Companies Act 2006 came into force on October 1st, 2009 and will bring with it long awaited changes to company law. One of the most prominent changes will be the alteration in purpose and prevalence of the memorandum of association. The Companies Act 1985 positioned the memorandum of association as an important constitutional document that provided external sources with key details about the company, from its name and company objectives to member’s liability and share capital.
Starting from October 1st 2009, the memorandum of association will simply be used to record individuals who want to form a company, agree to become members and take at least one share each. For existing companies practising under the rules of Companies Act 1985, documented requirements of the company should now be reviewed and updated to adhere to Companies Act 2006 which now places the articles of association at the fore (every company must have articles of association). Although not a legal requirement, it can often be in the interest of the company to review statements based on them in the memorandum of association that could now restrict the company or prove detrimental, as the memorandum is quickly becoming irrelevant.
The emphasis on the importance of supporting small businesses coincides with the introduction of Companies Act 2006, which is believed to bring useful benefits such as the use of service addresses for company officers, a flexible and responsive register and increased protection for companies with regards to filing. The primary objectives of the 2006 Act are; to enhance shareholder engagement and a long-term investment culture, ensure better regulation, make it easier to set up and run a company and provide flexibility for the future.
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