The Companies Act 2006 makes significant changes to the content and effect of a company's memorandum of association. The relevant sections of the 2006 Act will come into force on 1 October 2009. They will affect existing companies as well as companies first formed on or after that date.

The memorandum under the Companies Act 1985

Under the Companies Act 1985 the memorandum of a company limited by shares must state:

  • the name of the company;
  • the situation of its registered office;
  • its objects;
  • a statement of limited liability;
  • the amount of its share capital;
  • the number of shares each subscriber takes;
  • if it is a public company, a statement to that effect.  

The memorandum under the Companies Act 2006

Under section 8 of the 2006 Act, the memorandum will be a more limited document. It will be a statement that the subscribers wish to form a company, agree to become members and, where the company is to have a share capital, to take at least one share each.

The memorandum will therefore be crucial to registering a company, but after that it will not be a "living" document.

Information about the proposed company's name, its registered office, limited liability, total number of shares taken by subscribers and public or private status will be dealt with in the other registration documents.

The objects clause

Historically, one of the main purposes of a memorandum has been to set out the company's objects. At common law, these delineated the scope of the company's activities and anything outside the objects could be void. In contrast, under the 2006 Act every company will have unrestricted objects. However, a company may choose to restrict its objects in its articles (section 31). If the articles do contain a restriction, that restriction will act as a fetter on the directors. The directors may be liable to the company if they enter a transaction in breach of the restriction. Companies which are charities will need to continue to restrict their objects (under charities legislation).

Existing companies

From 1 October, the provisions of an existing company's memorandum, if they are not provisions which would form part of a new style memorandum, will automatically be treated as part of that company's articles (section 28). Existing companies will be able to alter these provisions by amending their articles.

So, for example, an existing company will, if it wishes, be able to remove its objects clause by amending its articles by special resolution.

Where an existing company has entrenched provisions in its memorandum, those provisions will become entrenched provisions in the articles. Where the entrenchment is expressed to be incapable of change, that will remain valid. In contrast, a company formed on or after 1 October 2009 will always be able to change any provision for entrenchment in its articles by agreement of all the members.