Any limited company will be required to have a Memorandum of Association which is the guidebook for its internal operations and external dealings. Often referred to as the Memorandum or just memorandum by the Companies House and all registered businesses, this document governs relationships within the company, whether it’s a limited liability business, privately owned or a corporation.
The Memorandum is required for any business or company that will be incorporated in the United Kingdom and Ireland. This is the same system followed in India as well, and used by many of Commonwealth’s common law jurisdictions. So whether the business comes with a mere Ltd. or LLC, they must submit their Memorandum to be fully and legally recognized by the Companies House and the national government where the business is operating.
Prior to October 2009, any new limited company must fulfill a Memorandum to be incorporated. But since then, most of the company’s constitutions are not wholly formed by the document. Information provided on the Memorandum has been limited as well.
Under the Act, a limited liability company indicates in the Memorandum their subscribers’ intent to form a company. Included as well would be their shared capital for each subscriber. Unlike the older ruling, there are no more requirements to indicate company name and type of company, the registered office location, authorized share capital and the objects of the company.
The Memorandum also contains the agreement of the first subscribers, or the persons who expressed intent to form a limited company or any business type covered by the Companies House. The subscribers, as indicated in the said document, will automatically become board members of the company and allowed to have one share of capital each.
For those companies incorporated before October 2009, their Memorandum may not be amended. Instead, such details have been among the requisites in the Articles, to include details of the share capital and objects clause. Also, the Memorandum eliminates restrictions of any business undertaking of a limited liability company.
In its place, the company’s constitution does have the restrictions that form part of the articles which allow them to conduct any lawful or legal trade or business as provided for by the “Companies Act”. This came after the term “general commercial company” was introduced for such purpose, making it much easier for businesses to reach out to other industries and groups. For non-profit making companies, their articles then include statements that their members shall not benefit from any profit distribution.
It can be said that the “Companies Act” has been much less stringent on businesses as it removed the need for an objects clause. Prior to this, objects clause was deemed posing impediments in freer trade and business pursuits. Thus, existing companies pushed on the passage of special resolutions to remove such clauses which are deemed to have strongly limited the company’s capacities to act. Directors then of any limited company can opt for other measures apart from day to day trading.
Jim F. Roberts has been expertly writing articles for 5 years on a variety of topics of interest. He finally discovered that starting a business requires a good knowledge on the types of company formations like solo ownership, Ltd., LLC, Limited Company and all the requirements in a business start-up.