c7 Flashcards
will the veil be lifted?
creditors of an insolvent sub are not paid in full despite the holding co remaining solvent
no
will the veil be lifted?
a Co is registered in England but all its members, except one, belong to Neverland, a country with which England is at war
yes - reveal true national identity and expose illegality
will the veil be lifted? quasi-partnership
yes - lift the veil to reveal a Co so completely in nature of a partnership - a winding up of the Co could be ordered by the court on the grounds of it being just and equitable
what happens if a plc fails to obtain a trading certificate?
a member-director may be personally liable
when does a co need to obtain a trading certificate:
-before commencement trading
-within 12m trading
before commencement
do all companies need a secretary?
only plc are required
public vs private : liability
public - limited
private - limited or unlimited
limited Co - by what?
shares (shareholders/members)
guarantees (members)
public vs private : share capital mim
private - no minimum
public - £50k
public vs private : when can they commence trading?
private - once incorporated
public - must have trading certificate
public vs private : directors
private - must have at least 1
public - must have at least 2
public vs private : written resolutions
only private limited Co can have written resolutions (instead of calling meetings)
public - not allowed
public vs private : AGMs
private - does not need to call an AGM
public - must hold AGM
public vs private : secretary
private - does not need one
public - must have one
public vs private : filing accounts
private - 9m
public - 6m
what is a statement of guarantee?
appropriate for a company limited by guarantee
public vs private : preemption rights
public - cannot exclude
private - can exclude
public vs private : reduction of share capital
private - needs a special resolution (75%) and directors’ solvency statement
public - needs special resolution confirmed by the court
public vs private : power to redeem or purchase shares out of capital
private - may do so subject to its’ articles of association
public - N/A
additional rules for payment of shares for public Co
shares must be at least 25% paid up;
other rules surrounding valuations for non-cash consideration
will the veil be lifted?
english sub deemed to be agent of American holding Co
H therefore liable to tax - lift the veil!
will the veil be lifted?
if evasions alleged to have been committed by holding Co, what will happen to sub?
lift the veil - restrain sub’s assets
will the veil be lifted? to give entitlement to compenstion
director being disqualified - an example of
lifting the veil = director will be jointly/severally liable along with Co for Co’s debts
examples of veil being lifted
-produce a tax liability
-prevent tax evasion
-to give entitlement to compensation
fraudulent and wrongful trading - if a director is held personally liable as they knew or shouldve known about an insolvent liquidation, this is an example of
lifting the veil
trading without a trading certificate (plc) - failure can lead to liability on director
lift the veil!
formation of a Co - memorandum of association
states:
-subscribers wish to form a Co
-they agree to become members
-if Co with share cap: they agree to take at least one share each
-signed by subscribers
formation of a Co - application
states:
-proposed name
-whether liability by shares or guarantee
-private or public
-registered in England/Wales or Scotland/N Ireland
-address of registered office
formation of a Co - statement of capital and initial SHings
if Co limited by shares!
states:
-total number of shares
-aggregated nominal value
-details of individual classes of shares
-amount to be paid and unpaid on each share
formation of a Co - statement of guarantee
if Co limited by guarantee!
states:
-max amount which each member undertakes to contribute to the net assets of the Co if the Co is wound up while he is a member or < 1 year thereafter
formation of a Co - statement of proposed officers
states:
-directors
-company secretary (obligatory for plc; optional for ltd)
formation of a Co - statement of compliance
a statement that the provisions of the Act have been met
what does the company registrar issue?
certificate of incorporation - gives date of incorporation and registered number
-conclusive evidence that the Co is registered properly
what does a public Co need to obtain before start trading?
trading certificate
failure to obtain before commencement of trading: directors could be liable
failure to obtain trading cert < 1 year incorporation - compulsory winding up
formation of a Co - do you send Articles of Association?
only if you want to deviate from the standard articles
define - promoter + their duties
includes anyone who makes business preparations for the
company
-exercise reasonable duty and skill
-fiduciary duty: disclose any personal transaction. any profits from promoting the Co + fails to disclose must be surrendered to the Co. if he discloses them + Co gives consent - may retain the profits.
define - preincorporation contracts
a contract which the promoter enters into before the Co has come into existence (aka before rec’d cert of incorporation) - enters into in the Co’s name
preincorporation contracts - can a Co ratify them?
no - they did not exist at the time
preincorporation contracts - can a Co enforce the contract against TP?
no - unless the promoter/TP have given rights of action to the Co under the Contracts Act
preincorporation contracts - who are the parties? who is liable?
TP - promoter
promoter is personally liable
who can a promoter avoid liability on preincorporation contracts?
-not making contracts until Co has been incorporated
-using an off the shelf Co
-entering into a draft only on basis that Co once formed will enter into the agreed contract
-novation (replace party in contract: have a provision that once incorporated the Co will replace the promoter)
can a promotor reclaim expenses?
legally - no
in practice - directors usually arrange that the Co will pay him back
Co name - who needs approval if Co name is sensitive or contains British/International etc
Secretary of State
what resolution is needed for a Co changing its’ name?
special 75%
what does the Co do if it changes its’name?
notify the Registrar + obtain a new cert of incorporation
what is the contractual affect of the company’s Articles of Association / constitution ?
-binds Co to its’ members
-binds members to members
-do not bind Co to TPs
-only binds members in their capacity as members
define : provision for entrenchment
normally a change of articles of association : 75% special resolution
provision for entrenchment : provisions can only be altered with the agreement of all company members or by court order
can a Co provide that a provision for entrenchment can never be replaced or amended?
they cannot!
if a Co includes or removes a provision for entrenchment - who must they notify?
Registrar
file accounts : ltd vs plc
ltd = within 9m of year end
plc = within 6m of year end
trading certificates : ltd vs plc
ltd = not required
plc = needs to obtain one before it can begin trading
needs to submit:
-application stating that the nominal value of the Co’s alloted share cap > authorised minimum (50k)
-a statement of compliance
if it does not adhere to this:
-trades before getting certificate: director can be held personally liable (but transaction remains valid aka not void)
-not trading cert < 1 yr incorporation = compulsory winding up
which co produces consolidated group accounts?
parent Co
which Cos must disclose directors remuneration?
quoted Co
which industry Co are always audited?
insurance + banking
exemptions from audit?
micro and small Co (unless insurance or banking)
dormant Co (unless insurance or banking)
NFP Co subject to public sector audits
subs whose parent Co guarantees their liabilities at the balance sheet date
can SHs request an audit even if there is an exemption?
yes - need 10% SHs to request
what Co need to make disclosures re emissions, energy consumption + energy efficiency?
quoted Co
large unquoted Co
large LLPs
auditors : ltd vs plc
ltd = deemed to be reappointed unless the Co decides otherwise
plc = appointed each year by SHs or directors
auditor removal - ordinary or special resolution
ordinary : 50%
