Business Law V Corporate Finances, Companies-recordkeeping, Filing, and Disclosure Flashcards
Review what is a memorandum of association
A memorandum of association is a document where members agree to purchase a certain number of the company’s shares at a certain price once the company is formed. These people are known as the company’s subscribers
The procedure of additional share allotment
For companies incorporated after 2009, directors automatically have the power to allot additional shares provided the company has only one class of shares and there is no restriction removing this power in the articles.
Otherwise, the directors must seek permission from the existing shareholders through an ordinary resolution.
Explain preemption rights in share issuance
When the company proposes to issue additional shares in exchange for CASH, unless its articles provide otherwise, those shares must first be offered to the existing shareholders so that they have the opportunity to maintain their proportional share of ownership and voting strength in the company.
The existing shareholders must be given at least 14 days to accept.
When do preemption rights not apply
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if the shares are issued in exchange for other consideration than cash
to preference shareholders
if a special resolution is passed to disapply the preemption rights, or there is a clause in the company’s articles that disapply the rights.
Who can block a transfer of shares
Directors have the absolute power to refuse to allow a transfer of shares unless the articles state otherwise
Explain a floating charge
A floating charge is a charge taken over a group of assets that change regularly. The clearest example is inventory. If there is a default, the charge crystallises and attaches to the individual items that comprise the asset that is subject to a floating lien.
Rules on registration of charge
A charge created by a company must be registered at Companies House within 21 days of creation. A certified copy of the charge and a fee must also be sent. Failure the charge may be voided.
Priority of charge
Fixed charge > Later Fixed charge > Floating Charge＞later Floating Charge
Rules for record-keeping
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The minutes from all general shareholders’ meetings must be kept for at least 10 years and made available for the shareholders to inspect free of charge
Copies of directors’ service contracts must be kept for at least one year beyond each director’s service and made available for members to inspect.
What is a confirmation statement?
An annual confirmation statement to Companies house confirms that the information held by companies house for the company is up to date.
The review period covered by a company’s first confirmation statement begins on the date of incorporation and ends 12 months later.
What is the consequence of failure to file a confirmation statement?
It is a criminal offence to fail to file the confirmation statement within 14 days of the end of the company’s review period.
The reporting deadline for a charge against a company’s asset
Charge against the company’s assets must be filed at companies house within 21 days of creation
The reporting deadline for annual accounts
no later than nine months after the relevant accounting reference period. for plc, it is six months
Penalties for failure to submit annual accounts timely
Financial penalties, possible criminal sanctions or could result in disqualification of directors
What information that the company is required to update
Appointment or termination of a director or officer (within 14 days)
An ordinary resolution giving directors the power to allot new shares (within 15 days)
Special resolutions (15 days)
issuance of new shares (1 month)
change of address (only effective when filed with Companies House)
