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SQE 1 Flashcards > Business (Formation) > Flashcards

Business (Formation) Flashcards

1
Q

What are the two constitutions required for companies under CA 1985?

A
  • Articles of Association
  • Memorandum of Association
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2
Q

What is the purpose of the objects clause in the Memorandum of Association under CA 1985?

A

The objects clause sets out the purpose for which the company was formed, and acting outside this purpose is considered ultra vires.

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3
Q

What happens to the objects clause for companies registered before 2006?

A

The objects clause continues in force and limits the company’s capacity unless the Articles are amended to remove it.

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4
Q

What is the status of the Memorandum of Association under CA 2006?

A

Under s.17 CA 2006, the Memorandum no longer forms part of the company constitution; it is only required for registration at Companies House.

Don’t forget a memoranum is still needed for regisreation. But they have unrestricted objects

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5
Q

What does s.31 CA 2006 state about objects for newly formed companies?

A

Companies formed under CA 2006 have unrestricted objects unless specifically restricted in the Articles.

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6
Q

What is the main constitutional document regulating the relationship between shareholders, directors, and the company?

A

The Articles of Association.

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7
Q

What provisions must Articles of Association comply with according to CA 2006?

A

Articles must comply with minimum provisionsof CA 2006, but companies can provide more onerous procedures.

Further there are some CA provisions that overrule all Article provisions. For example, s.321 right to demand a poll at GM.

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8
Q

What are Model Articles in the context of company formation?

A

Model Articles serve as default Articles if a new company does not register its own; similar provisions existed under CA 1985 as Table A.

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9
Q

What is the process for amending Articles of Association?

A

Articles can be altered by special resolution, and any alteration must be made bona fide in the interest of the company.

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10
Q

Can an provision of the articles be entrenched?

A

s.22 CA 2006 permits entrenchment of specific provisions within Articles which can only be amended if a certain condition is met.

However, they can always be amended by agreement of all members, or court order.

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11
Q

What is the legal effect of Articles of Association as per s.33(1)?

A

Articles bind the company and its members as if there were a covenant between the company and each member.

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12
Q

Can members enforce the Article between themselves?

A

Members are not allowed to enforce any rights against the company that are not relevant to capacity as a member.
…
If a member wishes to enforce rights against other members, they should enter into a shareholder agreement
…
Rights enforceable by members would be the right to vote or receive a final dividend once it has been declared.

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13
Q

What is required to incorporate a company from scratch?

A

Deliver the following to Companies House:

  • Copy of Company Memorandum
  • Articles of Association (unless using unamended Model Articles)
  • Application for registration (Form IN01)
  • Fee.
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14
Q

What is included in the application for registration (Form IN01)?

A
  • Proposed name
  • Registered office address
  • Email address
  • Share structure
  • Proposed officers
  • Statement of compliance
  • Statement of lawful purpose.
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15
Q

What happens once the Registrar approves the incorporation application?

A

The company is sent a certificate of incorporation, becoming a legal entity from the date the certificate is issued.

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16
Q

What is a shelf company?

A

A shelf company is pre-registered and can be converted by changing its name, registered office, Articles, and appointing new members and directors.

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17
Q

What must happen to change the name of a shelf company?

9 Stages (Directors Resign > Change of Address)

A
  1. Appoint Directors (Ordinary Resoution or Board Resolution > File AP01)
  2. Existing Directors Resign (Board Resolution > File TM01)
  3. Appoint Chairperson (Board Resolution)
  4. Existing Secretary Resign (Board Resolution > File TM02)
  5. Appoint Secretary (Board Resolution > File AP03)
  6. Transfer Shares (Board Resolution > Stock Transfer Form > Update Register > File PSC02 and PSC07 > Re-Issue Share Certificate)
  7. Board Resolution to approve notice and call a General Meeting
  8. General Meeting (Change Name by Special Resolution > File NM01)
  9. Board Meeting to Change Registered Address (Board Resolution > File AD01)
18
Q

What happens if a contract is entered into before incorporation?

A

Since the company is not a legal entity, it is not possible for the company to have legal rights or duties.

s.51 CA seeks to protect third parties who believe they are entering into a contract with a company which is incorporated and registered by making pre-incorporation contracts enforceable as personal contracts against the persons purporting to act on the company’s behalf.

The director will personally liable under contract if they entered into the contract.

19
Q

What type of vote is required for passing Board Resolutions?

A

Board Resolutions are passed by simple majority unless directors agree otherwise.

Each director has one vote

20
Q

What types of shareholder resolutions exist?

A

Ordinary Resolutions (passed by simple majority)

Special Resolutions (passed by at least 75%).

21
Q

What is needed for an Ordinary Resolution to be passed by Simple Majority?

A

51 % +

Remember, 50% isn’t enough!

22
Q

What is a special resolution?

A

Passed by 75 % or More

Note, it is sufficient if it is 75% (unlike OR it need not be 76%)

23
Q

What must be included in the notice for a General Meeting?

A

The Board usually convene the General Meeting.

14 Days Clear Notice!

… Excluding the day notice is given and the day of the meeting

If posted or emailed, notice is served 48 hours after sending it

24
Q

When is notice of a General Meeting deemed served if posted or emailed?

A

48 hours after sending it

25
Q

What is the notice requirment for a Board Meeting?

A

Reasonable Notice

Whatever notice is usual for those directors

26
Q

What are the quorum requirments for a Board Meeting?

A

Minimum two directors to be at a meeting, unless the articles provide otherwise.

27
Q

What is the quorum for a General Meeting?

A

Two shareholders are needed, or one for single-member companies.

28
Q

How can Shareholders vote in a General Meeting?

A

Show of hands
or
Poll

29
Q

What is the purpose of a show of hands in voting?

A

Each shareholder present has one vote regardless of the number of shares held.

This is default method

30
Q

What does it mean to vote on a poll in a GM?

A

Every shareholder has one vote in respect of each share held by them.

Shareholders can demand a vote by poll (i) in advance of GM; (ii) at the GM before a show of hands; or (iii) immediately after the result of a show of hands.

Note there are restrictions on who can demand a poll!

31
Q

Who can demand a poll vote?

A

A poll can be demanded by…

  • The chairperson
  • Directors,
  • Two or more voting members; or
  • A person/persons representing 10% of total voting rights.
31
Q

When can shareholder vote on a written resolution?

A
  • Only private companies
  • Every member has one vote in respect of each share held by them when voting
  • There are two types….
  1. Written Ordinary Resolution: Passed by simple majority (over 50%)
  2. Written Special Resolution: Passed by a majority of members representing no less than 75% of total voting rights
  • Removal of directors and removal of auditors cannot be passed by written resolution.
32
Q

What are the post-meeting matters that need to be addressed after a General Meeting?

A
  • Minutes must be kept for 10 years
  • Statutory books updated.
  • Special Resolutions Filed
  • Amended Articles Filed
33
Q

What is the default accounting reference date upon incorporation?

A

The default accounting reference date is the last day of the month in which the company was incorporated.

34
Q

What are the requirements for appointing an auditor?

A

All companies must prepare annual accounts and usually appoint an auditor by board resolution.

35
Q

What is the purpose of a shareholder agreement?

A

While not required, a shareholder agreement is a private contract between shareholders that can clarify rights and obligations.

36
Q

How are General Meetings convened and held?

GM Sandwich

A
  1. Board Meeting to Call GM
  2. Notice circulated
  3. GM for Shareholder vote
  4. Board Meeting to put effect to outcome
  5. PMMs (e.g. filing)
37
Q

Who can convene a General Meeting?

A

Typically, the board convenes the General Meeting.

38
Q

What is the process to shorten the notice period for a General Meeting?

A

For a private company, short notice must be agreed to by:

  • A majority (51%) in number of the members who;
  • Together hold shares with a nominal value of no less than 90% of the total nominal value of the shares which give the right to vote at a GM.
  • This can be increased to 95% by a provision in the Articles.

If consent is gained, the GM takes place immediately following the adjournment of the board meeting.

39
Q

How long does a Written Resolution take?

A

If the company doesn’t receive a sufficient number of responses, it will lapse. The lapse date is 28 daysunless stated differently in the Articles.

Short Proccess: if shareholders are present, approval of WR can take place immediately following adjournment of BM. If not, there’s the 28 day period.

40
Q

What is the voting threshold for a written board resolution by the directors?

A

Unanimity

Note, this differs to the usual threshold for board decision making of a simple majority.

41
Q

What do you affirm?
What do you ratify?

A

The company can….

  • Affirm a transaction
  • Ratify a Breach

SQE 1 Flashcards (57 decks)

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