Memorandum of association: meaning, contents and examples
Have you ever wanted to know the general information about such a document as a memorandum of association? By reading this piece, you will get know what type of official paper it is, how it is composed, for what purposes, and its contents.
Source: UGC
The joint-stock company as a subject of law arises on the basis of a complex legal composition. Memorandum of association is the most primary document among the official papers, which are necessary for its establishment if the number of founders is more than one.
What is a memorandum of association?
Memorandum of association is an official document that must be included on the register of companies before the official registration of a joint-stock corporation. The document regulates the company's external relations with third-person parties. The memorandum of association must contain specific mandatory articles:
- Company name;
- Company sector (a type of the company);
- The country in which the company is located;
- Information on whether the company is limited to shares or in any other way;
- Signatures of the founders of the company, each of which must have at least one share.
These are only general details, so read on to find out how to make an appropriately composed memorandum of association.
Purpose of the memorandum of association
A joint stock corporation is an organisation which authorised capital is divided into shares. Losses of participants are limited to the value of their shares. It is the most common form of organisation of medium and large businesses in the world. The agreement on the creation of a joint company is one of the mandatory documents required for registration of a legal institution. It should address all the issues designated by law for this type of organisation, in particular:
- Letter of attorney for registration of LLC;
- Execution of the contract for the pledge over shares;
- Execution of the sales and purchases agreement for financial credit documents;
- Execution of the sales and purchases agreement for a stake in a company;
- How to issue a gift agreement between relatives;
- Execution of securities exchange agreement actions of founders on creating an organisation;
- Authorised fund formation procedure;
- Information on classes of shares;
- Share denomination;
- Fee payment schedule.
The memorandum of association is necessary if there are two or more founders in the company. It will be valid until the expiration of the payment of shares, and also it is not applicable to foundation documents. After the founders are determined with the name, type of activity, the address of the legal institution, etc., the founder meeting of the joint stock corporation should be held, where the following questions are to be solved:
- Taking the decision about the establishment of the company;
- Approving the charter of the organisation;
- Signing the memorandum of association.
Source: UGC
Contents of a memorandum of association
To create a properly composed memorandum of association, the contract for its execution should contain the following obligatory elements:
- Place and date of contract execution;
- The number of founders, their legal status, details and other required information (legal or private person, native or foreign);
- The legal status of the organisation itself (public or non-public joint stock corporation);
- Full name and address/location of the company;
- Limited or not limited period for which the organisation is created;
- The number of shares and denomination owned by each founder;
- Fee payment schedule;
- Whether or not preference shares are allocated;
- Information on the authorised capital (its size, whether it exceeds the established minimum size);
- The costs of the institution are distributed in accordance with the shares owned by the founders, or a separate responsible individual is designated;
- Whether or not fines are imposed for non-fulfilment of obligations to pay for shares;
- Confidential information and dispute resolution procedures;
- Signature of the founders.
Source: UGC
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The contract for the memorandum association can also indicate the next statements:
- The procedure of registration of those present at the general meeting of shareholders;
- The method of electing the chairperson at the meeting;
- The procedure for approving the order of business and adoption of decisions;
- The duty and procedure for sending transcripts of the minutes of the general assembly to the founders.
The conclusion of such a contract provides each shareholder with the right to act on behalf of all the subscribers, imposing responsibility for any transactions made by other participants between the participants themselves, what is called joint and several obligations.
Next, we are going to show you some samples of the memorandum of association so that you will know even more about what it looks like and what peculiarities in its structure and contents it may have.
Memorandum of association sample
Source: UGC
The memorandum of association of a privately-held joint stock corporation is executed according to the scheme mentioned above with the appropriate specifications. The number of participants is not limited. The abbreviation does not contain instructions on the class and type of the company, it simply stands for LLC.
Memorandum of association samples will show you that the content of the memorandum of association of a public joint stock corporation is executed according to the scheme discussed above with the necessary instructions. Unlike private joint stock companies, public companies place their shares through an open subscription. The issue of shares on the stock market is public, without restrictions. The number of participants is also unlimited.
The memorandum of association is a complex document which requires a lot of attention and precision for its execution, like any other official paper. But nothing is difficult or impossible for you now, as we hope that the piece of information you had just read was helpful for you and cleared everything up. And now you know what to do in case you and your friends have some shares to spare.
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Source: Legit.ng
