The articles of association: everything you need to know
Are you planning to start a business? To start a company, you need a memorandum of association, which regulates the basic organisation of the company. Read on to find out exactly what it is and what it must contain.
What is a memorandum of association?
A Memorandum of Association is a document that establishes a company or cooperative under the Companies Act (the "CA"). In addition to the CCC, the new Civil Code (hereinafter referred to as the "CCC") also regulates the elements of a memorandum of association.
In addition to the articles of association, you may also come across the term articles of incorporation. What is the difference between them?
- A Memorandum of Association is used when a company is formed by more than one shareholder.
- A memorandum of association is signed when a company is formed by a single person (this procedure is allowed by law for joint stock companies and limited liability companies).
In the text below, we collectively refer to both documents as "articles of association" for the sake of clarity .
A memorandum of association of an LLC and an a.s. must by law take the form of a public deed. This means that it is drawn up by notarial deed and published in the collection of deeds. Company records and contracts can be found online at or.justice.cz.
For other companies, e.g. limited liability companies, a public deed is not required and the contract does not have to be created as a notarial deed.
Drawing up a memorandum of association is the first step to incorporating a company. This is because you need the document to obtain a trade license for the company and to register it in the Commercial Register. Are you interested in how the whole process works? Read our guide to registering an LLC in the Commercial Register.
Contents of the articles of association
In order to successfully register a company in the Commercial Register, the articles of association must meet the statutory requirements. These are regulated in particular by §146-149 of the CCC.
The following information must be included in the articles of association:
- The company's business name;
- the registered office of the company (it is sufficient to indicate the city or address, later on, when dealing with the trade and registration in the Commercial Register, you must additionally provide the consent of the property owner to the location of the registered office);
- the subject of the company's business or activity (it is best to define it in such a way that the contract does not have to be changed in the future when the activity is expanded - this will save you unnecessary paperwork);
- identification of the partners (name and residence; or ID number, name and registered office if a legal entity);
- the amount of share capital (discussed in more detail in the article on share capital);
- information on the shareholdings of the shareholders and the amount of the related contributions;
- the designation of the managing directors and the manner in which they act for the company (in the case of a public limited company, the members of other bodies must also be specified);
- the designation of the custodian of the deposits (typically one of the founders).
If you are setting up a joint stock company, the articles of association will also need to be included in the agreement. Voluntary articles of association may also be drawn up by limited liability companies that wish to set out the internal organisation of the company in more detail.
In addition to the mandatory elements, the articles of association may also provide for, among other things:
- the establishment of a reserve fund;
- the establishment of a supervisory board (if it is not mandatory for a given type of company);
- the method of payment of profit shares;
- the shareholders' pre-emptive right to shares in the company;
- issue of share certificates.
The more detailed regulation of the company's functioning will make it easier to avoid future ambiguities - this is particularly useful if you plan to set up a company with other people. Read about the pitfalls of doing business with partners.
How to change the articles of association?
In the course of running a business, there are sometimes changes that need to be made to the articles of association. This could be moving the business to another city, changing the business, the name of the business or a partner joining.
It is possible to amend the articles of association:
- by agreement of all partners;
- by decision of the general meeting (if the articles of association allow it).
In both cases, the amendment must take the form of a notarial deed.
TIP: Don't you want to deal with the administration associated with changing the articles of association? We will do it for you - contact us and let us get to work.
Don't know what to do with your articles of association?
Trust the professionals. We can help you not only with the drafting of the articles of association or the articles of incorporation, but also with the choice of name, trade names and other formalities. Moreover, we can handle everything remotely. Write to us, call us or order the incorporation of an LLC online.