Most people attempting DIY company formation struggle with the company’s Memorandum of Association and the company’s Articles of Association. These documents are very important - they describe the company’s objects and also deal with the way in which the company’s internal affairs are regulated. For example, the Articles of Association deal with such things as the transfer of shares, the conduct of directors’ and members’ meetings, the declaration of dividends and the directors’ indemnity from company assets.
The format of the Memorandum of Association and the Articles of Association may be found in The Companies (Tables A to F) Regulations 1985. This legislation contains a ‘model’ example of a Memorandum of Association and Articles of Association. A copy of these regulations may be obtained from The Stationery Office Limited (the privatized publishing arm of Her Majesty’s Stationery Office). The Stationery Office Limited has an office at Nine Elms, London and at the time of writing could be contacted on ph. 0870 600 5522. It has a website at www.tso.co.uk. (In general, statutory enactments going back to 1989 may be obtained free of charge from www.hmso.gov.uk. Unfortunately, The Companies (Tables A to F) Regulations 1985 are not available from that source as they were passed in 1985.)
But even armed with The Companies (Tables A to F) Regulations 1985, the process of forming a company has complications. The ‘model’ set of Articles of Association (known as ‘Table A’) found in these regulations has undergone little change since it appeared in earlier legislation in 1948 and is unsuitable in many respects for modern companies. (For example, the meeting procedures are cumbersome, the provisions for compulsory rotation of directors are usually unsuitable, the provisions requiring directors to keep minutes are usually considered to be drafted in a manner which is too onerous on directors and there are no satisfactory pre-emption rights in relation to shares. Many other examples could be given.) Although it is possible to adopt Table A in full (e.g. by writing a letter to Companies House at the time of lodging the other documents) thereby avoiding the need to prepare any Articles of Association, this is rarely a good idea in practice.
Also The Companies (Tables A to F) Regulations 1985 give no guidance as to how the Articles of Association should be signed. In practice, they are usually signed by the subscribers (initial members / shareholders) in the presence of a witness who signs also.
There are more hurdles after lodging the correct documents at Companies House. Various sections of the Companies Act 1985 require limited companies (and indeed other types of companies) to keep proper registers - e.g. section 352 (Register of Members), section 288 (Register of Directors and Secretaries) and section 407 (Register of Charges). If these registers are not kept, the company and every director and company secretary commits an offence and is liable to a fine. The registers are not in a specific format prescribed by legislation. Rather, each company register may generally be set out in whatever format is convenient, so long as all of the information required by the legislation is included.
In addition to the company registers, a limited liability company will usually wish to issue share certificates to its initial members / shareholders shortly after it is formed. Again, share certificates are not in a specific format prescribed by legislation.
So in summary, the process of limited company formation (with all of the legally required registers etc.) can be quite difficult and time-consuming, even after carrying out a good deal of research into primary materials such as the Companies Act 1985, The Companies (Tables A to F) Regulations 1985 and the requisite Companies House forms as prescribed by legislation.
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