The memorandum and articles of association are two essential documents required to set up a limited company in the UK. They are both a matter of public record. The memorandum of association is a single-page document that records the names of the founding shareholders or guarantors and their formal agreement to become members of the company. If you are setting up a limited by shares company, the memorandum will also state each shareholder’s agreement to take at least one share in the company. The articles of association are a multi-page document that outlines the rules and restrictions relating to the way the company is governed, operated and owned.
Overview of the Memorandum of Association
The memorandum confirms that the founding members (referred to as ‘subscribers’) agree to set up and join the company under the Companies Act 2006. Within the memorandum of a company limited by shares, the shareholders also undertake to hold a minimum of one issued share each. The maximum number of shares each subscriber agrees to take will vary on a case-by-case basis, depending on the total issued share capital of a company.
The memorandum is a pro-forma document and includes a statement of compliance of each founding member. It should be delivered to Companies House, together with the adopted articles of association, as part ohf the application to register the company.
Prior to the introduction of the Companies Act 2006 on 1st October 2009, limited companies were incorporation under the Companies Act 1985. At that time, the memorandum also included a number of governing provisions that are now part of the articles of association (including the company’s objects). These rules and restrictions for companies registered under the old Act are now treated as being part of the articles, rather than the memorandum.
Overview of the Articles of Association
The articles of association are a governing constitutional document adopted by a limited company when it is formed at Companies House. It includes key information about how the company should be run, how decisions are made, who can own and manage the company, the rights and responsibilities of members and directors, and the types of activities and transactions in which the company can engage.
Unlike the memorandum, the articles of association do not have a prescribed format. Companies can choose to:
- Adopt Model articles from Companies House
- Remove, add or alter certain provisions in the Model articles
- Create entirely unique articles to suit their needs
Model articles are the standard default articles a company can use. They are prescribed by the Companies Act 2006 and used on many new companies. Companies House offers different Model articles for private companies limited by shares, private companies limited by guarantee, and public limited companies. You can view them here.
The need to alter the Model articles or create unique, bespoke set is less common but may be necessary if you want to restrict or enhance directors’ powers, issue more than one class of shares, or alter the rights attached to Ordinary shares, for example. The Model articles for companies limited by shares are only suitable if you issue only Ordinary shares that provide equal rights to all shareholders.
Contents of the Model articles
The contents of the Model articles of association for private companies limited by shares are:
PART 1 – INTERPRETATION AND LIMITATION OF LIABILITY
1. Defined terms
2. Liability of members
PART 2 – DIRECTORS’ POWERS AND RESPONSIBILITIES
3. Directors’ general authority
4. Shareholders’ reserve power
5. Directors may delegate
DECISION-MAKING BY DIRECTORS
7. Directors to take decisions collectively
8. Unanimous decisions
9. Calling a directors’ meeting
10. Participation in directors’ meetings
11. Quorum for directors’ meetings
12. Chairing of directors’ meetings
13. Casting vote
14. Conflicts of interest
15. Records of decisions to be kept
16. Directors’ discretion to make further rules
APPOINTMENT OF DIRECTORS
17. Methods of appointing directors
18. Termination of director’s appointment
19. Directors’ remuneration
20. Directors’ expenses
PART 3 – SHARES AND DISTRIBUTIONS
21. All shares to be fully paid up
22. Powers to issue different classes of share
23. Company not bound by less than absolute interests
24. Share certificates
25. Replacement share certificates
26. Share transfers
27. Transmission of shares
28. Exercise of transmittees’ rights
29. Transmittees bound by prior notices
DIVIDENDS AND OTHER DISTRIBUTIONS
30. Procedure for declaring dividends
31. Payment of dividends and other distributions
32. No interest on distributions
33. Unclaimed distributions
34. Non-cash distributions
35. Waiver of distributions
CAPITALISATION OF PROFITS
36. Authority to capitalise and appropriation of capitalised sums
PART 4 – DECISION-MAKING BY SHAREHOLDERS
ORGANISATION OF GENERAL MEETINGS
37. Attendance and speaking at general meetings
38. Quorum for general meetings
39. Chairing general meetings
40. Attendance and speaking by directors and non-shareholders
VOTING AT GENERAL MEETINGS
42. Voting: general
43. Errors and disputes
44. Poll votes
45. Content of proxy notices
46. Delivery of proxy notices
47. Amendments to resolutions
PART 5 – ADMINISTRATIVE ARRANGEMENTS
48. Means of communication to be used
49. Company seals
50. No right to inspect accounts and other records
51. Provision for employees on cessation of business
DIRECTORS’ INDEMNITY AND INSURANCE
It is important to be aware of the content of the Model articles before agreeing to adopt them. For example, they give the directors wide ranging powers. If you wish to put certain restrictions in place, such as limiting the directors’ powers or requiring that they seek approval from members before authorising certain actions, you will need to alter the articles accordingly.
It is commonplace for shareholders to draw up a formal Shareholders’ Agreement to supplement the provisions in the articles in relation to the way the company is run, the powers of members and officers, and the issue or transfer of shares. Unlike the articles, a Shareholders’ Agreement is optional and not a matter of public record. If you set up a company with more than one shareholder, we highly recommend entering into a Shareholders’ Agreement to protect and clarify the rights of each member.
Changing the articles of association
If you wish to alter the articles or adopt new articles after company formation, the members will be required to pass a special resolution to approve the change. You will then have to send a copy of the resolution and the new articles to Companies House. A copy of the final document as altered must be submitted to Companies House within 15 days of the resolution.
Changing the company’s objects
If you need to change the company’s objects (i.e. what the company does) within the articles, you will need to complete Form CC04 and send it to Companies House with a copy of the special resolution and the articles as altered.
Where to find your Memorandum and Articles of Association
If you register a company through a company formation agent, you will receive a copy of your Memorandum and Articles of Association when your company registration has been approved by Companies House. These documents will be sent to you by email, along with a copy of your Certificate of Incorporation and share certificates.
Alternatively, you can view and download a digital copy of these documents via Companies House WebCHeck or Companies House Service (formerly known as Companies House BETA). Quality Company Formations customers can also view their memorandum and articles online by signing into their client account on our online Company Manager portal.