What Are A Company’s Memorandum And Articles Of Association?

When you form a company, you come across the phrase ‘Memorandum And Articles of Association’. They sound important. You have the idea they might be like the Ten Commandments or Bill Of Rights; some kind of important legal documents.

Well, they are, and they are not.

They are important in that they state how your company is set up, legally; what it is and is not.
They are not important in that 99.99% of companies can used standard templates; they don’t need their own special articles.

To draft your own articles for a new startup is 1. Time consuming 2. Bothersome and 3. Unnecessary.

Your company is not so important or strange it needs to have a unique constitution. To draft your own watertight Articles requires specialist legal help and we all know that doesn’t come cheap!

Memorandum Of Association

This is a very simple, dull-looking document. It cannot be altered, once published. It is the ‘foundation statement’ of a company. The word ‘company’ means .. a bunch of people! It simply says ‘we, listed here-under, make up this company’.

The Memorandum:

– Declares the first shareholders;
– States they wish to set up a company and be part of it;
– States the date of incorporation;
– States the type of company;
– States the Act under which the company is registered.

It’s so simple it actually looks stupid. It isn’t. Simple is good engineering!
 


 

 

memorandum example

 
Memorandum of Association – Screenshot
 


Articles Of Association

The Articles contain rules about the following:

– Shareholders;
– Shares;
– Distribution of shares;
– Dividends;
– Capitalisation of profits;
– General meetings;
– Voting;
– Directors’ powers;
– Directors’ responsibilities;
– Directors’ decision making;
– Directors’ appointment and removal;
– Directors’ indemnity and insurance.

 


 

 

Articles Of Association Screenshot

 
Articles Of Association – Screenshot
 


These are more complicated in layout, but simple to understand. The Articles are the rulebook of the company; what it can and can’t do and what its members can and can’t do.

Most companies use Model articles; a standard template which founders don’t alter in any way, because there’s no need.

Later, when you get fat with cash or things become more complicated, the need may arise to make changes, but this is not the case for most small companies.

Articles can be changed via a special resolution. Members have to pass this special resolution agreeing to the changes. The final changed document must be submitted to Companies House within 15 days of the resolution being passed by the membership.





Related:

Memorandum And Articles Of Association
Model Articles
Memorandum example

How To Make A Company Dormant

Companies can be registered as dormant, or made dormant, for various reasons:

– You want to make sure no one else gets a particular company name;
– You want to protect a brand name or trademark;
– You need it to hold a fixed asset which you don’t want to hold personally, like property;
– You need it to hold intellectual property, like artistic works;
– The company’s majority shareholder or CEO has died or has been incapacitated.

A company is classed by Companies House as dormant if it doesn’t engage in ‘significant transactions’. Beware: there are very few insignificant transactions a company can engage in. Even paying to strike off your limited company with a company cheque will mean it’s still ‘live’.

Try not to be too clever. If your company is actually doing business, however small, don’t try to classify it as dormant. It’s as much work, and more nerve-wracking, to be crooked, as it is to be straight.

Note: You still need to do annual returns for a dormant company: you can’t just register it as dormant and then forget about it.





Things the company can pay for and still be dormant: penalties for late filing of accounts, filing fees paid to Companies House, payments for shares when the company was incorporated.

How to indicate to the authorities that my company is dormant?

HMRC: You write to them and tell them the date from which your company will be dormant. The will then post you a ‘Notice to deliver a tax return’. You complete and file a tax return for up to the date you told them your company was going dormant and then they will write back that your company is now classed as dormant for their purposes.

If VAT-registered, you must tell HMRC that you have ceased making VAT-taxable goods or services and that you wish to cancel your VAT registration.

If HMRC accept your cancellation, they will write to you confirming this and you will then file a final VAT Return and pay any ourstanding VAT.

Companies House: If the company is to be dormant from the beginning, make sure 99999 is entered as the SIC code as part of the formation process.

You file full financial accounts for the period up to the start of the dormancy period. After that, you submit simplified dormant company accounts. You also have to keep submitting the Confirmation Statement yearly and keep the director’s details and the company’s registered office up-to-date.



If you decide to stop being dormant, you just start submitting normal returns.

Note: it’s not a smart move to advertise your dormant company on your website and elsewhere and give the illusion that it’s somehow ‘live’, unless the website too is a placeholder.

Anyone can check the status of your company at Companies House and see quite easily that it’s dormant. This doesn’t look right if you’re still pretending your company is active.
 


 

 


 
Companies House Webfiling – Dormant Accounts PDF Screenshot
 


Tip: Don’t have active company bank accounts. If you can, close them.

The reason is that any charges made on the account, or payments out, could invalidate your dormant status. If you need to pay for something, do it from your personal bank account.

Notify all suppliers and service providers that you’re ceasing to trade. Settle all debts. Cancel all direct debits and standing orders.

When the dust has settled, then go to your bank to close the account.

The idea is that there will be no outstanding debt that will be levied against your company in the future, thus causing it to be active again.

The following activities will void your dormant status.

– Managing/making investments;
– Receiving dividend payments;
– Earning interest e.g. on a company bank account’s deposit;
– Paying bank charges and fees;
– Paying accountancy fees through the business bank account;
– Buying and selling goods, services or property in the company name and/or through the company bank account;
– Operating a payroll;
– Paying directors’ salaries;
– Issuing dividends.

Ongoing, all you need to do to retain your company’s dormant status is to keep filing keep your Annual Returns and Accounts with Companies House each year.

If you are dormant for more than two years, and you’re not particularly attached to the company name, you might consider closing down the company entirely. You can easily set up another company later, when you actually want to start trading again.





Companies House WebCheck Updated To New Beta Search

In 2015 Companies House updated the old WebCheck with its new ‘Beta’ service. ‘Beta’ in software development means that it’s ‘not quite ready for prime-time’, but it is safe to use.

The interface is simple. It disgorges almost all the information that is allowed to be shown to the public about a company. And that is quite a lot.

What can be alarming for a new business owner is seeing their name, month and year of birth and postal address listed for all to see. In that case, you can buy a Director’s Service Address from us: https://www.registeredaddress.co.uk/officeservices

There are now three ways to get information from Companies House:

– Webcheck [per-document download fee]
– Direct [subscription-based]
– Beta [free]






Here are the types of information you can get for free:

– Company name;
– Previous company names;
– Company registration number;
– Company type;
– Nature of business;
– Incorporation date;
– Company status;
– Registered Office address;
– Director’s Service address;
– Current and ex-officers details and initial shareholdings;
– Insolvency information;
– Yearly accounts;
– Accounts filing dates;
– Account type e.g. Dormant, abbreviated , full.



 

 

Companies House Beta Search Screenshot
 
Companies House Beta Search Screenshot
 

This service lets interested parties investigate just who they are actually dealing with when they contract with “Luminescent Dirigible Ltd”.

Someone with an eye for detail and a knowledge of how honest, successful companies present themselves can discern quite a bit if the company they are interested in is neither of these things, using WebCheck!

Beware: A lot (not all) of the information you submit about your company to Companies House will likely be visible forever, barring a court order or that you can make a case to Companies House that your personal security is at risk.

Here is personal information anyone can see for company Directors and Secretaries:

– Full name;
– Month & year of birth;
– Service (public, mailing) address;
– Nationality;
– Occupation.

Tip: Be careful that your landlord or the bank that holds your mortgage may not allow you to use your home address as the registered office of a limited company.

It’s a possible change of usage and may result in unwanted traffic, like debt collectors and aggrieved clients to the address!

What Is My Company Registration Number?

A company registration number (CRN) is a unique number issued by Companies House when a company is incorporated in the UK. It is usually 8 numbers, or 2 letters followed by 6 numbers. It will be displayed on your certificate of incorporation and on your listing at Companies House.

It is designated by Companies House and cannot be changed.

Companies formed in England and Wales: Numbers start with 0 or 1. Often the 0 is left out; the company number will read like 7845123.
Limited Liability Partnerships (LLPs): Start with ‘OC’.
Scottish LTDs: Start with ‘SC’.
Scottish LLPs: Start with ‘SO’.
Northern Ireland LTDs: Start with NI.
Northern Ireland LLPs: Start with NC.

Want to find out yours or any other company’s? Go here: https://beta.companieshouse.gov.uk/

There’s no mystery to it. A company name can be exotic, but for bureaucratic purposes a legal entity also has to have a number. You have your passport number, your car has a registration number, your company has its CRN.


 

 


 
Sample Incorporation Certificate
 


Important: Sole traders do not have a number. They are trading as themselves, as persons. They already exist and the government does not deem it necessary to maintain a separate database of small traders. They do not register with a government department, except HMRC, and HMRC does not offer a publicly searchable database. Your personal tax information is not a public matter.

The number has to be printed on the following, so correspondents know who they are contracting with:

– Letterheads;
– Compliment slips;
– Emails;
– Faxes;
– Invoices;
– Receipts;
– Order forms;
– Websites.

Interesting facts:

– You may change your company name, but the CRN stays the same.
– If ‘Superfluous Gondoliers Ltd’ is struck off, and then someone re-registers ‘Superfluous Gondoliers Ltd’, it will have a different CRN, as it is an entirely different company in the eyes of the law.

The CRN is the ‘brand’ that marks your company as distinct, legally.

You’ll need to quote the number when interacting with Companies House, HMRC and setting up a bank account.

• Start your own company today!

How To Go About A Limited Company Registration In The UK Properly

Registering a limited company in the UK is attractive to many people, worldwide.

Why?

It’s easy to do, and you only need one person, yourself. You get a corporation registered in a stable country which lets you maintain that company fairly easily.

Someone who knows basic accounting terms and whose company’s finances are simple can even file their own tax returns online from the comfort of their front room; how futuristic is that?

That doesn’t mean it’s like signing up to social media. If you forget about your Facebook account and leave it for a year, you won’t incur fines!

UK Limited Company Registration – Tips

First, some basic do’s and don’ts, for the more experienced businessman:

– Get your personal name correct.

If the name on your passport is Horace Whipplethwaite, don’t put ‘Harry Whipplethwaite’ in the registration form.

Reason: Companies House will let that name go through (they don’t check) but banks do check that field.

If the Director’s name doesn’t match what’s on your passport and their credit referencing database, you will be denied a business bank account until you correct the name at Companies House.

That will be boring and tiresome, so don’t try to be clever and use a pseudonynm; being a UK company director means you have to ‘come out from the shadows’ a bit.

– Double check you’ve spelled your company name correctly.

Mistakes can be corrected later, but it will cost money and time. More importantly, the name change will be part of your company’s permanent record online and you will look like a ninny for making a dumb mistake!
 


 

 


 
– Use a real residential address as your ‘Director’s Residential Address’.

Companies House will do a basic check on UK addresses. If you use our address, or your office, as your residential address, they’ll reject your application.

Banks can ‘see’ the address when they do a credit check, so your application will be rejected until it’s corrected. For banks, it has to match where you actually live.

The address you submit as your Director’s Residential Address will not be on the public register; only your Director’s Correspondence (or Service) address.

– Want to register on a particular date? Submit the afternoon before.

Some people are superstitious or just romantic. They want a company registered on 7.7.2017. Companies House is neither; it’s ‘first come, first served’ with them, although you can pay extra for ‘same-day formation’, but only if you go direct to them and do it via their website.

The downside of that if you only get the Incorporation Certificate from them i.e. the legal minimum. They don’t post you smart-looking documents for your portfolio, for the admiration of friends, family and colleagues; that’s not what they’re about.

Save money and just submit the afternoon of the day before. (If you submit in the morning, your formation might just possibly be done the same day; Companies House staff might be on the ball that day!)

Typically, however, your company will be formed the next day. So submit in the afternoon of the day before you want your company formed.

Or just stop being sentimental! Hard work and a product people find remarkable will be much more important to your long-term success.

– Keep share amounts sensible.

A company, whose liability is limited by shares, in the UK, means that, if the company goes bust and owes creditors, shareholders are liable for the stated share values.

If your personal share-holding is 10,000 shares at £1 each, you, as a shareholder, may have to fork out £10k to the company’s creditors, if your company has no assets.

So don’t make up inflated shareholdings to look bigger, if you’re not sure what you’re doing. It’s not smart.

– Have as few shareholders and directors as possible.

Do you have a good chum who listens to your guff and says he’ll help you get going and put some money into the business? Try not to give him any shares.

Businessmen constantly fall out with fellow shareholders or directors. They either don’t do as much work as you or they actually try something crooked. Shareholders are co-owners of your company and if it’s a 50/50 split you can’t do anything without their consent.

The best sort of startup has one shareholder and director: you. When you get fat and happy and drunk with money, you can make arrangements to take other people on board, after having got advice from the shrewdest and most honest accountant you can find.

Read more about limited company registration in the UK

Want to register online right now? – check this out!

Some other little bits and pieces

England Vs Scotland And Your Company

Here’s a little tip that not many English people are aware of, never mind foreigners:

Scottish law is different to English law. 

That’s right, Scotland is a different country in small, but significant, legal ways.

It’s not something that John Smith of Bermondsey needs to worry about. Or Pawel Nowak of Bemowo. Until he buys property there!

While The Companies Act 2006 governs all registered companies, UK companies are affected by the different regulations and laws of the jurisdiction in which they are registered.

It helps to think of it this way: If you register a company in Scotland you are in the UK (The United Kingdom Of Great Britain & Northern Ireland) but you are outside England & Wales (a separate, combined territory).

This peculiarity arose because, historically, Scotland was a separate country. In 1707 the English and Scottish parliaments passed the Acts of Union, which led to the creation of the United Kingdom of Great Britain on 1 May of that year. This UK Parliament met for the first time in October 1707.

What does this mean for the small businessman?

– Any company registered in one UK country has the same status as one registered in any other;

– The Registered Office cannot be moved from Scotland to England, or vice-versa;

– Scottish companies are registered in Edinburgh;

– Scottish company registration numbers begin with SC (English ones are solely numerical);

– A company name registered in Scotland will not be available in England and Wales, or vice-versa.

So, not much difference, really, in practical terms, for a startup.

However, tax, property, criminal, divorce and employment law and other rules can be peculiar to each jurisdiction.

Should you decide to register a company in a different jurisdiction to where you reside, make sure know what the corporate, and thus, personal consequences will be before proceeding.

In Scots corporate or contract law, the meanings and import of the following words differ to English law:

– ‘Deeds’;
– ‘Consideration’;
– ‘Joint and several’;
– ‘Representations’;
– ‘Undertakings’;
– ‘Full title guarantee’;
– ‘Warrants’;
– ‘Assignations’.

This is the sort of thing that doesn’t matter, until you have a contract or court case in which they crop up.

The main danger areas for the small businessman are: Family law, with regard to divorce, property law, with regard to purchase of same, and contract law.

You may get affected if you 1. get really big and then 2. have a court case.

Someone relying on their knowledge of English law with regard to marriage and property purchase in Scotland can run into trouble later, if they run into trouble later, to coin a phrase.

Therefore, one should not register a company in Scotland on a whim. There has to be a good reason. Being Scottish is one, or to obtain a toehold in Scotland.

At the time of writing, Britain is being convulsed by ‘Brexit’, the mechanism by which the UK will be severed from the EU. It also recently had a referendum on the secession of Scotland from the UK.

Now, the referendum went in the UK’s favour and Scotland will not be allowed to remain in the EU unilaterally.

The EU’s unofficial motto is ‘Ever closer union, ever greater enlargement’. As recent events in Spain have shown, it is decidedly against separatism.

Therefore, the only immediate benefit of being based in Scotland for a non-Scot is:

– To take advantage of local politics re: public projects;
– Local resources.

However, the trend in European politics currently is towards separatism. Many residents are not happy that their nations are being wiped out by creeping bureaucracy. They are upset that mass immigration is changing the character of their countries and degrading public services. Their wages have not kept pace with inflation, due to foreign competition.

Opportunist (or patriotic) politicians may sense an opportunity and where that happens, the smart businessman follows.  

People With Significant Control Register

On 6 April 2016 the law changed requiring all UK companies to keep a PSC register and from 30 June 2016 companies had to start filing PSC information via their Confirmation Statements. 

From Gov.Uk:

“The People with Significant Control (PSC) register includes information about the individuals who own or control companies including their name, month and year of birth, nationality, and details of their interest in the company.

From 30 June 2016, UK companies (except listed companies) and limited liability partnerships (LLPs) need to declare this information when issuing their annual confirmation statement to Companies House.

A person of significant control is someone that holds more than 25% of shares or voting rights in a company, has the right to appoint or remove the majority of the board of directors or otherwise exercises significant influence or control. PSC are popularly referred to in the press as the “beneficial owners” of a company.

This information will form a central public register of people with significant control, which is free to access.”

You now need to start keeping a register of your people with significant control (PSC) of your company.

Let us do it all for you free of charge.

New Special Offer: The first 50 customers who also buy our Confirmation Statement Service will get this essential add-on free. (Normal fee: £13.50 +VAT.)

Closing date: 5pm Monday 4 Dec. 2017.

Interested? Just buy the Confirmation Statement Service from your account control panel: https://www.registeredaddress.co.uk/login

Our accounting team will be in touch with you shortly thereafter.

Access Your Companies House Listing

The Companies House online interface is here:

https://ewf.companieshouse.gov.uk/

Click [Register] and then later, [Sign In]

(At the time of writing, these web links are tiny and not obvious at all.)

You can get access to your company’s listing, if you have the authentication code that is now typically created with a company formation. Otherwise, the code can be posted to your current registered office.

The authentication code is a string of 6 alphanumeric characters which the company formation agent sends to Companies House when they form your company. This code can then be used to get access to your company’s listing at Companies House, to make alteration to it or submit annual Confirmation Statements.

It’s actually simpler than it looks.

1. You have to setup up an account on the Companies House website like you would with any regular internet forum.
2. They email you a security code to validate your email address.
3. Then you log back in with the security code.
4. Then you request an authentication code, if you don’t have one. It will be posted to the company’s Registered Office.
5. After that, you use the authentication code to ‘claim’ your company.
6. Then you administer your company online at Companies House website

It’s surprisingly simple in practice, so don’t be intimidated.

Companies House appears to operate on the basis that most people it deals with are honest and just want to do boring company accounting procedures.

The back-check that they have the authority to do is the authentication code, which can only be accessed by 1. the person or company that created the company and thus initially submitted the code to Companies House or 2. whoever has access the the company’s registered office and thus can access the letter Companies House sends when someone requests the code.

We assume that making the process more secure would complicate matters and make more unnecessary work for honest company owners. Sometimes, deadlines loom or people are off sick, companies are moving office and the job just needs to get done!

What Does A Company Secretarial Service Provider DO?

One of the more bring aspects of business is the bureaucracy. We exist in a society of laws and compliance with these takes time and money.

We will leave aside the arguments for and against ‘light touch’ regulation and rather mention things a company secretarial service can do for you.

In practice this can mean two things:

1. That which a Company Secretary does for your company: help it comply with it legal obligations.
2. That which a normal secretary can do for your company: composing letters, sending invoices, arranging meetings, etc.

The boss traditionally hires a secretary because he needs someone to take a load of boring and unprofitable work off his back; basically, the paperwork.

BEWARE: the reason some companies grow fat, stupid and then fail is because the staffing gets out of hand (expensive) and clear, quick, correct decisions can’t be made (disastrous).

However, a dynamic boss who is successful finds he needs an assistant; someone who is a bit of a nerd and makes sure that the big contract which he negotiated so successfully actually gets printed, signed and posted before the deadline. That is not what a Company Secretary does.

Here is a list of that which a Company Secretary does. You may not wish to let your PA or girl-friday do it. It depends on their level of education. It’s not rocket science but it’s not work for a feather-head either.

If your personal secretary forgets to send an invoice at the end of the month, that is easily remedied. If she forgets to see that your annual Confirmation Statement is submitted correctly and on time, that can result in a fine and an error in the permanent, online record or your company’s returns at Companies House; this looks bad to investors.

Company Secretary duties:

– Maintaining the statutory registers of directors, shareholders, trustees, secretaries and related paperwork;
– Company incorporations;
– Maintaining the Registered Office and Director’s Service Address as a venue for receipt of letters from HMRC and Companies House;
– Acting on the contents of said statutory letters;
– Preparing and filing Confirmation Statements;
– Completion and filing of other Companies House forms;
– Preparing resolutions;
– Editing company details at Companies House, online;
– Provision of basic legal or VAT advice;
– Attendance at directors’ and members’ meetings.

This isn’t really work for someone with a GCSE-level education, unless that person is quite bright.

What catches small businesses out is the deadlines; the boss leaves the returns until seven days before the deadline and then realises that he can’t log into the Companies House website because he doesn’t have the requisite Authentication Code.

Read more: New Confirmation Statement Submission Service