THE ARTICLES AND THE MEMORANDUM FORM A CONTRACT BETWEEN THE COMPANY Essay

THE ARTICLES AND THE MEMORANDUM FORM A CONTRACT BETWEEN THE COMPANY AND ITS MEMBERS. DISCUSS WITH REFERENCE TO RELEVANT STATU - Essay Example In this regard, the law relative to the memorandum of association prior to the enactment of the Companies Act 2006 is relevant to this study. Suffice it to say for present purposes that the extent to which the articles and memorandum forms a contract between the members and the company are reflected by the functions of each document. The memorandum’s functions have been altered, but its historical significance continue to be applicable as it has been resurrected and placed within the articles of association. Prior to the implementation of the Companies Act 2006, the memorandum defined the company’s external charter while the articles define the company’s internal charter. Ultimately, the memorandum and articles of association functioned together to determine the member’s commitment to the company’s goals and objectives and how the members will and can facilitate those goals and objectives. ... Instead of referring to the memorandum and articles of association, it merely attributes the contractual basis to the company’s constitution. Elsewhere in the 2006 Act, the company’s constitution is described as the articles of association. This essay analyses the contractual role of the articles and memorandum association in binding the members to company. I. The Memorandum of Association A. The Contractual Nature of the Memorandum of Association Prior to the Companies Act 2006 All UK companies are required to have a memorandum of association.5 Under the Companies Act 1985, the memorandum of association was required to specifically state the company’s objects and constitution.6 Recent reforms promulgated by the Companies Act 2006 have effectively reduced the memorandum of association to a mere shell of its former contractual significance. The current memorandum of association is no more than a simple instrument reflecting basic information such as the companyâ⠂¬â„¢s name, its registered office in the UK, share capital and shareholder liability. Even so, the memorandum of association has historical significance in that its main contractual basis has been transferred to the articles of association. Therefore the common law relative to the members’ commitment to the company’s objects under the memorandum of association are now relevant to the same commitment under the articles of association. Moreover, the share capital and limitation of liability as stated in the memorandum of association are also important parts of the members’ contractual relationship with the company that they form. Under the Companies Act 1985, the Memorandum of Association set out the objects of the company and the purposes for which it was formed.7 Section 2 also provides