14 - Company Formation and Constitution

Question 1

types of liability

Answer 1

UNLIMITED LIABILITY

LIMITED LIABILITY:
1. by shares (public + private)
2. by the public

Question 2

advantages of buying a company off the shelf

Answer 2

(pre-existing company)
1. speed
2. cost
3. administration

Question 3

which details do you need to submit when forming a company

Answer 3

• name
• memorandum of association
• type
• registered office
• share capital
• directors
• shareholders
• registration fee

Question 4

what do you receive if the registrar is satisfied with info provided to create a company

Answer 4

certificate of incorporation confirming ‘birth’ of the company

before they can trade and borrow, public companies need to apply for and be issued a trading certificate by registrar

Question 5

minimum no of directors/members and minimum allotted share capital for public vs private

Answer 5

PUBLIC:
directors = 2
members = 1
share capital = 50k

PRIVATE:
directors = 1
members = 1
share capital = none, only one share

Question 6

time to hold accounting records, annual general meeting, company secretary, file accounts after year end, audit, needs to lay accounts at AGM

Answer 6

PUBLIC:
time to hold records = 6 yrs
AGM = compulsory
secretary = compulsory
file accounts = 6 months
audit = compulsory
lay accounts at AGM = yes

PRIVATE:
time to hold records = 3 yrs
AGM = optional
secretary = optional
file accounts = 9 months
audit = only if turnover is greater than 10.2m
lay accounts at AGM = no

Question 7

what is the articles of association (AoA)

Answer 7

working part of the constitution that has now absorbed much of the content used to be the preserve of the Memorandum of Association (MoA)

Question 8

what is the MoA

Answer 8

Memorandum of Association

records the initial subscribers to the company’s share capital

Question 9

which areas do the AoA govern

Answer 9

• directors powers, liabilities, responsibilities
• decision making by directors
• appointment and dismissal of directors
• organisation and conduct of directors and general meeting
• issue and transference of shares
• payment of dividends
• members rights and how to exercise them
• communication with shareholders
• documents and records

Question 10

what are model articles of association

Answer 10

standard articles provided by the government that companies can adopt as they are or amend

Question 11

company is free to amend articles as long as?

Answer 11

• shareholders vote in favour of alteration
• alteration doesn’t contradict company law

Question 12

what is the effect of articles

Answer 12

form a contract between/bind members and the company

articles may restrict the ability of directors to enter into certain contracts

Question 13

what are the binding powers of the AoA

Answer 13

1. members to the company = compel members to obey AoA
2. company to the members = members able to compel company to obey AoA
3. members to the members = members can compel each other

third parties cant enforce AoA

Question 14

what are unlimited companies

Answer 14

• share features of separate legal personality but without limited liability
• don’t have to file accounts or make them public

Question 15

what are companies limited by guarantee

Answer 15

• limited liability to an agreed amount
• allows them to drop suffix ltd
• a lot of charities and educational establishments use this

Question 16

what are private limited companies

Answer 16

• account for most of the companies in UK
• limit liability to amount unpaid on share capital
• commence trading when unincorporated
• ltd suffix

Question 17

what are public limited companies

Answer 17

• limit liability via shares
• plc suffix
• stocks may be advertised or listed on stock exchange
• not all plcs are on the stock exchange