Company formation documents, also referred to as company incorporation documents, are drafted during the process of registering and creating the constitution of a new company in the UK. The legal requirements for and purposes of these documents are covered in the Companies Act 2006 (CA 2006). Once drafted and approved, a company’s formation documents must be properly stored for ease of reference at the registered office address. The company formation documents include the following:
- Memorandum of Association.
- Articles of Association.
- Certificate of Incorporation.
In this article we will explain the purpose of these company incorporation documents and the requirements that each imposes upon companies in the UK under the CA 2006.
Memorandum of Association
The memorandum of association document is a prerequisite for registration and contains the agreement of each member to form a company. For private companies limited by shares the memorandum must confirm that each member agrees to take at least one share.
The requirement for a memorandum of association is contained in several sections of the CA 2006, as follows:
Section 7 (1) of the CA 2006 states: “A company is formed under this Act by one or more persons— (a) subscribing their names to a memorandum of association (see section 8)…”.
Section 8 of the CA 2006 then goes on to explain that a memorandum of association confirms that those applying for company registration (referred-to as “subscribers”):
(a) wish to form a company under the Act, and
(b) agree to become members of the company and, in the case of a company that is to have a share capital, to take at least one share each.
The memorandum must also be in the prescribed form and authenticated by each subscriber.
Section 9 makes it clear that a memorandum of association must be provided to Companies House (the registrar) together with an application for registration of the company, the documents required and a statement of compliance.
It is important to note that although the memorandum of association is essential for the incorporation of a new company, it now has a very limited purpose after this. Before 1 October 2009 the memorandum of association was considered an important constitutional document. After this date, however, the scope and purpose of the memorandum was considerably reduced, effectively becoming just a “snapshot” of the intention to form a company at the point of registration. It now has no other or continuing relevance.
When registering a new company using the online process, a memorandum of association is automatically produced. Those applying by post can use the standard memorandum of association template from the government website. The standard template contains the words:
“Each subscriber to this memorandum of association wishes to form a company under the Companies Act 2006 and agrees to become a member of the company and to take at least one share”.
There is also a space for the company name and the name and signature of each subscriber. A crucial difference between the Memorandum and the Articles of Association is that the former cannot be modified once the company is formally registered with Companies House.
Articles of Association
Another of the incorporation documents is the Articles of Association (also referred-to simply as “the articles”). The CA 2006 stipulates that all limited companies are required to have articles of association. The purpose of the articles of association is to outline the rules (i.e. the constitution) of how the company will be run. The articles of association must therefore be easily accessible and referred-to when important constitutional decisions are being made.
Section 18 of the CA 2006 states that the:
(3) Articles of association registered by a company must:
(a) be contained in a single document, and
(b) be divided into paragraphs numbered consecutively.
The articles of association must be provided with the company incorporation application to Companies House. Once the company is formally registered the articles must then be filed securely for ease of reference at the company’s registered office or SAIL address (Single Alternative Inspection Location).
In many cases, newly established companies are registered using “model articles”. These are standardised articles (i.e. a template) containing the main constitutional elements required for a company of the type being registered. Model articles exist for:
- Private companies limited by shares.
- Private companies limited by guarantee.
- Public companies.
These can be modified, or a complete set of tailored articles can be drafted, to suit the needs of the company. Whether you choose to use model articles of association or draft new articles, it is imperative that you understand the contents and that these fit the requirements of your company.
The contents of the articles of association will depend
on upon the type of company. For a private company limited by shares the contents may include rules on:
- Decision-making (e.g. unanimous decisions).
- Calling a directors’ meeting.
- The quorum required for a directors’ meeting.
- Casting vote.
- Transactions or other arrangements with the company.
- Directors’ conflicts of interest.
- Records of decisions to be kept.
- Number of directors.
- Appointment of directors.
- Appointment and removal of alternate directors.
- Rights and responsibilities of alternate directors
- Termination of alternate directorship.
- Appointment of a company secretary.
- Purchasing of own shares.
- Poll votes.
- Means of communication to be used.
Once drafted and filed, a company’s articles can later be amended by special resolution in accordance with section 21 (1) of the CA 2006. There are certain restrictions, however, on the amendments that can be made. Section 25 of the CA 2006 states that an alteration does not bind a member of a company to the Articles if it “requires him to take or subscribe for more shares than the number held by him at the date on which the alteration is made, or in any way increases his liability as at that date to contribute to the company’s share capital or otherwise to pay money to the company”.
Certificate of Incorporation
The final incorporation document to be drafted is the Certificate of Incorporation. The Certificate of Incorporation is created by Companies House as part of the company registration process. A new company is effectively brought into existence when Companies House issues the Certificate of Incorporation. Section 15 of the CA 2006 relating to the issue of the certificate of incorporation states, “On the registration of a company, the registrar of companies shall give a certificate that the company is incorporated”.
The CA 2006 states that the Certificates of Incorporation provide conclusive evidence that the company has been registered in accordance with the requirements of the Act. A Certificate of Incorporation can be used to prove to other agencies and organisations that the company is properly registered according to UK law, e.g. when applying for a government grant, commercial bank loan or entering into a commercial lease.
The date of incorporation on the Certificate of Incorporation is also your company accounting reference date and tells you when your first Confirmation Statement will be due (typically one year later).
Certificates of Incorporation contain several important pieces of information, as follows:
- The name and registered number of the newly formed company.
- The date of incorporation of the new company.
- Whether the company is a limited or unlimited company. If the company is limited, the certificate will also state whether it is limited by shares or limited by guarantee.
- Whether the company is private or public.
- Whether the company’s registered office is situated in England and Wales (or in Wales), in Scotland or in Northern Ireland.
As stated in the CA 2006, Certificates of Incorporation must be officially signed by the registrar (i.e. Companies House) or authenticated by the registrar’s seal.
The time taken to produce a Certificate of Incorporation depends upon the type of application service used:
- Electronic application: Within 3 to 48 hours.
- Postal application: Within 8 to 10 days.
Electronic applications are processed much faster than paper-based applications because the Certificate of Incorporation is sent in digital form (as a PDF file). With postal applications, a single paper Certificate of Incorporation is provided by Companies House.
Each of the three incorporation documents outlined above, the Certificate of Incorporation, the Memorandum of Association and the Articles of Association, are essential to the UK company registration process.
All companies in the UK must adhere to the requirements of the Companies Act 2006 at the time of initial registration and throughout the life of the company. As specialists in company formations, Uniwide can handle all aspects of your incorporation documents and registration and advise how you can then meet your continuing compulsory filing obligations with Companies House and HMRC.
Our friendly team of company formation specialists will be happy to help you with everything outlined in this article. We aim to remove from your shoulders the administrative burden of forming a company and then ensure your ongoing compliance with UK company law.