Every UK limited company is formed with two key documents in place: the memorandum of association and the articles of association. One records the fact that the company was created. The other sets out how it will be run. Both are required by law, and both stay with the company for as long as it exists. Most directors never give them a second thought – until something goes wrong. This is why understanding their purpose before you establish your new company can save you considerable aggravation in the future.
- The memorandum is a permanent, one-page document confirming subscribers’ agreement to form the company and take at least one share each.
- The memorandum cannot be altered after incorporation; any later changes to ownership or structure are dealt with through other legal mechanisms.
- The articles of association form a legally binding internal rulebook, governing directors’ powers, shareholder rights, decision-making, and share capital.
- Articles can be tailored, amended by special resolution, must be filed with Companies House, and are central in avoiding or resolving shareholder disputes.
- Model articles suit simple companies, but many businesses require bespoke articles and a separate, private shareholders’ agreement for comprehensive governance.
What Is the Memorandum of Association?
The memorandum of association is a short, formal statement signed by the founding members of a company at the point of incorporation with Companies House. Its purpose is to confirm that the subscribers, the initial shareholders or guarantors, agree to form the company and take at least one share each (for companies limited by shares).
Under the Companies Act 2006, which governs all companies incorporated on or after 1st October 2009, the memorandum is a fixed and permanent document. As such, once it is submitted to Companies House as part of the incorporation application process, it cannot be altered. Changes to membership or structure after that point are handled through separate mechanisms, not by amending the memorandum.
For companies formed before October 2009 under earlier legislation, the memorandum served a broader purpose. It also contained the company’s ‘objects clause’, a statement limiting what the company was permitted to do. Under the 2006 Act, this is no longer required in the memorandum. A company’s objects are now unrestricted as standard unless specifically limited in the articles of association.
What Does the Memorandum of Association Contain
For modern companies, the memorandum of association is a brief, standardised document. It includes the full names and signatures of each subscriber, a statement confirming their intent to form the company, and a confirmation that each subscriber agrees to take at least one share. That is its full extent.
There is no objects clause, no share capital declaration, and no operational detail. Those matters are addressed in the company formation documents submitted alongside the memorandum, particularly in the articles of association.
What Are Articles of Association?
The articles of association can be thought of as the company’s internal rulebook. They set out how the company is run, managed, and governed on an ongoing basis. Unlike the memorandum, the articles can be amended after incorporation, subject to the correct procedures being followed. The key points to bear in mind are as follows:
- The articles of association are legally binding on the company, its directors, and its shareholders
- They are enforceable as a contract between the company and its members
- Every private company limited by shares must have articles in place at all times, and
- A company cannot operate legally without them.
What Is Included in the Articles of Association?
The articles cover the practicalities of how the company actually operates. Key areas include:
- Directors’ powers and responsibilities – what decisions directors can make unilaterally and which require shareholder approval
- Appointment and removal of directors – procedures for changing the board
- Shareholder rights and meetings – voting rights, notice requirements, and quorum rules
- Share capital and transfers – how shares are issued, classed, and transferred between parties
- Dividend distribution – how profits are distributed to shareholders
- Decision-making procedures – written resolutions, board meetings, and general meetings
The specific contents can vary significantly between companies, depending on the number of shareholders, the relationship between directors and owners, and the complexity of the business’s governance needs.
Model Articles of Association
Companies House provides standard template articles known as model articles. These are available for private companies limited by shares, private companies limited by guarantee, and public limited companies. If a company incorporates without submitting bespoke articles, the model articles apply automatically by default.
The model articles of association are suitable for most straightforward owner-managed companies. However, they are generic by design. Businesses with more than one shareholder, complex ownership arrangements, or investor requirements often need tailored articles that address situations the standard template does not cover.
Bespoke articles are particularly important where shareholders want to restrict share transfers, create different share classes with different rights, or define the circumstances under which a shareholder can be required to sell. These matters require careful drafting as they cannot be adequately handled by a standard template.
How Do the Memorandum and Articles Differ?
| Feature | Memorandum vs articles |
|---|---|
|
Purpose |
Memorandum records the company’s formation; articles govern how it operates |
|
Length |
Memorandum: one page, standardised; articles: multi-page, customisable |
|
Can it be changed? |
Memorandum: no, permanent once filed; articles: yes, by special resolution |
|
Filed with Companies House? |
Both filed at incorporation; articles also re-filed after any amendment |
The memorandum and articles of association serve complementary but different roles. The memorandum is a one-time declaration. The articles are an ongoing governance framework that must be kept current as the company’s circumstances evolve.
Amending the Articles of Association
A company may need to amend its articles of association as circumstances change, for example, when new investors join, when a new share class is created, or when the management structure shifts. Amendments require a special resolution, meaning at least 75% of shareholders must vote in favour.
Once passed, the amended articles must be filed at Companies House within 15 days. The updated version replaces the previous articles on the public register. Companies House maintains a history of all previous versions, so the evolution of the company’s governance can be traced over time. Failing to file amended articles on time is a criminal offence under the Companies Act 2006. It can result in fines for the company and its officers. More practically, it means third parties relying on the register may be acting on outdated information.
Articles of Association and Company Formation
When setting up a UK limited company, the articles must be submitted to Companies House alongside the incorporation application. If model articles are being adopted, they do not need to be uploaded, Companies House applies them automatically. If bespoke articles are being used, they must accompany the IN01 application form.
From the moment of incorporation, the articles are a public document. As such, any person can inspect or download them from the Companies House register free of charge. Confidential operational matters, such as specific commercial arrangements between shareholders, should therefore be handled through a separate shareholders’ agreement rather than embedded in the articles. A certificate of incorporation is issued by Companies House once the application is approved. From that point, the memorandum and articles of association are live and fully enforceable.
The articles of association are frequently at the centre of shareholder disputes. If a shareholder believes a director has acted outside their authority, or that a share transfer has been handled incorrectly, the articles are the first document referred to.
Well-drafted articles reduce the scope for ambiguity. Poorly drafted or out-of-date articles, on the other hand, can leave significant gaps that courts must interpret, often at considerable expense and uncertainty. The model articles are silent on many situations that arise in real businesses: what happens when a shareholder wants to exit, what constitutes a deadlock between equal shareholders, and how disputes are resolved. These are not hypothetical concerns. They arise regularly in closely held companies, and the absence of clear provisions in the articles makes resolution significantly harder.
The articles of association are a public document. A shareholders’ agreement, by contrast, is a private contract between shareholders that sits alongside the articles. It can contain commercially sensitive terms that the parties do not wish to place on the public register.
Shareholders’ agreements are commonly used alongside bespoke articles to address matters such as dividend policies, exit rights, drag-along and tag-along provisions, and restrictions on competition. Together, the two documents form a comprehensive governance framework for the company.
Where disputes arise between shareholders, both documents are examined closely. Courts will consider whether a particular action was permitted under the articles, and whether the shareholders’ agreement provides additional protections or obligations. Having both documents properly drafted, and ensuring they are consistent with one another, reduces the likelihood of costly disagreement. Where the articles and the shareholders’ agreement conflict, the articles will generally prevail in relation to the company’s dealings with third parties. Between the shareholders themselves, the agreement may take precedence. This is an important reason why both documents need to be considered together and not in isolation from one another or from the broader governance structure of the company.
Final Words
The memorandum and articles of association are not administrative formalities to be completed and forgotten at the point of incorporation. They define the legal identity of the company and the rules by which it operates. Getting the articles right from the outset, whether by adopting model articles or commissioning bespoke drafting, can prevent significant disputes and complications later. The decisions made in these documents at formation can have consequences that last for the entire life of the company.
