Formation of a PLC

Question 1

What is a Memorandum of Association?

Answer 1

This document deals with the external regulations for the management of the proposed company.

Question 2

What does Memorandum include?

Answer 2

• The name of the company (to include PLC if appropriate)
• Address in the UK of the Registered Office
• Statement that the liability of its members is limited
• Details of the intended amount of share equity and types of shares
• A statement of its objective

Question 3

What are Articles of Association?

Answer 3

This document deals with the internal regulations for the management of the proposed company and is subordinate to and controlled by the Memorandum of Association.

Question 4

What does Article of Association include?

Answer 4

• The raising of equity/share allotment/borrowing powers
• Directors’ remuneration/powers
• Holding of company meetings
• The rights of shareholders

Question 5

Costs incurred when setting up a company:
What are Preliminary Expenses?

Answer 5

These include legal and other expenses (printing etc)incurred when a company is formed.

When such expenses are large they are often capitalised with a proportion being written off each year. They can be written off against a balance of the share premium account or they should be written off the income statement in the bottom section.