Entrenched Provisions, a notification must be sent to the Companies House within 15 days of the amendment. The notification can be done using Form IN01 upon incorporation. Those amending existing articles can use Form CC01, and a copy of the corrected Articles should be in the form.
Removing Entrenched Provisions
You can remove Entrenched Provisions if they aren't favourable for your company then use Form CC02 to inform Companies House of the amendment. A Statement of Compliance (Form CC03) must also be completed, and a copy of the corrected Articles and the resolution agreement to amend must be in the forms.
The Notification Process for Entrenched Articles
Use the correct form to notify Companies House of the alterations you wish to make to restricted provisions in your company's articles.
The notification provisions are in the Companies Act 2006, sections 23 and 24.
These notifications ensure that Companies House and other members of the public may search the public register of companies. Hence, the notice lets them know a company's articles have entrenching provisions where special rules apply.
Altering Existing Articles with Entrenched Provisions
For you to revise existing articles with entrenched provisions, Companies House requires you to provide a document with evidence of these alterations. A Statement of Compliance
You must also include a Statement of Compliance verifying the alterations are completed as per the articles. The statement should consist of any provision restrictions where relevant, in Compliance with any court order or other authority in force when the amendment happens.
The articles are not to be changed so that you may not alter them in any way that requires shareholders to raise their shares or liability. For this to happen, there must be a written agreement before or after the changes.
Frequently Asked Questions
Can I provide my Memorandum and Articles?
You can't provide your Memorandum since it's a template Companies House or your formation agent supplied after registration. The template is completed per the information you provided when filling it out for registration. But you can provide your articles if you still need to adopt the Model Articles.
Can I remove or change a subscriber's name from the Memorandum?
No, the Memorandum of Association can't be altered no matter what happens to a subscriber, including leaving the company or changing their name. Hence, you must be careful when filing the information.
Where are my company's articles of association?
Your company's articles of association are online, and you can download a copy from Companies House Online.
What does a memorandum of association contain?
The Memorandum of Association has the company's name, type of business, registered office address, share capital, and the names and signatures of the original subscribers. The document also profiles the company's goals, limitations, and powers within which the company must operate.
Are there different types of Memorandum of Association?
According to the form the Companies House provides, there are five types of Memorandum of association.
Conclusion
The Memorandum and articles of association are separate legal documents all limited companies must have during incorporation at Companies House. Limited liability partnerships do not need these documents. The Articles of Association are like a constitution that outlines how a company will be governed and managed. It has multiple sections and provisions, each with different company rules and regulations. The Memorandum of Association is a list of names and signatures of the original members of a company. The document must be filled with great care to ensure no one will wish to make a change later since it can't be altered. The founding members sign the Memorandum to guarantee that they intend to become part of the company as shareholders legally. do you have any questions about the Memorandum and Articles of Association? Kindly contact Incorpuk here for help.