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Memorandum and Articles of Association – Key Features and Function

The Memorandum and Articles of Association is a legal document drawn up by a lawyer, which is required during the incorporation of a company. This document is made up of two constituent parts – the Memorandum of Association and the Articles of Association. The following is a brief description of this document and the contents of its two constituent parts.

The Memorandum of Association of a company is the document which governs the relationship between that company and the rest of the world. The document is designed to communicate to the public the company’s state of affairs, as well as its purpose of being and operating. This enables company stakeholders such as creditors, suppliers and shareholders to evaluate the extent of their risk, as well as the possibilities of the company being able to overcome them in the future.

This document is required to state the name and type of the company, its objectives, authorized share capital and its original shareholders. The objects of the company include information such as what a company is permitted to do – which therefore limits the company’s capacity to act. The Memorandum acknowledges where the company is duly registered, and usually includes clauses on the property and sources of income of the company. The Memorandum of Association must be witnessed then notarized a notary public.

The Articles of Association of a company are the rules governing the relationship between the directors and shareholders of the company. Together with the Memorandum of Association, the Articles of Association constitute the constitution of a company.

The Articles of Association provide for the different voting and dividend rights attached to different share classes, as well as restrictions on the transfer of shares. These further include a preliminary clause with word definitions provided so as to prevent ambiguity during interpretation. This document also defines the company and provides for its members; it provides guidelines for the resignation and termination of directors by the Board; it also includes rules on holding annual and extraordinary general meetings, with regard to quorum, notices of meetings, proceedings and voting. It also indicates the maximum and minimum number of directors the company must have and how they may be disqualified; it provides for the inclusion of alternate directors, the powers and duties of directors and their interests and proceedings at Board meetings. The Articles of Association also include provisions for the CEO and Company Secretary, and details clauses relating to the company seal, auditing and accounting, winding up and indemnity.

Source by Joan One

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