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SQE2 - Business Organisations > 1.3 Business - Incorporation > Flashcards

1.3 Business - Incorporation Flashcards

1
Q

Who is a promoter?

A

Roles
- Business idea
- Formation of Co (deals with docs, CA reqs)
=> Meets necessary steps to accomplish formation

NOT purely acting in professional capacity
- E.g. Cannot be Solicitor/Accountant

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2
Q

Who may be liable to pre-incorporation contracts?

A

NOT Company
- NOT incorporated (NO capacity) => NOT legal entity

Agent

  • Personally liable (s. 51 CA 2006)
  • UNLESS contrary agreement
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3
Q

How can promoter avoid liability?

A

[Royal Mail Estates v Maple Teesdale]
- TP could allow Contracting Party to waive Promoter’s personal liability (explicit + clear wording required)

Waiver unlikely => Thus should not enter such contracts anyway

Promoter’s options

  • Include contract provision allowing other party to sue Company [Contracts (Rights of Third Parties) Act 1999]
  • Prepare contract drafts after incorporation
  • Enter novation agreement/Assign contract (consent may be required, Promoter may be liable until then)
  • Purchase ‘shelf company’ > Co can contract w/o waiting for incorporation
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4
Q

What is the difference between a Tailor Made and Shelf Company?

A

Tailor-Made Company

  • Meet Client’s specific requirements when incorporated
  • E.g. Bepsoke AA
  • More common

Shelf Company

  • Formed (not traded)
  • Constitution provisions > Amendable (once Client buys Co)
  • Incorporated by law stationers/Co formation agents/Solicitors
  • Transfer to Client
  • Less common
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5
Q

What steps should be taken to incorporate Companies?

A

1) Form IN01

2) One or more persons
- Subscribing names to memorandum of association
- Complying with CA

3) Articles of Association as chosen

4) Further Statement of Compliance
- Confirmation that Subscribers complied w/ CA (s. 13) registration reqs

=> Registrar of Companies will inspect docs + ensure reqs satisfied => Issue Certificate of Incorporation => Co exists

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6
Q

What is required in Form IN01 before incorporation?

A

Fee

Memorandum

Articles

Details

  • Co’s proposed name
  • Co’s proposed situation of registered office (E&W/Wales/Scotland/N. Ireland)
  • Limited liability? (typically is) > Limited by shares/guarantee?
  • Public/Private Co?
  • Statement of share capital and initial shareholdings
  • Statement of Co’s proposed officers
  • Statement of initial significant control
  • Statement of registered office > Intended address
  • Copy of proposed AA (to extent not supplied by default application of Model Articles)
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7
Q

What Company names should not be used?

A

Offensive/Criminal offence (SoS’s opinion)

Names with ‘Limited’ or ‘Ltd’ at end (for private limited companies)

NOT already registered Co’s names

NOT names connected to Gov/Local authority

  • ‘England’, ‘Chartered’, ‘Royal’, ‘Natural’
  • UNLESS SoS approval

NOT names containing sensitive/restrictive words

  • Board/Charity/Fund/Insurance/Trust
  • UNLESS SoS approval

NOT names already used/similar names
- Otherwise could sue in tort for ‘passing off’ (but must prove affected by similarity)

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8
Q

Should Model Articles be included in the application for registration?

A

If Co adopts Model Articles w/ NO changes => NO Model Articles to be attached

If Co adopts Model Articles w/ changes or additions => Changes/Additions to be attached

If Co adopts entirely bespoke articles => Bespoke articles to be attached

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9
Q

What is the Objects Clause?

A

Defines

  • Purpose of formation
  • Activities permitted to perform
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10
Q

Can Objects Clause be restricted?

A

NOT restricted generally

Only if Articles specifically restrict (s. 31(1) CA)
- New Cos/Existing Cos

Charity > Must restrict

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11
Q

How can a limited company’s registered office be maintained?

A

UK registered office (s. 86 CA)

  • Send comms, notice
  • If doc sent to office => Service is effective (s. 1139 CA)
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12
Q

How can the registered office address be changed?

A

1) Notice to Registrar
2) File within 14 days of change

3) Registrar to register notice > Change takes effect
- BUT can still validly serve doc to previous address until 14 days ends after registration

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13
Q

What are the rules for initial shareholdings?

A

Dictates who owns Co

Min: At least one share

Max: NOT limited

  • BUT Articles can restrict by including clause > Limit no. SHs
  • Before CA 2006 > Must include Authorised Share Capital
  • After CA 2006 > Must only state that Co issued Statement of Capital detailing no. shares in each class issued > Useful if Co likely to allocate shares to TP at later date (raise funds)
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14
Q

What issues are raised at the first board meeting after incorporation?

A

Appoint bankers + create bank accounts

Appoint auditors (if required)

Amend automatically designated accounting reference date (if required)

Register Co for tax at HMRC (if actively trading)

Approve executory Ds’ service contracts
- SH approval required > General meeting required

Update Co’s registry entries
- By secretary/professional advisers

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15
Q

How must Company name be published?

A

(Company, LLP and Business Regulations 2015, Part 6)

Display name (Parts 21, 22, 29)

  • Registered office
  • Where carrying on business
  • Where keeping available for inspection Co’s records (other than registered office)

Items (Part 24)

  • Business letters (if includes D’s name > Must include ALL Ds) (Part 26)
  • Notices
  • Official publications
  • Order forms
  • Invoices
  • Cheques, receipts
  • Business comms + docs, order forms, websites > Include 1) Country of registration, 2) Registered number, 3) Address of registered office (Part 25)
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16
Q

What happens if Company does not comply with disclosure requirements?

A

If NO reasonable excuse (Part 28);

  • Offence
  • Every officer liable to pay fine
17
Q

What should be included in Articles of Association?

A

Every company requires AA

Single doc (consecutively numbered paragraphs) (s. 18 CA)

  • Ds’ powers and responsibilities
  • Board + Members’ meeting conduct
  • Certain provisions (even though NO prescribed form)

Model Articles

  • Power to create and allot shares (MA21)
  • Power to allot different shares (MA22)
  • Restrict transfer of shares
  • Ds’ appointment process (MA17)
  • Roles and remuneration (MA19)
  • Ds’ decision-making (powers/process) (MA7-16)

Registrar can assist by providing ‘Model Articles’ (Companies Regulations 2008)

  • Private > Limited by guarantee/share
  • Public
  • NOT unlimited company
18
Q

What happens if Articles are not registered?

A

If NOT registered > Model Articles apply by default (s. 20 CA)

If registered > Articles do NOT exclude/modify relevant MAs
- MAs form part of Articles in same manner + same extent as if Articles duly registered

19
Q

How can amendments be made to Articles?

A

1) SR (members) (+75%)
- BUT NOT discriminate vs minority SHs (otherwise discriminatory actions)

2) Articles can NOT be ‘unalterable’
- Can always be amended by all members/court

3) Send copies of SR + new Articles > Registrar
- Within 15 days

=> Articles deemed effective

UNLESS they add/remove/alter Co’s objects statement => Registar must register change > Amendment deemed effective

20
Q

What happens if Articles amendments requirements are not complied with?

A

Co + default officers => Offence

If it appears to Registrar that Co not comply w/ reporting obligations => May notify Co to comply
- Date of issuance
- Co to comply within 28 days
=> Otherwise civil penalty + criminal proceedings

21
Q

How may Articles be amended?

A

Amend clause wording in Articles

Add/Remove clauses

Adopt entirely new Articles

Adopt model articles w/ changes

22
Q

Do amended Articles always have effect on Members?

A

NO effect for alterations made after Member became member and includes;

  • Requiring more share subscriptions
  • Increases liability to contribute to Co’s share capital/pay money to Co
  • UNLESS Members agree in writing to be bound (s. 25)
23
Q

What is entrenchment?

A

Provision allowing amendment/repeal of Articles

  • Must meet conditions/comply with procedures
  • Included through Articles on Formation/ALL parties’ agreement (not in force yet)
  • BUT court could also amend/repeal (limited circumstances)
  • More restrictive than SR
24
Q

What is required for entrenchment?

A 
Section 22 CA
1) Form CC01
2) Statement of Compliance (amendment made according to Articles/Court Order)
3) Amended Articles (copy)
4) SR (copy)
5) Within 15 days
=> Registrar
24
Q

What is Annual Confirmation Statement?

A

Confirmation that Co fulfilled all duties and notify relevant changes

25
Q

What is required for filing Annual Confirmation Statement?

A

Co (dormant/NOT dormant)

1) Fee

2) Confirmation Statement (Form CS01)
- Co’s name, number, confirmation date
- Filing > Signed/Authenticated on Co’s behalf

3) Co must check it informed CH before making statement
- Relevant events occurred during confirmation period
- Changes to Co’s principal business activities/standard industrial classification (SIC) code, info re people with significant control (SC), statement of capital (total no. shares, aggregate nominal value of shares, aggregate amount unpaid), trading status of shares, SH info

4) At least once every month
- Otherwise if not filed within 14 days at end of review period => Co + Officers may be criminally liable

26
Q

What happens if Confirmation Statement is out of date?

A

Co must file info needed to update records

- Before/At same time as it delivers Confirmation Statement

27
Q

When is a Company Secretary required?

A

Private company

  • NOT mandatory
  • NO specific qualifications
  • Secretary/Director as secretary

Public company

  • Mandatory
  • Qualifications (one or more)
  • Secretary/Director as secretary (maybe)
28
Q

What type of company records must be kept for inspection at its registered office?

A

Register of members/Ds/people with significant control

Ds’ service contracts/indemnities

Register of secretaries

Records of resolutions + GM minutes

Accounts

Agreements

Own share purchase

  • Contract
  • Memoranda

Docs
- Redemption/Purchase of own shares out of capital

Register of debenture holders

Report to members of investigation outcome by Public Co into interests in its shares

Register of interests in shares disclosed to Public Co

Instruments creating charges + Register of charges

29
Q

How should company records be kept?

A

Hard copy/Electronic format

Arrange in manner as Ds see fit
- As long as concerned info is adequately recorded for future reference

Available for printing off + put into hard copy (if needed)

30
Q

How may documents be executed by a private limited company?

A

Section 44 CA 2006

  • Affix common seal (less common - many Cos have no seal/need no seal)
  • 2 authorised signatories
  • D in presence of attesting W
  • Every D + Secretary

SQE2 - Business Organisations (16 decks)

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