If you’re planning on starting a limited business in the UK, then you’ll need to create both a company memorandum and articles of association.
With everything else you need to do to start your own business, the prospect of creating two very official documents can be pretty daunting. But the process of creating a company memorandum and articles of association isn’t as complicated as it sounds.
Companies House has over four million company registrations and more than 500,000 new businesses registering every year. Due to the volume of applications, the process is as simple as possible to help companies register quickly.
At Mint Formations, we help businesses create and submit these documents every day. So we’ve put together a guide for you to find out exactly what they are, when you need them and how to create them.
Overview: Company Memorandum and Articles of Association
In the UK, it’s a legal requirement for companies to have both a memorandum and articles of association. Businesses produce these documents to complete their formation and registration with Companies House.
Before we jump into exactly what these documents consist of and when you’ll need them, it’s helpful to have a basic understanding of them:
- Your memorandum of association will be a legal statement outlining the details of your company’s founders and their intentions to incorporate the business.
- Your articles of association are guidelines that show how you will run your company. Companies House provides template articles for business owners to create their own articles. Businesses personalise the document to devise their own regulations.
Now that you’ve got a basic understanding of company memorandums and articles of association, we can dive a little deeper into what they involve and how to create them.
What Is a Company Memorandum?
Of the two documents, the company memorandum is much more straightforward to complete. As the document is simply a statement of intent from your company’s founders to form or incorporate your business, it requires less information. Your memorandum should include these details:
- Your registered company name
- The date of subscription
- The legal act your company is incorporated under (Companies Act 2006)
- If your company is limited by shares or guarantee
- The name of all subscribers (founders and shareholders)
Before the 2006 Companies Act, the memorandum included other information like provisions, but they’re included in the articles of association now.
By completing and signing the memorandum, the subscribers agree to become the first members of a company under the Companies Act 2006 and agree to subscribe to at least one share.
Conveniently, a company memorandum of association must be in a form prescribed and supplied by Companies House. Once you have completed the form, you need to send it to Companies House with your application to register the company alongside the articles of association.
Once you have completed your registration and your business is set up, you cannot alter the name of subscribers on your memorandum as it is a binding legal document.
Does a Company Need a Memorandum of Association?
Unless you plan on running an unincorporated business, you will need to produce both a memorandum and articles of association.
It’s a legal requirement for all limited UK companies to have a memorandum of association. You will submit it to Companies House with your application and articles of association to register your company. Without these documents, you won’t be able to register your business.
What Are Articles of Association?
Your articles of association will take longer to put together than your memorandum as they involve more than names and signatures. Articles of association document your company’s constitution and form a guide and rulebook that outlines how you will manage your business. The areas that the articles cover include:
- Member’s rights, liability and duties
- Directors’ power and responsibilities
- Distribution of profits
- Appointment and removal of directors
- Decision making
- Administrative matters.
While you can choose to create your own articles of association, Companies House provides model articles as a default that many small businesses use. The template is easy to adapt for limited companies and can remove much of the stress and hassle from doing it yourself.
But if your company has more than one share class or multiple shareholders, it may be worth considering creating your own articles to make sure that the document reflects shareholders’ agreements and is tailored to the needs of your business. If you’re planning on creating your own articles, it’s wise to seek legal advice to avoid potential errors that can slow down your company registration.
Unlike the memorandum, you can alter your articles of association at any time, but any changes made must have a 75% majority in favour. You’ll need to send an updated version of the articles to Companies House within 15 days.
What Are Entrenched Articles of Association?
You probably won’t need to include entrenched provisions in your articles of association. Still, it’s a good idea to be aware of them, just in case you need them.
Entrenched provisions allow your company to adopt special clauses in the articles that make it more difficult to pass a resolution. Usually, to pass a resolution, you must have a majority vote in favour of it. Entrenched provisions mean that you must complete extra procedures before anything can pass.
Entrenched provisions were part of the Companies Act 2006. The act stipulates that they can only be added during formation or through an amendment that all company members agree with.
If you’re looking to start your limited company with only a single shareholder, then it’s unlikely that you’ll need to include entrenched provisions. But if you do want to adopt them later, you’ll need to notify Companies House within 15 days of the amendment and include any revised articles.
How to Submit Your Company Memorandum
If you’re looking to register your company with Companies House, you will need to submit your memorandum and articles of association with your registration. There are a few options available to do this:
- Online
- Post
- Via a company formations agent
If you decide to register your company online through Companies House, you’ll need to adopt the model articles supplied and submit your memorandum online.
If you’re looking to create bespoke articles, you’ll need to submit your documents by post with an application form. However, if you decide to use the model articles, you do not need to include a copy with your application.
A company formations agent will create your documents and submit them to Companies House for you. This can take the hassle and stress out of the process, letting you focus on what matters to your business.
Need a hand submitting your company memorandum and articles of association? At Mint Formations, our bespoke service takes care of creating and submitting your documents so you can focus on your business.
