This is the first part of a series of FAQs regarding the Memorandum and Articles of Association of a company incorporated in terms of the Companies Act (Chapter 386 of the Laws of Malta). This first part will delve into the concept and purpose of the Memorandum and Articles of Association as well as the procedure for amending the same. Sarah Grima writes
What are the Memorandum and Articles of Association?
The Memorandum of Association and the Articles of Association are two separate and distinct documents, each signed by the subscriber/s thereto, which taken together form the company’s core constitutional documents.
The Memorandum of Association sets out the company’s basic and fundamental information, including but not limited to its objects, its share capital information, as well as the key persons involved in the company.
The Articles of Association provide the rules for the governance and internal regulations of the company. The Articles may be considered as the “bye-laws” of the company.
Are the Memorandum and Articles of Association strictly required for the formation of a company in terms of Maltese law?
The Companies Actexpressly provides that a company shall not be validly constituted unless a Memorandum of Association is entered into and subscribed by at least 2 persons (save in the case of a single-member company, wherein the Memorandum would need to be entered into by the sole member thereof).
As far as the Articles are concerned, the Companies Act provides that Articles of Association may be registered with the Memorandum, and shall be signed by the subscribers to the Memorandum.
In terms of law therefore, it is the Memorandum that is strictly required to validly incorporate a company, while the Articles may or may not be registered with the Registrar of Companies upon incorporation.
Notwithstanding the above, it is widespread and common practice for the Articles to be registered with the Registrar of Companies together with the Memorandum, upon a company’s incorporation.
Is there a particular form that the Memorandum of Association must take in order to be valid?
Yes. The Memorandum must necessarily include the following company information to be valid at law:
- the name of the company;
- whether the company is a public or private company;
- the company’s registered office in Malta and its electronic mail address;
- the company’s objects;
- the company’s share capital information;
- the name and address of each shareholder of the company;
- the name and address of each officer of the company;
- the name and address of the person/s vested with the representation of the company and the manner in which such representation is to be exercised; and
- the period, if any, fixed for the duration of the company.
Is there a particular form that the Articles of Association must take in order to be valid?
There is no set form that must be adhered to or content that must be included in drafting the Articles of Association. Provided that the Articles are drawn up within the parameters of the Companies Act (as well as any other relevant laws and regulations applicable to the company in question), a company is free to establish as it deems fit, the rules which shall regulate its operation in line with its business model and exigencies.
The First Schedule to the Companies Act provides model regulations in respect of limited liability companies. What are these and when/how do they apply?
The model regulations for limited liability companies contained in the First Schedule to the Companies Act (the “Model Regulations”) constitute a set of general and standard regulations for the internal management of a limited liability company.
While a company is free to draw up its own Articles of Association (and therefore need not follow the Model Regulations for this purpose), the presumption at law is that if the Articles of in question are not registered with the Registrar of Companies, or if so registered, do not expressly exclude or modify the Model Regulations, the Model Regulations shall, accordingly, apply to the company.
This is without prejudice to any other law or regulations that may also be applicable to the company in question.
What is the procedure for amending the Memorandum and Articles of Association?
An amendment to the Memorandum and Articles of Association of a company requires an extraordinary resolution of the shareholder/s.
An original copy (or a certified true extract) of the extraordinary resolution must be delivered to the Registrar of Companies, together with an original copy of the revised Memorandum and Articles of Association within 14 days from the date of the extraordinary resolution in question.
Is there any exception to the requirement of an extraordinary resolution for the purposes of amending the Memorandum and Articles of Association?
Yes, there is one exception at law where an amendment to the Memorandum and Articles of Association does not require an extraordinary resolution, and this relates specifically to the change in the registered office of the company.
An amendment required to be made to the Memorandum and Articles of Association for the purposes of changing the registered office of the company may be effected simply by means of a resolution of the Board of the directors.
When do amendments to the Memorandum and Articles of Association take effect?
Any alteration to the Memorandum and Articles of Association shall not take effect unless and until it is registered with the Registrar of Companies.
Look out for the next set of FAQs which will focus on the share capital requirements stipulated in terms of law as regulated by the Memorandum and Articles of Association.
Sarah Grima is a senior associate within the Commercial and Corporate Department of Fenech & Fenech Advocates.