All limited companies in the UK must adopt a memorandum of association. In this blog we will explain the significance of this document – and if it is possible to change it further down the line.
We also cover the articles of association and discuss their significance and whether it is possible to change them.
What is a memorandum of association?
As part of the procedure of incorporation, all limited companies in the UK are provided with a memorandum of association which, together with the articles of association, comprises the company’s constitution. The company constitution regulates how the company is managed, outlines the responsibilities of directors, and sets out the rights of shareholders, amongst other things.
Section 8 of the Companies Act 2006 defines the memorandum of association as: “a memorandum stating that the subscribers … wish to form a company under this Act, and … agree to become members of the company and, in the case of a company that is to have a share capital, to take at least one share each.” In other words, this document proves that the initial shareholders agreed to form the company and to become shareholders.
Before October 2009, the memorandum of association was an integral part of a company’s constitution, since it contained an “objects clause”. This clause set out the purpose of the company and listed the activities that the company was able to undertake in its day-to-day operations.
Newly formed companies no longer require an objects clause, and any remaining objects clauses are now considered to be part of the articles of association. So the constitutional significance of the memorandum of association has been greatly reduced.
There is no need to write a memorandum of association, since this is generated automatically as part of the online incorporation procedure. However, Companies House provides a template memorandum of association for anyone who wants to apply by post. This template can still be used to notify Companies House that each initial shareholder – known as a subscriber – agrees to:
- form a company under the Companies Act 2006
- become a member of the company
- take at least one share in the company
Anyone who forms their company with 1st Formations will receive a copy of their memorandum of association by email (and by post if your chosen company formation package includes printed company documents).
There will be no need to register this separately with Companies House, as this is done automatically as part of the incorporation procedure.
What is the difference between the memorandum of association and the articles of association?
Although both memorandum of association and articles of association are required for the formation of a company and are considered to form its constitution, this is where their similarities end.
As discussed, the memorandum of association merely provides a record of the initial company formation. But the articles of association are far more important, as they affect the day-to-day activities of a limited company.
The articles of association set out a range of provisions that govern the management of limited companies. Some of the corporate governance aspects covered by the articles of association include:
- the powers and responsibilities of company directors
- decision-making procedures for company directors and shareholders (this includes matters such as the quorum for holding meetings and how voting is decided)
- the appointment and termination of company directors, along with matters such as remuneration
- management of company shares, including the ability to issue new shares
Can I update my memorandum of association?
Once the memorandum of association has been generated upon company formation, it will not be possible to change or update this document at a later date.
There is no need to update the memorandum of association, since it no longer contains the historic objects clause. There is nothing else contained in this document that needs to be changed after the company has been formed.
Is it possible to change my articles of association?
It is possible – and sometimes necessary – to update the articles of association.
Although the model articles are generally sufficient at the incorporation stage, some companies will later decide to customise the provisions, e.g. to increase shareholder protection or issue multiple share classes.
A company’s articles of association can be amended by passing a special resolution of the members, under section 283 of the Companies Act 2006. A special resolution requires a majority of at least 75% of the total votes. It can be passed either as a written resolution that is signed by the shareholders, or else by casting votes at a general meeting of the shareholders.
Once it is passed, a copy of the special resolution should be submitted to Companies House within 15 days. A copy of the amended articles of association should also be submitted within 15 days of them taking effect. It may also be necessary to submit the following:
- statement of company objects – if the company is changing its objects in the articles of association
- change of constitution by enactment – if the change in the articles of association is due to a change in the law
- change of constitution by order of court or other authority – if a court or other authority has requested that the company changes its articles of association
1st Formations customers receive a memorandum of association and articles of association when they form a company.