7: Companies: incorporation Flashcards
What is the veil of incorporation?
Referee to the veiling of the company as a separate legal entity
Legal identify and liability is different from that if its members.
What are the main consequences of incorporation?
Management is sepearte from ownership
Co is subject to CA2006
Enters into contracts in its own name
Perpetual succession
Owns its own property
Co. liable for own debts and can sue and be sued in own name
Liability limited to:
- amount unpaid of their share capital
- amount agreed to contribute (by guarentee)
What does ‘lifting the veil of incorporation’ mean?
In certain circumstances the courts can look through the company to the identify of the shareholders
Members or directors become personally liable for debts
Only done when the veil is a ‘facade concealing the true facts’
What reasons are there for lifting the veil?
Groups of companies
- when subsidiary is acting as agent of the parent
To reveal national identity
- in times at war, illegal to trade with companies we are at war with
- funds or shareholders in enemy country - no!
Sham company
- company registered for improper purpose
- ie. evade legal obligation or hide identity
Quasi partnerships
- business which is registered as a company, run as if it was a partnership
Statutory occasions
What statutory occasions are there for lifting the veil?
Only when director is also members of a company;
- Company Directors Disqualification Act 1986. Director who is disqualified participates in management
- Insolvency Act 1986. Wrongful or fraudulent trading
- CA06. Public company trades without trading certificate
In all instances, directors can be made personally liable for something
Three types of company?
Public - limited by shares
Private - limited by shares or guarantee
Private - unlimited (no need to file accounts)
How can a company alter its status?
Amends its name and articles and notifies the registrar
- private company can apply to registrar to be reregistered as public (and vice versa)
- limited company can become unlimited with consent of all members
- unlimited company can change to limited by special resolution
Company compare: definition?
Plc: must be registers as a public company under CA2006
Ltd: any company not a public company
Company compare: name?
Plc
Ltd - some charities are exempt from this
Company compare: capital?
Plc: must not be less than authorised minimum of 50,000, and must have allotted shared of at least that amount
Ltd: no minimum
Company compare: raising capital?
Plc: may raise by advertising its securities for public subscription
- can be listed on stock exchange or similar
Ltd: prohibited from offering shares to public
Company compare: payment for shares?
Plc: shares must be at least 25% paid up
- rules on non-cash consideration
Ltd: no restrictions
Company compare: reduction of capital?
Special resolution needed in both
Plc: approved by courts
Ltd: statement of solvency also made by directors
Company compare: purchase of own shares out of capital?
Plc: not allowed. Only done from distributable profits
Ltd: permitted subject to articles
Company compare: start of trading?
Plc: must obtain trading certificate from registrar
Ltd: can begin from date of incorporation
Company compare: director minimum?
Plc: two
Ltd: one
Company compare: loans?
Plc: members approval needed for loans and quasi loans
Ltd: not applicable unless public
Company compare: secretary?
Plc: required, must be qualified
Ltd: optional, need not be qualified
Company compare: accounts?
Plc: must lay before general meeting and file accounts within 6 months of end of accounting period
Ltd: need not lay accounts in AGM. Must file within 9 months.
- SMEs have lesser requirements
Company compare: audit?
Plc: yes
Ltd: yes unless company is small or micro sized
Company compare: AGM?
Plc: must he held each year
Ltd: need not hold one
Company compare: resolutions?
Plc: cannot pass written resolution
Ltd: can pass written resolutions instead of calling meetings. Subject to exclusions
Company compare: pre-emption rights?
Plc: cannot be excluded
Ltd: can be excluded
8 registration documents?
Memorandum of association
- signed by all subscribers, agreeing to be members of company
Application
- name
- liability level
- public or private
- registered office country and address
Articles
- model articles apply if no articles supplied
Statement of capital and initial shareholdings
- number of shares
- aggregate nominal value
- details of each class of share
- how much paid up on each share
Statement of guarantee (if applicable)
- maximum amount each will contribute
Statement of proposed officers
- details of directors and first company secretary, consent to act
Statement of compliance
- confirmation that CA2006 has been complied with
Registration fee