Memorandum Of Association: The Procedure For Conclusion And Features

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Memorandum Of Association: The Procedure For Conclusion And Features
Memorandum Of Association: The Procedure For Conclusion And Features

Video: Memorandum Of Association: The Procedure For Conclusion And Features

Video: Memorandum Of Association: The Procedure For Conclusion And Features
Video: Memorandum of Association - Formation of a Company | Class 11 Business Studies 2024, March
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The Memorandum of Association is concluded when organizations are created in the form of limited liability companies. This agreement does not have the status of a constituent document, therefore it is interpreted as an ordinary civil law transaction.

Memorandum of Association: the procedure for conclusion and features
Memorandum of Association: the procedure for conclusion and features

The constituent agreement is concluded by the participants of the organization in the form of a limited liability company at the stage of its creation. The conclusion of this agreement is not a prerequisite for the registration and subsequent activities of a legal entity, therefore, the question of carrying out this procedure is left to the discretion of the founders.

When forming joint-stock companies, it is possible to conclude a similar agreement, which is called an agreement on the creation of a company. The constituent agreement does not have the status of a constituent document, it is not submitted to various state bodies for a legal entity to exercise its own rights, to fulfill obligations.

How to conclude a memorandum of association?

To conclude a memorandum of association, future members of the company must agree on all of its basic conditions. Usually, this agreement is signed before the charter of the legal entity is formalized, sometimes in the memorandum of association a reference is made to the charter, which supplements and deciphers some of the terms of this transaction.

The main issues that are agreed upon when signing the memorandum of association and are fixed in its text are the conditions for the transfer of property to the organization being created, the specifics of the founders' participation in this company, the rules for the distribution of profits, losses, methods of managing the company, and other significant points. After that, the founders draw up a written text of the agreement, which is signed by each of them. After reaching an agreement between the participants, the memorandum of association enters into legal force.

What can be included in the memorandum of association?

Structurally, the memorandum of association usually includes an introductory, main and final part. In the introductory part, the purpose of concluding the contract is indicated, its parties are named, the name, organizational and legal form of the created legal entity are given. Also in this block information is recorded about the type of activity and location of the future company.

The main part describes the obligations of the participants, the procedure for forming the company's property, the peculiarities of the formation of management bodies, the procedure for distributing profits and other significant issues. In the final part, the participants agree on the procedure for resolving disputes that may arise in the future, and also determine the conditions for a possible change, termination of the contract later.

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