The Differences Between Article of Association and Memorandum of Association
Starting a business can be an exciting but intimidating process. There are many details to consider, including legal requirements. Two of the most important legal documents you’ll need to establish your business are the memorandum and articles of association. These documents establish the legal framework for your business. Here are the differences between the two documents.
Memorandum of Association
The Memorandum of Association is the legal document that outlines the company’s purpose and the relationship between the company and its shareholders. It also establishes the company’s name, registered office, and the type of company it is.
The Memorandum of Association includes the following information:
– Company name and registered office
– Company type, such as private or public limited company
– Nature of the business
– Liability of the members, whether it’s limited or unlimited
– Details of shareholders, such as how many shares they own and any restrictions on their transfer
– The details of the initial shareholders
The Memorandum of Association is a legal requirement for all companies for registration purposes. It is one of the most important legal documents, and any amendments to it must be filed with the Companies House.
Articles of Association
The Articles of Association document outlines the internal management, governance, and decision-making framework of the company. It details the rules for how the company should operate, and how it should be run on a day-to-day basis.
The Articles of Association includes the following information:
– The rights and responsibilities of the company’s shareholders
– The rules and regulations for conducting meetings
– The procedures for electing and removing directors
– The process for voting on company resolutions
– The details of any company share options
– How the company’s accounts should be prepared
The Articles of Association are not a legal requirement. However, they are essential for keeping the company operating efficiently and in accordance with the law. They can be amended by the company’s members at any time.
Key Differences Between Memorandum of Association and Articles of Association
The primary differences between the Memorandum of Association and Articles of Association are:
– The Memorandum of Association establishes the company’s identity and purpose, while the Articles of Association outline the company’s internal regulations and procedures.
– The Memorandum of Association is a legal requirement for registration, while the Articles of Association are not required by law but are vital for running the company efficiently.
– The Memorandum of Association is more difficult to amend than the Articles of Association. The Memorandum of Association requires a special resolution of the members, while the Articles of Association can be amended by the members at any time.
In conclusion, both the Memorandum of Association and Articles of Association are important legal documents for any new organization. The Memorandum establishes the company’s identity and purpose, while the Articles of Association outline the internal regulations and procedures of the company. While Memorandum of Association is a legal requirement, Articles of Association are not necessary but still very important for running the company efficiently. You should never ignore these documents and should create sufficiently detailed Memorandum and Articles of Association to avoid difficulties in the future.
Table difference between article of association and memorandum of association
| Article of Association | Memorandum of Association |
|---|---|
| It defines the internal management structure and operational rules of a company. | It defines the objectives, scope, and powers of a company. |
| It is a subordinate document to the memorandum of association. | It is the main document of a company and it cannot be altered easily. |
| It deals with the day-to-day business affairs of the company. | It deals with the fundamental and legal aspects of the company. |
| It can be amended by passing a special resolution by the members of the company. | It can only be altered during incorporation of the company and not after that. |
| It contains provisions related to the borrowing of money, distribution of dividends, and appointment of directors. | It contains the name, objectives, and registered office of the company. |