When Should You Amend Your Company's Memorandum And Articles Of Association (MEMART)? Triggers You're Likely Ignoring

INTRODUCTION

For many companies, the Memorandum and Articles of Association ("MEMART") is drafted at incorporation and rarely revisited. Yet under the Companies and Allied Matters Act (CAMA) 2020, it remains the backbone of a company's identity, governance, and operations. As businesses grow through capital raises, restructuring, or expansion, their MEMART must grow with them. An outdated MEMART can create governance gaps and expose the company to compliance risks. Therefore, knowing when to amend a company's MEMART is an essential part of sound corporate governance and long-term stability.

WHAT EXACTLY IS THE MEMART?

The Memorandum and Articles of Association ("MEMART") is the constitutional document of a company. It defines the company's legal identity, sets the boundaries of its operations, and establishes the rules that govern its internal affairs. In simple terms, the Memorandum of Association determines what a company is permitted to do, while the Articles of Association regulate how it does it. Together, they serve as the company's operating blueprint, guiding ownership, control, decision-making, and the relationship between the company, its shareholders, and directors.

KEY CONTENTS OF THE MEMART

In essence, a well-drafted MEMART should contain:

• The company's name, type, and registered office;
• Share capital structure and rights attached to each class of shares;
• An object clause defining the scope of business activities;
• Powers and duties of directors and officers;
• Meetings, resolutions, and dividends;
• Transfer and Transmission of shares;
• Winding-up procedures.

When registering a company with the Corporate Affairs Commission ("CAC"), a standard form of the Articles of Association is provided for adoption. However, companies are at liberty to prepare and file their own customised Articles if they prefer. The standard form can also be modified during the registration process to reflect the company's specific structure, governance preferences, or business objectives.

WHEN AND WHY TO AMEND YOUR MEMART

Aside from the stringent penalties imposed by the Corporate Affairs Commission ("CAC") for failing to update the MEMART when a change occurs, it is also expedient to update your MEMART so members of the company and likely investors are aware of changes to the company as they occur.

As the company evolves, its governance and operational realities may outgrow the provisions it initially put in place. The MEMART can and should be amended when material changes occur that affect the company's structure, ownership, or operations. Timely amendment ensures that the company's legal framework remains aligned with its current objectives and regulatory obligations.

1. Structural or Ownership Changes

These are some of the most common reasons companies revisit their MEMART. They include:

• Capital restructuring: When a company increases or reduces its share capital, creates new classes of shares, or alters the rights attached to existing ones, the share capital clause and related provisions of the MEMART must be updated.
• Entry or exit of investors: Bringing in new shareholders, venture capital investors, or strategic partners often requires changes to the Company's MEMART.
• Mergers, acquisitions, or group reorganisations: Where a company becomes a holding or subsidiary entity, or merges with another, the MEMART must be reviewed to reflect its new corporate position, objectives, and shareholding structure.
• Corporate Structure: such as converting from private to public status or vice versa.

2. Governance and Control Adjustments

As companies grow, decision-making processes and board dynamics also evolve. It becomes necessary to amend the MEMART to:

• Redefine the powers and composition of the board of directors.
• Record the appointment or change of the Company's Secretary.
• Adjust voting thresholds or quorum requirements for Board Meetings or General Meetings.
• The procedure for declaring dividends is contained in the Articles of Association. If there is a change to this procedure, then it should be adequately reflected.

3. Strategic or Regulatory Drivers

Some amendments are driven by shifts in the business environment or by changes in law. For instance:

• Expansion into new business areas: If a company's activities extend beyond the scope of its current objects clause, the Memorandum must be amended to legitimise those new ventures.
• Compliance with new legal or regulatory frameworks: The CAMA 2020 introduced significant reforms, including single-member companies, new minimum share capital requirements, and other changes. As company law and regulatory frameworks evolve, companies must update their Articles to take advantage of these provisions or to ensure compliance.
• Change of company name: A change of name must be reflected in the MEMART to avoid legal inconsistencies

WHY TIMELY AMENDMENTS PROTECT THE COMPANY

Keeping your company's MEMART up to date is not just good governance; it is a form of legal and operational risk management. When the MEMART is outdated, the company may inadvertently operate outside its authorised scope, rely on governance provisions that no longer suit its structure, or make decisions that can be challenged for procedural defects. The Corporate Affairs Commission also heavily penalises companies that are not compliant and whose MEMART is not updated to reflect the company's current status.

A timely amendment protects the company in several important ways:

1. It ensures regulatory compliance.
2. It strengthens the validity of decisions and transactions.
3. It enhances investor confidence and transaction readiness.
4. It prevents governance conflict.

CONCLUSION

The MEMART was never intended to be a static record. It is a foundational instrument that must evolve alongside the company it created. A well-maintained MEMART is a sign of a company that takes governance, compliance, and long-term strategy seriously. As your business evolves, revisiting and updating this foundational document ensures that your structure, operations, and decision-making processes remain legally sound and aligned with CAMA 2020. Keeping your MEMART current is not just an administrative exercise; it is a proactive step that protects the company, supports growth, and positions it for future opportunities.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.