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SQE general > BLP WK 2 > Flashcards

BLP WK 2 Flashcards

1
Q

What are the two primary ways a company can be formed?

A

1.Incorporation from scratch

  1. Shelf company conversion
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2
Q

What documents are required to incorporate a company from scratch?

A

○ Memorandum of association

○ Articles of association (unless using the Model Articles)

○ Registration application (Form IN01)

○ Fee

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3
Q

What are the key components of the registration application (Form IN01)?

A

The registration application includes:

○ Company name and registered office

○ Type of company (private or public)

○ Registered email address for Companies House

○ Statement of capital and shareholdings or guarantee

○ Proposed officers and persons with significant control

○ Statement of compliance and lawful purpose

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4
Q

What happens once the Registrar approves the incorporation application?

A

The company receives a certificate of incorporation, which includes the company’s name, registered number, and incorporation date. The company officially becomes a legal entity with the issuance of the certificate.

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5
Q

What are some common modifications made during a shelf company conversion?

A

Common changes include:

○ Company name
○ Registered office
○ Articles of association
○ Officers and shareholders

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6
Q

What factors should be considered when choosing a company name?

A

Key considerations include:

○ Must not be offensive or suggest inappropriate connections
○ Must not be too similar to an existing company name
○ May need approval for certain words
○ Must comply with ECCTA restrictions

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7
Q

What are some important post-incorporation tasks for directors?

A

Post-incorporation tasks include:
○ Appointing a chairperson
○ Setting an accounting reference date
○ Appointing an auditor
○ Registering for taxes (corporation tax, VAT, PAYE, National Insurance)
○ Considering a shareholder agreement

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8
Q

Who is bound by pre-incorporation contracts under s 51 CA 2006?

A

Pre-incorporation contracts bind the individual acting (promoter), not the company. The company cannot ratify the contract. The parties may novate the contract to the company after incorporation.

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9
Q

What are the two main types of resolutions in company decision-making?

A
  1. Board resolutions, passed by directors.
  2. Shareholder resolutions, passed by shareholders.
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10
Q

How are board resolutions passed?

A

Board resolutions are typically passed by a simple majority vote of directors at a board meeting. They can also be passed in writing if all directors agree.

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11
Q

What are the two types of shareholder resolutions?

A
  1. Ordinary resolutions, passed by a simple majority (over 50%) of shareholder votes.
  2. Special resolutions, requiring at least 75% of shareholder votes to pass.
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12
Q

What are the voting methods for shareholder resolutions?

A

Shareholder resolutions can be voted on by:
1. Show of hands: each shareholder present has one vote.
2. Poll vote: each shareholder gets one vote per share held.
3. Proxy: shareholders can appoint someone to vote on their behalf.

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13
Q

When can a poll vote be demanded?

A

A poll vote can be demanded by the chairperson, directors, two shareholders, or shareholders holding at least 10% of voting rights.

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14
Q

What are written resolutions and who can use them?

A

Written resolutions are a method for passing shareholder resolutions without holding a meeting. They can only be used by private companies.

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15
Q

What are the limitations of written resolutions?

A

Written resolutions cannot be used to remove a director or an auditor.

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16
Q

What is the effect of shareholder abstention on a written resolution?

A

Abstentions count as votes against the resolution, so even if the ‘for’ votes have a simple majority, if another shareholder abstains, the resolution won’t pass.

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17
Q

Who can call a board meeting?

A

Any director can call a board meeting or ask the company secretary to do so.

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18
Q

What notice is required for a board meeting?

A

Reasonable notice is required for a board meeting. What constitutes “reasonable” depends on the typical practices of the directors.

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19
Q

What is a quorum for a board meeting?

A

At least two directors must be present for a board meeting to proceed.

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20
Q

How are decisions made at board meetings?

A

Board resolutions are passed by a majority vote of the directors present. Each director has one vote. The chair may have a casting vote to break a tie.

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21
Q

Who typically calls a general meeting (GM)?

A

A GM is typically called by the board of directors.

22
Q

What notice period is required for a general meeting (GM)?

A

For private companies, at least 14 clear days’ notice is required for a GM. Clear days exclude the day of the notice and the day of the meeting.

23
Q

What is the quorum for a general meeting (GM)?

A

Generally, a quorum of two shareholders is required for a GM. Single-member companies only require one shareholder for a quorum.

24
Q

What is the typical process for a general meeting (GM)?

A

The process for a GM typically involves:

1.Board Meeting 1: the board calls the GM and approves the meeting notice

  1. General Meeting: shareholders vote on the resolutions
  2. Board Meeting 2: the board implements the outcomes of the GM
25
Q

When can short notice be used for a general meeting (GM)?

A

A GM can be called on short notice if approved by a majority in number of shareholders holding at least 90% of the voting shares. Some companies’ articles may require a higher percentage (e.g., 95%) for approval.

26
Q

What are written resolutions (WR) used for?

A

Written resolutions provide a way for private companies to pass shareholder resolutions without holding a general meeting.

27
Q

What are the restrictions on the use of written resolutions?

A

Written resolutions cannot be used to remove a director or an auditor.

28
Q

What happens if a written resolution isn’t passed within a certain time frame?

A

Written resolutions typically lapse if they are not passed within 28 days of the circulation date.

29
Q

What are some important post-meeting matters?

A

Key post-meeting matters include:
○ Internal: keeping minutes of meetings for 10 years, updating statutory books and registers

○ Filing: filing certain resolutions and amended articles with Companies House

○ Record Keeping: retaining certain documents (like directors’ service contracts) at the company’s registered office

30
Q

What is the role of the memorandum of association under CA 2006?

A

Under the CA 2006, the memorandum of association is a simple declaration by the subscribers stating their intention to form the company. The memorandum no longer forms part of the company’s constitution.

31
Q

What is the significance of the ultra vires rule under CA 2006?

A

The ultra vires rule, which restricted a company’s actions to those specified in its objects clause, does not apply under CA 2006 unless the company chooses to include an objects clause that limits its activities. For companies formed under CA 1985, an objects clause in the memorandum is treated as part of the articles.

32
Q

What is the primary constitutional document of a company?

A

The articles of association are the primary constitutional document of a company.

33
Q

What do the articles of association govern?

A

The articles set out the rules for operating a company, including the relationships between:

○ Shareholders
○ Directors
○ The company itself

34
Q

What are some typical provisions included in the articles of association?

A

Typical provisions include:

○ Rules on appointing and the powers of directors
○ Procedures for conducting board meetings
○ Shareholder rights and share transfers

35
Q

What are the options for a company’s articles of association?

A

Companies can choose to use:

○ Model Articles (MA): default articles provided by CA 2006

○ Amended MA: adopt Model Articles with modifications

○ Tailor-made articles: bespoke articles drafted with legal assistance

36
Q

How can the articles of association be amended?

A

Amendments to the articles require a special resolution, which needs at least 75% of shareholder votes to pass.

37
Q

What is the legal effect of the articles of association?

A

The articles of association form a binding contract between:
○ The company and its members
○ The members themselves

38
Q

What is the significance of the case Eley v. Positive Government?

A

This case established that a member cannot enforce a right under the articles unless that right arises from their status as a member.

39
Q

What types of rights are enforceable under s 33 CA 2006?

A

Only rights arising from membership in the company are enforceable under this section. Rights that do not relate to membership are not covered.

40
Q

What is the significance of the case Rayfield v. Hands?

A

This case demonstrated that, while members can sometimes enforce personal obligations in the articles directly against each other, enforcement is generally achieved through the company itself.

41
Q

What was the significance of the “objects clause” in the Memorandum of Association under the CA 1985?

A

The objects clause defined the company’s permissible business activities. Any actions beyond this scope were considered ultra vires (beyond its powers) and could be deemed invalid.

42
Q

How are objects clauses in the Memoranda of companies incorporated under the CA 1985 treated under the CA 2006?

A

They are treated as part of the company’s Articles under s. 28 CA 2006, acting as limitations on the company’s activities unless removed via amendment of the Articles.

43
Q

Provide some examples of provisions commonly found in the Articles of Association.

A

○ Appointment and powers of directors.
○ Procedures for conducting board meetings.
○ Shareholder rights and procedures for share transfers.

44
Q

How are amendments made to a company’s Articles of Association?

A

By passing a special resolution, which requires the approval of at least 75% of the shareholders.

45
Q

What are the main steps involved in incorporating a company from scratch?

A

○ Prepare necessary documents: Memorandum of Association, Articles of Association (if not using the Model Articles), and a registration application (Form IN01).

○ Complete Form IN01: This includes details about the company’s name, registered office, type (private or public), share capital, proposed officers, and statements of compliance.

○ Submit documents and fee to Companies House.

46
Q

How does a company formally change its name after incorporation?

A

By passing a special resolution and filing Form NM01 with Companies House.

47
Q

What are some post-incorporation actions that directors must take?

A

○ Appointing a chairperson
○ Setting the accounting reference date (Form AA01)
○ Appointing an auditor
○ Registering for corporation tax, VAT, PAYE, and National Insurance
○ Drafting a shareholder agreement (optional)

48
Q

What are the two main categories of shareholder resolutions?

A
  1. Ordinary resolutions (ORs): Require a simple majority (over 50%) of the votes cast.
  2. Special resolutions (SRs): Require at least 75% of the votes cast.
49
Q

Who has the right to demand a poll vote at a shareholder meeting?

A

The chairperson, directors, two or more shareholders, or shareholders holding at least 10% of the total voting rights.

50
Q

Briefly explain the main differences between board resolutions and shareholder resolutions.

A

Board resolutions are passed by directors for day-to-day management decisions. Shareholder resolutions are passed by shareholders for significant matters like amending Articles or approving major transactions.

SQE general (24 decks)

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