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memorandum and articles of association - private companies
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Memorandum and articles of association - private companies

Memorandum and
articles of association

All limited companies have a memorandum and articles of association.  Our model gives you a starting point that you can tailor to your company’s needs.

What’s a memorandum?

The memorandum simply states the subscribers’ wish to form a company, agree to become members and agree to take at least one share each. Historically, it was a more complicated document, setting out the company’s powers and any limits on them (called the company’s “objects”, along with information such as the company’s place of incorporation and share capital.

For any company incorporated before 1 October 2009, the contents of its memorandum, e.g. the place of incorporation, objects, share capital etc, are deemed by the Companies Act 2006 to be part of its articles and are therefore capable of being amended and or deleted by special resolution.

What are the articles?

It’s a document that sets out how a company can function and operate internally, and therefore deals with such important matters as: the notice and conduct of board meetings and shareholders’ meetings, the appointment and dismissal of directors, transferring shares etc.

A new model

The Model Articles are the default set of articles that apply to companies incorporated on or after 1 October 2009, i.e. they apply unless the company opts to register its own articles. They can be tailored to suit a company’s needs on incorporation or afterwards by special resolution. Therefore, most companies’ articles take this form or are based on it, where the company was incorporated after they came into effect. For companies incorporated prior to 1 October 2009, their articles are likely to be based on the previous default articles, known as Table A. Again, these can be changed by special resolution.

Advice

To use the default articles effectively, you’ll need to know your way around the Companies Act 2006 because, despite the plain language, there’s a lack of detail about how to do things, e.g. set up a shareholders’ meeting. As director, don’t forget that one of your statutory “general duties” is to be familiar with the company’s constitution.

Possible changes

It’s perfectly acceptable to rely upon the New Model Articles as the basis for your company’s articles.

However, as with anything that’s not bespoke to specifically match the needs of your business, you might want to consider the following amendments:

          watch out for the requirement to give written reasons for declining to agree to a share transfer.

          consider adding the words “without any reason therefore”

          if the board utilise alternative directors, the articles will need changing to allow for this

          if other officers of the company, apart from directors, are to enjoy the protection of directors’ indemnity insurance, the articles will need changing because only directors are currently covered

          if you want directors to retire automatically, then the articles will need to be changed because there’s no provision for this

          directors’ remuneration is determined by the board, whereas previously, Table A, gave the shareholders the power to decide this

          dismissal of a director isn’t addressed, therefore you’re left with having to follow the procedure set out in the Companies Act 2006. As well as being time-consuming and long-winded, the decision is taken by the company’s shareholders and not the board. Consider, instead, an amendment empowering the directors to take this decision.

 

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