Documents used in the formation of companies

• The formation of a company be it a Private Limited or Public Limited company is an involved process
• It is much more complicated than the formation of say a sole trader business
• Before it is incorporated (formed) those intending to form the company have to complete several documents
• These documents include the Articles and Memorandum of Association

Memorandum of Association

• It governs the relationship of the company and the rest of the world.
• It states the name and address of the company,
• its objectives, country of registration and
• the name of the directors.

Articles of Association

• They are known as The Articles of Association
• It is a document which governs the company’s internal operations.
• It details such matters as the name of the company,
• the procedure for calling an Annual General Meeting,
• the voting powers of shareholders,
• the procedure and tenure of directors,
• the responsibilities of directors,
• The objectives of the company,
• classes of shares,
• dividend policies and liquidation procedures.

Certificate of Incorporation

• Once the Registrar of companies is satisfied with the contents of the above documents
• He issues the company with a certificate of incorporation
• It is a legal document indicating that the state government has officially recognized a business or other entity as a corporation.
• It is like a birth certificate to the company to which it is issued.
• Once issued with a certificate of incorporation, a Private Limited Company can start trading immediately.
• A Public Limited Company meanwhile, has to issue a Prospectus.

Prospectus

• A legal document in which a Public Limited Company invites the public to buy shares and invest in the business.
• Once, it has raised enough capital a Public Limited Company is issued with a Certificate of Trading
• This authorizes the business to start trading.

To access more topics go to the O Level Business Notes page.