6d Formation of a Company Flashcards
What documents need to be submitted to the Registrar in order to form a company?
- Memorandum of association
- Application
- Articles
- Statement of capital and initial share holdings
- Statement of guarentee
- Statement of compliance
- Registration fee
What is the Memorandum of association?
Signed statement that all subscribers wish to form a company and agree to become members and take a share each providing they are limited by share capital.
What is in the application to form a company?
- Proposed name
- Whether members will have limited liability
- Whether company will be public or private
- Registered office
What must the statement of capital and initial shareholding’s state?
- Number of shares
- Aggregate nominal value of shares
- Details of each share class
- How much has been paid up on each share
What must the statement of guarantee state?
Maximum amount each member undertakes to contribute.
What does the statement of proposed officers show?
First directors (and secretary) and their consent to act.
What does the statement of compliance provide?
Confirmation that CA 2006 has been complied with.
What must the registrar do on receipt of the required documents to form a company?
- Inspect to ensure CA requirements are met
- Issue certificate of incorporation
When does a company officially exist?
From the date of the certificate of incorporation (public companies must also obtain a trading certificate).
What must a company do to obtain a trading certificate?
Must apply to Registrar stating:
- Nominal value of allotted share capital >= £50,000.
- 25% of nominal value of shares paid and all premium paid.
- Amount of preliminary expenses and who has/is to pay them.
- Any benefits given or to be given to promotors.
What happens if a plc trades before the Registrar have issued a trading certificate?
- Company is fined.
- Criminal offence but contracts still binding.
- Directors personally liable if defaults after 21 days.
- Ground for winding up if not obtained within 1 year.
What is an off-the-shelf company?
A company that has already been formed and ready to trade.
What’s the advantages of buying an off-the-shelf company?
- Cheaper than going through the process yourself.
- No issue with pre-incorporation contracts.
What is the main disadvantage of an off-the-shelf company?
All the details like name of company, registered offices etc will need amending.
What is a promoter?
Anyone who makes business preparations for a company.
What are the fiduciary duties of a promoter?
- Exercise reasonable care and skill.
- Disclose any interest in transactions with the company and not make a secret profit.
- Disclose any benefit acquired to an independent board or to the shareholders.
What are the remedies for a promoter making a secret profit?
- Rescind the contract.
- Obtain damages.
- Recover the profit.
What are the problems with the following remedies of a promoter making a secret profit?
1. Rescind the contract.
2. Obtain damages.
3. Recover the profit.
- Not always possible say if a third part has rights under the contract.
- Must prove a loss.
- Must prove that the promoter failed to disclose a profit.
What is a pre-incorporation contract?
Contract made by someone on behalf of an unformed company; this becomes personally liable as company does not have the capacity to enter a contract as does not legally exist.
What happens if a company enters into a pre-incorporation contract?
Company cannot ratify the contract.
Company is not bound by the contract.
Company cannot enforce the contract against 3rd party.
How may a promoter protect his position?
- Enter into an agreement of novation.
- Postponing finalising contracts until company is formed.
- Buying an off-the-shelf company.
- Agreeing with the company that it will meet his expenses.
- Including a term giving the co. the right to sue under the contracts act (this does not remove the promotors liability).
