Memorandum of Association

Overview

The Memorandum of Association is a crucial official document that a company must submit to the Registrar of Companies during its formation. This document serves as a charter for the company and outlines the primary conditions under which the company is allowed to operate. It includes fundamental data about the new company, such as its name, the purpose for which it is being formed, and initial share capital.

Definition and Details

Historical Context

Until October 2010, when the Companies Act 2006 was fully implemented, the Memorandum of Association formed a significant part of a company’s constitutional documents. It typically included detailed information such as the objectives (or objects) of the company, the type of company (e.g., public limited company), and the authorized share capital. However, under the current Companies Act, the Memorandum is a much more concise document.

Current Requirements

As per the latest regulations, the Memorandum of Association merely states that the subscribers (members) wish to form a company and agree to take at least one share each. This simplification has made the process of company formation more straightforward.

Key Components

1. Company Name: The proposed name of the company.
2. Registered Office: The location (England, Wales, Scotland, or Northern Ireland) in which the registered office of the company will be situated.
3. Company Objective: The primary purpose for which the company is being established.
4. Type of Company: Specifies whether it is a limited company (by shares or guarantee) or an unlimited company.
5. Subscribers: The names of the initial shareholders or guarantors who are forming the company, signing the memorandum.

Examples

1. Tech Startup Example: A group of tech enthusiasts forms a new software development firm. The Memorandum of Association would outline the company name (e.g., Tech Innovations Ltd.), its business objective (providing cutting-edge software solutions), and the initial subscribers’ agreement to form the company.

2. Non-Profit Organization: Several community advocates decide to form a non-profit organization aimed at environmental conservation. Their Memorandum of Association would state their collective intention to form a company with a primary objective centered around environmental protection.

Frequently Asked Questions

Q1: Is the Memorandum of Association the same as the Articles of Association? A1: No, the Memorandum of Association and Articles of Association are distinct documents. The Memorandum provides fundamental details about the company’s formation, while the Articles of Association outline the internal regulations and governance of the company.

Q2: Can the Memorandum of Association be amended? A2: Typically, no. Once registered, the Memorandum of Association cannot be altered; however, any necessary changes to the company’s objects and structure would now generally be made to the Articles of Association.

Q3: Why is the Memorandum of Association still important despite its brevity under current laws? A3: Despite being shorter and simpler, the Memorandum of Association is crucial as it legally records the company’s founding members’ intention to form a corporation and take on shares.

Related Terms

1. Articles of Association: A document that specifies the regulations for a company’s operations and defines the company’s purpose, and lays out the responsibilities and rights of its directors, and relationships between shareholders.
2. Authorized Share Capital: The maximum amount of share capital that a company is authorized to issue to shareholders, as outlined in the company’s constitution.
3. Registrar of Companies: A governmental agency or a designated official responsible for maintaining a registry of companies, where all official company documents, like the Memorandum of Association, must be submitted.
4. Companies Act 2006: The primary legislation governing company law in the UK, providing the legal framework for the registration, reporting, and administration of companies.

Online Resources

• GOV.UK - Setting up a business
• Companies House
• Legislation.gov.uk - Companies Act 2006
• Investopedia - Articles of Association
• The Institute of Chartered Accountants in England and Wales

Suggested Books for Further Study

1. “Company Law, and Practice” by Alan Steinfeld QC

   • A comprehensive guide covering all aspects of company law, including incorporation, documents, and compliance.

2. “Mayson, French & Ryan on Company Law” by Derek French

   • Considered a fundamental textbook for understanding company law and its practical application.

3. “Company Law” by Alan Dignam and John Lowry

   • Essential reading for students and professionals dealing with corporate documents and governance.

4. “Gower and Davies’ Principles of Modern Company Law” by Paul L. Davies

   • A detailed discussion of modern company law including the statutory requirements for company formation and documents.

Accounting Basics: “Memorandum of Association” Fundamentals Quiz

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