A memorandum of association is a type of business document that is used as part of the incorporation process to form a new company, and helps to define the relationship between that new company and the rest of the world. In times past this document, sometimes known simply as a memorandum, required a number of details that are not typically included in the articles of incorporation that are filed at the time a business is formally incorporated. A memorandum of association is required as part of the documentation necessary for incorporation in a number of nations, including the United Kingdom, India, and Ireland, as well as other nations around the world.
In times past, one of the functions of a memorandum of association was to define the scope of external activities that the business would engage in once it was properly incorporated. To some extent, this is still true in many nations, in that the text must provide a general concept of what the business will provide in terms of goods or services. In recent years, the depth of detail required within the document has shifted to more general data, while more specific information is required in other documents that must also be submitted as part of the incorporation process.
Today, essential information within a memorandum of association focuses on stating that a certain group of individuals wish to form a business that is legally incorporated and are willing to share capital in order to fund the activities of the company. Depending on governmental regulations that apply to the content of the memorandum, there may be a need to define what the partners will receive in return for their investment, such as shares of stock. While at one time there was a need to identify the name of the business, a permanent business address and the type of company they wished to form, details of this type are now accounted for in other documents and are not considered necessary in the memorandum presented as part of the incorporation documents. There are sometimes provisions that allow for the inclusion of additional information at a later date if deemed necessary to comply with a change in governmental standards and regulations.
In years past, the memorandum of association also required that the text indicate exactly what the company would do as part of the business operation. This means that the provisions would state whether the business would manufacture goods and services or simply sell products manufactured by a vendor or supplier. Today, the detail required within the memorandum no longer includes this type of information since that data is found in other documents related to the incorporation process.
For non-profit entities that are incorporating, it is not unusual for a memorandum of association to include a clause that specifically states that the owners or members will not receive distribution of profits from the venture. Depending on government regulations that apply, the text may not require identifying exactly how owners and investors will be compensated, leaving the business free to provide salaries or similar types of compensation in return for investments made into the operation. Since a number of changes in the laws of many nations regarding the content of the memorandum of association have taken place since 2009, taking the time to determine what is and is not necessary for inclusion in the document is essential for any group of individuals who wish to start and incorporate a new business.
