Memorandum of association vs. deed of incorporation

When setting up a limited liability company (s.r.o.), you will come across two basic documents, and the question immediately arises: memorandum of association vs. deed of incorporation (spoločenská zmluva vs. zakladateľská listina)? Both establish the company, but they differ according to how many people are founding it. Understanding this difference will help you prepare the right document and avoid unnecessary complications when the company is entered in the register.

Why the founding document is important

The founding document is the cornerstone of every company. It defines the rules by which the company operates, the relationships between the shareholders, the amount of the contributions and the way the company acts externally. It serves as a kind of constitution of the company, which is referred to both when resolving disputed issues and in everyday decision-making. Without it, the company cannot come into existence, which is why preparing it carefully and correctly is absolutely crucial.

Memorandum of association vs. deed of incorporation – what is the difference

The difference lies in the number of founders. If more than one person is founding the company, they conclude a memorandum of association with one another. If the company is founded by a single person, that person draws up a deed of incorporation. So when it comes to memorandum of association vs. deed of incorporation, it is essentially the same type of document, adapted to the number of founders.

• Memorandum of association – two or more shareholders.
• Deed of incorporation – a single founder.
• In terms of content, the two documents overlap to a large extent.
• When the number of shareholders changes, the document can be transformed.

What the document must contain

Regardless of which document you use, it must contain the particulars required by law. These include in particular:

1. The business name and registered office of the company.
2. Identification of the shareholders and managing directors.
3. The scope of business.
4. The amount of the share capital and of the shareholders’ contributions.

How the document changes during the life of the company

If, for example, a new shareholder joins a single founder, the deed of incorporation is replaced by a memorandum of association. Conversely, if only one shareholder remains in the company, the document is adjusted again. Each such change requires an entry in the Commercial Register (ORSR).

Common mistakes when preparing the document

The most common problems arise from incomplete particulars, an imprecise scope of business or unclear rules between the shareholders. If, for example, the document does not address what happens when the shareholders disagree or when an ownership interest is sold, lengthy disputes may arise later. Nor should you underestimate the precise definition of the scope of business, since it determines which activities the company is allowed to carry out at all. A well-written document prevents future disputes and makes decision-making in the company considerably easier.

Optional but useful provisions

In addition to the mandatory particulars, the document may also contain further arrangements that will make the future operation of the company easier. It is precisely these details that often decide whether the shareholders reach agreement in the future or end up in a dispute. A well-thought-out founding document thus works like the rules of the game, protecting everyone involved.

• Rules for transferring ownership interests.
• The method of decision-making and voting.
• Conditions for a shareholder joining and leaving.
• Resolution of any disputes between shareholders.

When to turn to an expert

Choosing between a memorandum of association and a deed of incorporation is simple, but drafting the content correctly may not be quite so simple. Bilvao’s accountants and partners will help you prepare the document and the supporting documents for registration so that everything goes through without unnecessary delays. Check the current fees and deadlines associated with registration in advance.

Related articles: Company registered office: a virtual registered office and its advantages, Is the managing director liable for the company’s debts?, Changes to Commercial Register details: what must be reported.

Frequently asked questions

When is a memorandum of association used and when a deed of incorporation?

A memorandum of association is concluded when two or more shareholders are founding the company. A deed of incorporation is drawn up by a single founder. In terms of content, the two documents are very similar; they differ mainly in the number of founders.

What happens to the document if the number of shareholders changes?

If a shareholder joins a single founder, the deed of incorporation is replaced by a memorandum of association, and vice versa. Each such change requires the document to be amended and the change to be entered in the Commercial Register in accordance with the current rules.