Memorandum – what's a memorandum?
Many legal commentators have questioned whether the Companies Act 2006 has achieved its objective of simplifying the process of setting up and running a small business. One change that proved to extremely challenging to directors who formed their companies was the decision to reduce the amount of information about the subscribers in the memorandum and articles of association filed on formation.
On 1 October 2009 the memorandum of association that all in the industry knew and loved, disappeared. It was replaced by the new statutory memorandum showing only the subscribers' names with no addresses or indication of the amount of shares taken. Submission of additional information risked rejection by the Registrar. This, we were all told, was a decision not taken lightly - Companies House had consulted with leading high street banks and all would be well.
It came as no great surprise then to hear from clients who took their post-October incorporation documents to their bank only to be told that they were not fit for purpose!
“Added to all the confusion at Companies House at that time, the last thing registration agents like Jordans needed were clients complaining that their company documents were incomplete” commented Paul Townsend, UK Corporate Director. “Whilst Companies House may have consulted with the banks on this at a certain level, it was clear this hadn’t filtered down the ranks”.
Within a week , Companies House had capitulated under pressure. They permitted the submission of additional information relating to subscribers' addresses and shareholding. However, this would be only a temporary reprieve until 6 April 2010, when the situation would revert back.
As April approaches, many remain unconvinced by the merits of this particular change. As Paul Townsend puts it “Jordans take the view that we have a responsibility to our clients in the first instance. We’ll certainly be taking steps to protect them from a repeat of the October confusion”.
The Jordans approach will be two-fold. After 6 April all Jordans company formation clients will receive an additional, non-statutory document, detailing the subscriber information as part of their registration pack. Following incorporation this will be supplemented by the provision of a pdf of the INO1e (Application to register a company) image direct from the public record.
So whilst there is still time for common sense to prevail, Jordans are taking no chances.
For more information.
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