Business Law Flashcards
What is the effect of abstentions in voting?
Abstentions / abstaining is interpreted as voting against the resolution in question.
What is the limitation period of a deed agreement compared to a simple agreement / underhand?
A deed agreement has a limitation period for an action arising from the contract of TWELVE YEARS.
A simple agreement only has a SIX year limitation period for bringing action.
How does a company change from a private company to a public company?
A private company must pass a special resolution and submit an application to the Registrar of Companies, together with a number of documents, and a fee.
Once the Registrar is satisfied with all these, a certificate will be issued confirming the company has been re-registered as a public limited company. It is on the date of issue of this certificate that the company’s status changes.
Can a director vote on a resolution to remove them?
A director who is also a shareholder is allowed to vote in their capacity as a shareholder on an ordinary resolution to remove themselves.
However, this will be dependant on context, for example, if there is a Bushell v Faith clause, or if the articles stipulate unanimity is required for the removal of a director.
Can directors vote on resolutions for their own service contracts?
NO - a director cannot vote on a resolution regarding their own service contract in a company with unamended model articles.
What defences are available to directors in breach of the compliance rules for transactions with a company for a loan, quasi loan or guarantee?
If a transaction contravenes s 200, 201 or 203 CA and is entered into with a person connected with a director, that director will not be liable if they took all reasonable steps to ensure the company complied with those sections.
There is also a defence under s 213(7) for any connected person and any director that authorised the transaction who can show that they had no knowledge of the circumstances giving rise to the breach.
What remedies are available for breach of a rule against transacting with directors of a company without shareholder approval?
The transaction will be VOIDABLE, unless:
- Restitution is no longer possible.
- The company has been indemnified for the loss or damage suffered by it; or
- Rights acquired in good faith by a third party would be affected by the avoidance.
In which case - the director involved - and those persons connected - will be liable to account to the company for any profits made and indemnity the company for any loss incurred.
How is a Board Meeting called?
Any director may call a board meeting.
Notice must be reasonable.
The quorum is 2 directors.
Board resolutions must be passed with majority vote (on show of hands).
How is a GM called?
The board calls a GM at a BM.
Notice must be at least 14 clear days in advance.
Or short notice procedure may be used.
Quorum is 2 shareholders (or 1 for a single member company)
Voting may be on ordinary resolution or special resolution.
(Remember - separate rules apply for removal of a director - there must be special notice 28 days before the resolution).
Where the board fails to cooperate, shareholders with more than 5% of paid up voting share capital can serve a s 303 notice requesting directors call a GM within 21 days (to be held no more than 28 days after the date of the notice).
If they still don’t comply, the shareholders may call a GM using normal notice which must be called within 14 clear days of the notice and held within 3 months of the s 303 request.
How is a director appointed?
By decision of the directors (MA 17(1)(b)
By an ordinary resolution of the shareholders (MA 17(1)(a)
When does beneficial title to share pass following transfer?
Beneficial entitlement to shares received on transfer will pass on EXECUTION of the STOCK TRANSFER FORM.
Legal title passes on registration of the new owner in the company’s register of members.
When does legal title pass on allotment of new shares?
Legal title passes when the shareholder’s name is entered in the company’s register of members.
What are the post GM requirements following a buyback of own shares using distributable profits?
After a Board Resolution has entered into the contract and it’s been signed. The company must file the return, notice of cancellation and statement of capital within 28 days.
They must keep a copy of the contract for 10 years and they must cancel shares and update the register of members (and PSC register if applicable).
What is a person with significant control?
Owns more than 25% of the shares or voting rights in the company
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Has the power to appoint or remove a majority of the board of directors
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Otherwise exercises “significant influence or control” over the company
What is the difference between income receipts and capital receipts?
Income Receipts: Regular money inflows (e.g., trading profits, interest, rent).
Capital Receipts: One-off transactions (e.g., selling a business property).
