What’s the Difference Between Memorandum & Articles of Association?

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What’s the Difference Between Memorandum & Articles of Association?

Setting up a limited company has many benefits. The foremost benefit is that you won’t be personally liable for debts and other liability incurred by the company. Moreover, you will be able to raise a large amount of capital to finance expansion activities of the business.

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One of the important requirements of establishing a limited company in the UK is creating a memorandum of association (MOA) and articles of association (AOA). In this post, we will explain the major point of differences between the two documents.

Memorandum of Association (MOA)

MOA is a legal statement that is signed by all founding shareholders who agree to establish a company. The shareholders signing the MOA confirm that they want to form a company as per the terms of UK Companies Act 2006.

The MOA should be in a specific format. You can contact accountants for small limited company to know the prescribed format for the memorandum. The document must include a statement of compliance and submitted to the Companies House along with the registration document.

In the MOA, the name of every shareholder is listed. They are known as subscribers as they are subscribing their names during the incorporation process by including in the memorandum document. The document contains information on just one or two pages depending on the list of subscribers.

Once the company is registered, you are not allowed to make changes in the MOA. So, it’s important to carefully review accuracy of the information before submitting for incorporation.

Articles of Association (AOA)

AOA is also a legal document that contains rules and regulations on how the company should be governed. The document is signed by company directors, shareholders, and secretary.

The AOA is a more detailed document as compared to MOA. It contains various rules for the admin, officers, and company management. Some of the elements that should be covered in the AOA include the following.

  • Members Liability
  • Rules regarding voting, meeting, and conflict of interest
  • Responsibilities of directors
  • Procedure for retaining records
  • Procedure for appointing and removing directors
  • Share certificates in case of a company limited by shares
  • Process of decision making by members
  • Preferred medium of communication
  • Rules regarding the use of company seal
  • General administrative provisions
  • Financial accountability of members

Company members mentioned in the AOA need to adhere to the prescribed rules. The document should be referred to before passing business judgments. It can create restrictions on the powers of company directors and they may be required to obtain approval of shareholders before pursuing a certain course of action.

Unlike MOA, AOA can be changed anytime over the course of the business. Any changes in the document must be informed to the Companies House no longer than 15 days after the change. To make changes in the AOA, more than 75 percent of members should vote in favour of the changes. Voting is typically carried out during the general meeting of the members. You should consider getting specialised guidance from limited company accountants before making any significant changes in the document.

Tips for Creating MOA and AOA

You can create a personalized MOA and AOA according to the requirements of your company. The MOA should inform the Companies House that each member who has signed the MOA agrees to become a member of the company, establish the company according to the Companies Act 2006, and agrees to take shares of the company. It should include the company name along with the name and signature of each member.

You can submit a personalized AOA when registering the company. However, if you are registering the company through the Companies House website, you must use Model Articles available online.

After your application for incorporation has been accepted by the Companies House, you will be sent a copy of the AOA. It’s important to retain the electronic or printed copy at the registered office that is mentioned in the document.

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