What are the Articles and Memorandum of Association?

When registering a new limited company, you must provide (or adopt) Articles of Association, which act as the company’s ‘rule book’, and an initial list of subscribers via a Memorandum of Association.

The Articles and Memorandum are legal requirements for setting up your company.

The company incorporation process

Setting up your business as a limited company is likely to be more tax advantageous than’ self-employment’ and will usually limit your personal liability for any debt or liabilities the business might incur in the future.

If you have sought advice and are certain that it is in your best interests to do so, you will need to register your business at Companies House to ‘incorporate’ it.

To register your limited company, though, several steps must be taken first:

• Choose a business name (following the rules set out here).
• Allocate a registered address for your company. This must be a real address, not a PO Box.
• Name at least one director (you, a business partner, your spouse, or anyone you trust to decide how the company is run) and a company secretary.
• Name at least one shareholder (see the Government’s website here).
• Draw up your memorandum and articles of association.

Memorandum of Association

The Memorandum is a legal document stating that each proposed shareholder has agreed to form a new limited company. It contains the name of each initial shareholder (also known as a subscriber) and the number of shares they hold.

Once your company has been registered, this document cannot be changed or updated. Companies House offers a standard template, which you can download here.

In practice, however, assuming you incorporate online, the Memorandum is automatically created using the information provided during submission.

Articles of Association – what do they contain?

The Articles set out the rules that your company will abide by.

These ‘rules’ must be agreed by all shareholders, all directors and the company secretary, and will need to cover all of the important elements of running a limited company, including:

• What decisions can the directors make on their own, and which must be approved by all shareholders?
• What happens if there is a deadlock between shareholders and directors over a particular decision (who will have the casting vote?)
• How directors will be paid.
• Whether shares may be transferred.
• How and when dividends are paid.
• Directors’ indemnity and insurance.
• Appointment and removal of directors.

In addition, you may want to include rules for issuing new shares, shareholder rights and obligations, and specific terms for director responsibilities.

Model or customised Articles of Association

If no customised Articles of Association are provided, the company will default to the ‘Model Articles’ provided by the government.

You can create your own Articles to set out exactly how you want your business to be run.

If you do so, then you will not be able to register your business online through Companies House and will instead need to make a paper application, which will take longer to process.

You can create your own Articles to set out exactly how you want your business to be run.

If f you do so, you will not be able to register your business online through Companies House and will instead need to make a paper application, which will take longer to process.

Most new companies elect to use ‘model articles’ (similar to standard terms and conditions), available on the Government’s website here.

These model Articles contain all the rules that companies typically need to agree upon for the company to run without administrative difficulties, so if you are thinking of writing your own articles, they offer a good starting point.

Can you make changes in the future?

Unlike the Memorandum of Association, your Articles can be changed as necessary to reflect changes to your business over time.

A copy of the amended Articles and a written or special resolution passed by the company’s directors must be sent to Companies House within 15 days of the company’s shareholders approving the amendments.

If Companies House does not approve your Articles (or any amendments), your application may be rejected.

Alternatively, changes to Articles after incorporation can be rejected if they conflict with legal regulations, in which case Companies House will inform you and request modifications.

If you are not adopting a standard set to reduce the risk of your application being rejected, you can have new articles drafted professionally.