Memorandum of association
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The memorandum of association of a company, often simply called the memorandum (and then often capitalised as an abbreviation for the official name, which is a proper noun and usually includes other words), is the document that governs the relationship between the company and the outside world. It is one of the documents required to incorporate a company in the United Kingdom, Ireland and India, and is also used in many of the common law jurisdictions of the Commonwealth.
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[edit] Requirements
A memorandum of association is required to state the name of the company, the type of company (such as public limited company or private company limited by shares), the objectives of the company, its authorised share capital, and the subscribers (the original shareholders of the company). A company may alter particular parts of its memorandum at any time by a special resolution of its shareholders, provided that the amendment complies with company law.
[edit] Capacities
The objects of the company state what a company is permitted to do, and therefore limit its capacity to act. Since 1844, when the first limited companies were incorporated, the objects have become wider and more encompassing so as not to restrict the directors in their day to day trading. In the Companies Act 1989 the term "General Commercial Company" was introduced which meant the company could undertake "any lawful or legal trade or business."
If the company is to be a non-profit making company limited by guarantee, there will be statement saying that the profits shall not be distributed to the members.
[edit] Purpose
The MOA is designed to communicate to the public the state of affairs of the company and its purpose of being and operating. This aids various stakeholders of the company (creditors, suppliers, shareholders, etc.) to evaluate the extent of their risk and also possibilities of the company to overcome them at a future date.
[edit] Reform
The Companies Act 2006, scheduled to come into force in October 2008, will simplify the company law of the United Kingdom, and in doing so will remove the requirements for an objects clause, leaving the memorandum as a simple statement of certain facts relating to the company. Any limitation on capacity will thereafter be contained in the company's articles of association and will, if breached, be a purely internal matter potentially making directors liable to shareholders for any loss caused by the breach but not invalidating the act itself [1].
In Australia, the memorandum of association and articles of association have been combined since 2000 into a single document called the constitution of the company.
[edit] See also
- Articles of association (law)
- Company (law)
- Constitutional documents
- Table A
- Memorandum of agreement
- Mem and arts
[edit] References
- ^ Companies Act 2006 s39(1) "The validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the company's constitution"
