If you are planning on setting up a limited company, you must draft an article of association and a memorandum. These documents can seem daunting if you have never done them before but there are some tips that could make drafting them a bit easier.
The articles of association outlines how you will operate your company. It contains rules about how your company will be managed and the administration and give the responsibilities of company officers and members. Once this document has been drafted, it should be adhered to. All members should stick to the responsibilities and requirements that pertain to them in the articles of association.
Many companies include the general administrative provisions of your company as well as the financial accountability of your company members. It outlines the powers of your company directors, the selection and dismissal of those directors and how profits are to be disbursed, as well as the transfer and issue of shares and the power of your members.
If you are planning to file your articles of association through Companies House then you will need to use the Model Articles. You can also use default articles if they are relevant to your company or you may choose to adopt your own articles. Model articles can be found on the Companies House website. You can download these articles and then form your company through Companies House. If you are using a company formation agent, they can help you to draft and adopt your articles of association. Many offer bespoke articles or they can help you to draft them from scratch.
You should keep a printed or digital copy of your articles at your registered company office. Once the articles have been accepted by Companies House, you will receive a copy of them. Both the association and your memorandum includes the names of the people who are stated as guarantors or shareholders in your company. The memorandum will indicate that the shareholders consent to take shares in your company. The worth of these shares is what helps to keep each member protected with limited liability.
You do not have to draft a memorandum yourself. Companies House creates the memorandum for you from the details that you provide when you apply to form your business. The memorandum is merely a piece of paper that is just one page that includes certain information about your company. Once your company has been registered you cannot make any changes to the original memorandum. Because of this, it is imperative that you ensure that all information is correct before you file the memorandum. If you have a shareholder or guarantor that leaves your company after you have incorporated it, that name will remain on the memorandum. The memorandum simply acts as an original record of the members of your company and will never change even if you change shareholders over and over again. You should also keep a printed or a digital copy of this document at your registered office address.