Chaoter 7 Flashcards
Promoter
In addition to the parson that takes procedural steps to get that company incorporated the term printer included anyone who makes business preparations for the company
Duties promoter owes to company
General duty to Excersise reasonable care and skill
A fiduciary duty is not disclose any personal interest in a transaction and sometimes account for monies received. Generally speaking any profits which he makes from promoting the company and fails to disclose must be surrendered to the company
Pre incorporated contract
A contract which the promoter enters into purportedly in the name of the company y before the company has come into existence
Consequences of pre incorporation contracts
-Company had no capacity to enter into contracts and therefore cannot be bound by them
-company cannot ratify contract as they didn’t exist
-company cannot enforce the contract on the third party unless given rights of action
- contract takes effect in the same way as one made wuth the promoter and he is personally liable on it
A promoter can avoid liability on a pre incorporation contract by
-Not making contracts u tik company is incorporated
-using off the shelf company
-greening a draft only with 3rd party on basis that the company will enter once formed
-Novation/provision that contract will be replaced when company is incorporated
Expenses for a promoter
A promoter usually incurs expense in procedures such as drafting legal documents pre incorporation
He can’t legally claim any remuneration or indemnity for his services but will generally arrange that the first directors pay him a sum of money
A company name must
End with plc or Ltd
Can’t be offensive
Words which indicate company is of different type
Constantly be same as existing company
Approval from SOS if
- connection with government
- sensitive
“International” etc
Change of company name
Company can change name at any time by passing a special resoloution
Must notify registration and submit new certificate of reg
Sos may order company to change name
Disclosure of company name
Just be displayed in certain locations or on certain documents and just be engraved legibly on companies seal
Contractual effect of the companies constitution
-binds companies and members
-binds members and members
-do not bind the company to 3rd parties
-only to members in their capacity as members
Eley v positive gov life assurance
Eley a solicitor drafted the original articles and included a provision that the company just employ him as a solicitation. Eley then because a me ever if the Company. Then he later sired the company for BOC as they didn’t employ him as a solicitor
He couldn’t rely on the article since it was a contract between company and its members and he was not asserting any claim as a member
Alteration of articles
A company may normally alter its articles by passing a special resoloution
However where the articles contain provisions for entrenchment such provisions can only be altered with the agreement of all company members or by court order
A company is required to keep
Register of members
Of directors
Of people which significant control
Of directors residential addresses
Records of resolutions and minutes
Register of charges and copies of charges
Copies of directors service contracts and indemnity provisions restricting directors liabilities
Registrar of companies maintain a register on respect of each company at companies house
This contains
Certificate of incorporation
Trading certificate
Certificates of registration of charges
Information contained in document delivered to the registrar in accordance with any statutory provision, including annual accounts and return, special and some ordinary resoloution and change of directors
Any person has the right to inspect companies register except for
Protected info on directors residebtial addresses
And contents to any charges
Accountancy records
Company just keep adequate accounting records that are detailed eniughh to show companies financial position at any given moment in time -
Should include
-daily entries
-records of assets
-statements of stock and stock takings
Annual accounts that are addressed to shareholders must be
Approved and signed for on behalf of board of directors
Filed at registry before 9 or 6 month deadline
Directors report must include
Name of directors
Principle activities of company
Statement that auditor is not unaware of any relevant audit information.
Directors remuneration
Quoted continues just disclose directors remuneration
Auditors report
Identify the accounts audited and the financial reported framework applied in their prepeation
Describe the scope of audit
State that in auditors opinion the accounts true an fair
State that the directors report is consistent with accounts
Strategic report is required for later and medium companies to prepare. They must
Include a fair review of companies business as well as description of the principal risks uncertainties facing the business
Must also report if any environmental matters, to the estate that this environmental information is necessary for an understanding of the position of the companies business s
Companies regulations 2018
Disclosures on the extent of engagement with employees suppliers customers and others
Large customers must include a statement in the strategic report describing that the directs have regard to the matters set out in the companies act when performing duties
Companies that either have 2000 employees or turnover 200m globally must include a statement of corporate governance
Companies and limited liability partnerships regulations 2018
This act introduced additional surveys report disclosures requirement concerning company emissions, energy consumptions and energy efficiency for quoted and large unquoted companies
All companies are required to carry out annual audit unless they are
Micro and small companies in insurance or banking
Dormant companies
Nonprofit making companies subject to public sector audit
Subsidiaries whose parent company guarantees their liabilities at the balance sheet date
Economic crime and corporate transparency act in audit
If a company applies for an audit exemption the directors are required to file an eligibility statement which confirms that the company qualifies for the exemption it is claiming. Even where an exemption applies an audit can be required by 10% or more of the members, or by members representing at least 10% of the nominal value of the company issued share capital
Micro company
Less than 632 turnover
316k balance sheet
Less than 10 employees
Small company requirements
Less than 10.2m turnover
Less than 5.1m balance sheet
Less than 50 employees
Medium companies
36m turnover
18m balance sheet
250 employees
A company secretary must be employed by a plc
A company secretary…
Is an employee of the company
Is an officer of the company and therefore faces potential civil and criminal liability alongside directors
Will convene the meetings of the board of directors, issue the agenda and draft minutes
He will also be responsible for the various statutory registers and for filing documents with the registrar
Had the power to contract on behalf of the company in respect of its administrative operations
Veil of incorporation
Separating the company and the members for identification and liability purposes
liability Difference between LTD and PLC
Ltd may be limited or unlimited whereas PLC must be limited
Share capital Difference between LTD and PLC
For ltd there is no minimum but a 50,000 for plc
Ability to commence into trading Difference between LTD and PLC
Ltd can commence once company is incorporated/set up but a PLC must have trading certificate with registrar
Public offers Difference between LTD and PLC
Ltd are prohibited from offering shares to the public but PLC can offer its it’s security to the public (may request listing from the stock exchange)
Name Difference between LTD and PLC
Private limited = ltd
Public limited = Plc
Loans Difference between LTD and PLC
For plc loans to persons concerned with directors and quasi loans and credit transactions to directors need embers approval
These rules don’t apply for Ltd
Directors Difference between LTD and PLC
Ltd need at least one director whereas plc need at least 2
Company secretary Difference between LTD and PLC
PLC need a company secretary but Ltd don’t
Written resoloution Difference between LTD and PLC
Ltd may pass written resoloution instead of calling meetings
Plc is n/a
Annual general meeting Difference between LTD and PLC
Ltd have no requirement to hold a agm but plc must hold one
Accounts and reports Difference between LTD and PLC
Ltd just be files within 9 months and pic just be filed within 6 months
Small and medium sized company audit exceptions
Ltd may qualify as small or medium and take advantage of audit exemptions and less stringent filing regimes
Plc n/a
Appointment of auditors Difference between LTD and PLC
For Ltd existing auditors can be deemed to be reappointed but for plc they have to expressly appoint auditors each year
Payment for shares Difference between LTD and PLC
Ltd is n/a
Plc additional rules apply to public companies, including that shares just be at least 1/4 paid up and concerning valuations for non-cash consideration
Reduction of capital Difference between LTD and PLC
Ltd needs only special resoloution and directors solvency statement
Plc needs special resoloution confirmed by the court
Power to redeem it purchase shares Difference between LTD and PLC
Ltd may do so subject to conditions
N/a to plc
Documents to be submitted to companies registrar on the formation of a company
Memorandum of association
Application
Statement of capital and initial shareholding
Statement of guarantee
Statement of proposed officers
Statement of compliance
Memorandum of association
Memorandum starring that all subscribers (initial shareholders) wish to form a company and agree to become members of the company and agree to take one share each
Application for formation of a company must include
The proposed name
Whether it is limited liability and by what
Private or public
I get her registered office is in EAW, W, S or NI
the intended adress of registered office
Statement of capital and initial shareholdings must state
The total number of shares
Their aggregate nominal value
Details of individual classes of shares
Amount to be paid and unpaid on each share
Statement of guarantee
Must state the maximum amount which each member undertakes to contribute to the net assets of the company if wound up while he is a meaner or within one year thereafter
Statement of proposed directors must give particulars and consent of
First directors of the company
First company secretary
Statement of compliance
Statement that all provisions in companies act have been met
