Memorandum and articles of association explained
If you’re thinking about starting your own business and registering as a limited company, then you’ll need two documents – a memorandum of association and articles of association.
These documents form the constitution and legal foundation of your company and essentially lay out the rules by which the company must be run.
By forming a limited company and becoming a company director, you will be required to have both, so you will need to know what they are. Our guide covers everything you need to know.
What is a memorandum of association?
A memorandum of association is a legal document which is signed by all initial directors and shareholders agreeing to form a company. A memorandum of association is often referred to as simply a memorandum.
The memorandum is a statement by the first members to Companies House that they wish to form a company. Once you have registered and your memorandum of association has been created, it cannot be amended, and it serves mainly as a document to note who set the company up and when.
The memorandum will notify Companies House that each subscriber to the company:
- Agrees to form a company under the Companies Act 2006
- Agrees to become a member of the company
- Agrees to take at least one share in the company
If you decide to register a company online, then you won’t need to write your own memorandum. Companies House will create one for you as part of your registration.
Before the Companies Act 2006, the memorandum of association had a much more prominent role in the formation and running of a company. Prior to the act, you were required to state the name of the company, the type of company, the location of the registered office, the objects of the company and the share capital.
However, after the law change, the memorandum remains more of a formality in the forming of a company, and these requirements now fall inside the articles of association.
What are articles of association?
A company’s articles of association is the legal document which states the specific rules and regulations of the company and what the company does. Essentially, it is the company’s rulebook.
All rules and bylaws of the company will be contained in their articles of association, and it must be agreed to by all company directors and shareholders of the company.
The articles of association will outline important information, such as:
- The purpose of the company
- How shares are issued and transferred
- The rights of shareholders
- How meetings are called
- How votes are cast
- The powers and responsibilities of the company directors
- How directors can be appointed or removed
- How profits and dividends are distributed
Companies can add any specific bylaws into the articles of association that they might need. This could be any kind of requirement the company has, but must still be consistent with the law and agreed upon by all directors and shareholders.
The articles of association form a public document that is accessible to anyone.
What are model articles of association?
If you’re setting up a small business, you might not necessarily need anything but a standard articles of association document for your business, especially if you’re a sole director. Plus, you might not have the knowledge or expertise for corporate governance, so you are not expected to write your own articles of association.
Model articles of association are standard templates provided by governing bodies, which if you are forming a company in the UK, will be Companies House.
You have the option to choose different model articles of association, depending on what type of limited company you are forming, e.g. a private company limited by shares.
Simply visit the Companies House website and pick the appropriate model articles of association that fit your company. If you are forming a Community Interest Company, model constitutions are provided by the CIC regulator.
With a preset framework, you can ensure that your company is legally compliant, and also save time when registering your company.
Top Tip: At Tide, we are all about saving you time and money. When you register a company with us, we use the model articles of association, making the formation process faster and easier💡
Who is bound by the articles of association?
The company, its directors, and its shareholders are all bound by the articles of association. They also apply to company secretaries, and guarantors, if a company has either.
The articles of association outline the powers and responsibilities of company directors, and can include restrictions on performing certain actions without shareholder approval.
Shareholders are also bound by the articles of association and it will outline how shares are allocated and the certain rights that are attached to shares, including the procedures for shareholder decisions.
Amending the articles of association
As companies change and expand, there might be a necessity to update the articles of association. The articles contain strict rules about how the company can be run, and if they are unsuitable or too restrictive this can cause problems. Changes to the law can sometimes render certain articles illegal, or there might also be a loophole or a mistake which needs to be corrected.
Your company must always operate in line with the articles of association, so knowing how to make amendments is crucial. These changes could be as small as changing a single clause or line within the document.
To make any changes to your company’s articles of association, you must first pass a ‘special resolution’ which requires you to have the agreement of 75% of company members (directors, shareholders and other company guarantors). If it’s just you in the company, you can make changes straight away.
You do not always have to call a meeting, as this can be done with a written resolution that can be agreed upon by the members who then sign and return it.
If the changes are considered to be significant, and there are a lot of company members, then companies will often call a general meeting to discuss the proposed changes and agree on the resolution. Proposing a special resolution at a general meeting carries certain requirements, such as notifying all members at least 14 days in advance and including the full text of the special resolution in the meeting notice.
Once agreed upon, and the changes are made to the articles of association, you must notify Companies House within 15 days of the agreement. This will require you to send a copy of the resolution and the new articles of association to Companies House, along with any other forms.
Where can the memorandum and articles of association be found?
As the memorandum and articles of association are public, they can be viewed by anyone on the Companies House register.
Under ‘Filing History’, you will be able to find the memorandum and articles of association of any company.
For example, you can find our company information on Companies House under ‘Tide Platform LTD’. Within this platform, you will be able to find our articles of association and our memorandum of association.
You can also find a physical copy of the memorandum and articles of association at the registered office, or Single Alternative Inspection Location (SAIL) address of the company, as this is a legal requirement.
Wrapping up
The memorandum of association and articles of association are two vital documents which form the basis of your limited company. If you are thinking about starting your own company, then it’s crucial that you understand the requirements.
The articles of association form the legal framework for your company, and outline all the powers and responsibilities that company directors and shareholders have. If you need to make any changes to the articles of association, this can be done easily by following the correct procedures and notifying Companies House of the changes.
At Tide, we aim to save business owners time and money. Registering a limited company with Tide will take minutes, and as well as forming a limited company, you’ll also get a free business bank account so you can be ready to start trading right away.
Within the Tide app you can even access our accounting software, invoice generator, business loans, and everything else you need to let you get back to doing what you love – running your business.
