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Corporate Secretarial Practice > Chapter 4: Company Formation > Flashcards

Chapter 4: Company Formation Flashcards

1
Q

What were the facts in Salomon v Salomon & Co Ltd (1897)?

A

Salamon operated a leather business as a sole trader before forming a limited company to which he sold the business. Payment was secured by a floating charge. Salomon’s floating charge took precedence over the unsecured creditors. The House of Lords held that the company was a separate legal personality to those that own and manage it.

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2
Q

What is the definition of a private company according to CA 2006?

A

S4: a private company is any company that is not a public company.

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3
Q

What does Model Article 21 state?

A

With the exception of subscriber shares, no share is to be issued for less than the aggregate of its nominal value and any premium.

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4
Q

Can a plc be formed with a single subscriber?

A

Yes, any company may be formed with one subscriber. (s 7 CA).

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5
Q

What must a public company do before beginning to trade?

A

It must have issued shares with a nominal value of £50,000 or the Euro equivalent.

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6
Q

Why is a plc not necessarily a listed company?

A

There is a separate process for becoming listed on the Stock Exchange or AIM, for which companies must meet additional criteria.

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7
Q

How many directors must a public company have?

A

At least 2 (s. 154 CA), at least one of whom is a natural person (s. 155).

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8
Q

Can a public company pass written resolutions?

A

No, resolutions may only be passed in general meeting.

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9
Q

What are the key differences between a private limited company and a public limited company relating to share capital and shareholders?

A
  • ltd may not offer public shares, plc can
  • plc may not allot shares for a non cash consideration without an independent valuers report, ltd can.
  • ltd has no minimum share capital requirement, plc must have £50,000 of which 25% paid up.
  • plc has more stringent requirements for purchase of own shares.
  • ltd can exclude preemption rights in the articles, plc must pass a special resolution to limit preemption rights
  • ltd can purchase or redeem shares out of own capital, plc cannot.
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10
Q

What are the key differences between a private limited company and a public limited company relating to directors or officers?

A
  • ltd needs one director, plc two
  • ltd does not need CoSec, plc needs CoSec qualified according to CA.
  • ltd can appoint multiple directors with a single resolution at general meeting, plc requires separate resolutions.
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11
Q

What are the key differences between a private limited company and a public limited company relating to general meetings?

A
  • ltd is not required to hold an AGM, plc is.
  • ltd may pass written resolutions of the members in lieu of resolutions at general meeting, plc cannot.
  • ltd not required to hold AGM following serious loss of capital, by plc must.
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12
Q

What are the key differences between a private limited company and a public limited company relating to statutory registers?

A
  • ltd does not need to maintain certain registers, but plc has no exemptions
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13
Q

What are the key differences between a private limited company and a public limited company relating to accounts?

A
  • ltd can operate as a dormant company, and therefore be exempt from auditing, plc cannot.
  • ltd must file accounts within 9 months of year end, 6 for plc.
  • ltd may be able to produce abridged accounts, depending on size, plc cannot.
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14
Q

How can you become a member of a company limited by guarantee?

A

By submitting a statement of guarantee, agreeing to pay outstanding debts on winding up to a certain amount, if the company is wound up within one year of them ceasing to be a member, or while they are a member.

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15
Q

When may a company limited by guarantee apply to omit the word “limited” from its name?

A

It may apply to the registrar if (s60):

  • the objects are the promotion of commerce, art education etc,
  • the company’s articles require profits to be applied to the objects, prohibit dividends and require all assets to be transferred to another company with similar objects on winding up.
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16
Q

Will the death of a shareholder in a single-member company terminate the company?

A

No, companies have perpetual succession due to their separate legal personality.

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17
Q

What are the key characteristics of a partnership?

A
  • no separate legal personality
  • accounts are private
  • constitution of the partnership may be changed by agreement.
  • profits are subject to income tax, payable by the partners
  • partners usually take an active part in the business
  • the partnership ends of death, resignation or removal of a partner.
  • there is no limit on the number of partners.
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18
Q

How is a limited liability partnership formed?

A

Registration at Companies House under Limited Partnership Act 1907, with one or more partners, who have full liability, and one or more limited partners who only contribute money or property.

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19
Q

In what ways is an LLP similar to a limited company?

A
  • incorporation follows the same model as for limited companies
  • an LLP must maintain at leas two designated members,
  • annual accounts and conformation statements must be filed.
  • all LLP names must end with “LLP”.
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20
Q

Which act introduced the community interest company?

A

The Companies (Audit, Investigations and Community Enterprise) Act 2004.

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21
Q

What is the purpose of a community interest company?

A

A CIC must satisfy the test that a “reasonable person might consider that its activities are being carried on for the benefit of the community”.

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22
Q

What is an SE?

A

A Societas Europea is a public limited company operating across two or more EU countries

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23
Q

How is an SE formed?

A

3 ways:

  • merging two ore more public companies in different EU countries
  • transforming a plc, which has had a subsidiary in another EU country for 2+ years.
  • creating a subisidiary from companies in two or more EU countries.
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24
Q

What is the minimum invested share capital for an SE?

A

120,000 euro.

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25
Q

What are the benefits of operating an SE?

A

The company does not need separate subsidiaries for each EU state in which it operates. i.e. it simplifies its business structure.

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26
Q

Why would an unincorporated charity wish to form a CIO?

A

A CIO is not subject to company law, and are instead governed by the Charity Commission.

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27
Q

When is a company a subsidiary of another company?

A

Definied in CA S 1159 and S1160. A company is a subsidiary if its holding company

  • holds a majority of voting rights
  • is a meber of and has the right to appoint or remove a majority of directors
  • is a member of and controls alone a majority of voting rights
  • it is a subsidiary of a company which is itself a subsidiary of another company
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28
Q

Which documents must be submitted to the Registrar of Companies on incorporation of a private company?

A

Form IN01
Memorandum and articles of association
Form SH50 (for public companies)

29
Q

Where are the rules surrounding company names set out?

A

CA 2006

Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015

30
Q

What are the restrictions on the selection of a company name?

A
  • Not too similar to existing company name
  • Words such as “limited” or “unlimited” are only at the end
  • not offensive
  • not a criminal offence to use the name
31
Q

When might the SoS for BEIS need to grant permission for use of a word in a name?

A
  • words that imply authoritative status (e.g. Institute, British)
  • words implying connection with UK government
  • words representing a regulated activity (e.g. bank)
  • words suggesting a specific function (e.g. fund)
32
Q

When may the Registrar order a change in name?

A

1 Within 12 months of registration if the name is too like another
2 Within 5 years of registration if misleading information was given on registration
3 At any time if the use of the name could cause public harm

33
Q

What is the purpose of the Company Names Tribunal?

A

To receive complaints about names, and order a name change if necessary.

34
Q

What information appears on a certificate of incorporation?

A
  • allocated registration number
  • whether the company is public
  • the actual date of incorporation (not the date of issue of the certificate)
35
Q

What is the purpose of a memorandum of association?

A

Sets out the subscribers intentions to form a company and to become a member.

36
Q

What is the purpose of the articles of association?

A

To set out the rules governing the internal affairs of the company. These are typically amended as the company progresses.

37
Q

What is a trading certificate and why is it required?

A

A trading certificate allows a public company to commence business, and is required to show that the company has the required paid up share capital.

38
Q

What key information goes into form IN01?

A
  • the address of the registered office
  • names and particulars of the first directors and secretaries
  • details of any alteration to the model articles
  • information on the capital of the company and its shareholders
  • statement of significant internal control (PSC register)
  • a statement of compliance from every subscriber
39
Q

What is form SH50?

A

Application by a public company for a certificate to commence business and exercise borrowing powers.

40
Q

What is the purpose of form AA01?

A

Change of accounting period date.

41
Q

What is form SH01?

A

Return of allotments of further shares.

42
Q

What steps should be taken when registering a new company?

A
  • is the name too similar to an existing company?
  • is the name misleading?
  • does the name contain sensitive words, and if so, has permission been granted?
  • is there a conflict with a registered trade or service mark?
  • will the business use a separate business name?
  • submit documents to the registrar
  • complete form AA01 to change accounting reference date
  • complete form SH01 for any additional share allotted
  • pay fee
43
Q

What matters should be handled at the first board meeting?

A
  • appoint a chairman and a managing director (if relevant)
  • appoint the company’s bankers
  • appoint auditors
  • determine the company’s accounting reference date
  • approve the registration of any necessary transfer of subscriber shares.
  • make any necessary allotments of share capital
  • approve the issue of share certificates
  • appoint persons to represent the company at meetings
  • approve directors’ service contracts and notify the registrar where they are kept.
  • note and receive any declaration of directors’ interests
  • notify the registrar of the place where the register of members is kept.
44
Q

What is the default accounting reference date?

A

The last day of the month in which the anniversary of incorporation falls.

45
Q

Where must the full name, registered office and registered number be stated?

A
  • all business letters
  • all notices, and other official publications
  • all bills of exchange and cheques
  • all invoices, receipts and letters of credit
  • all company emails, faxes and websites
46
Q

What provision is given where one premises hosts six or more companies?

A

The names of the companies may be displayed for 15 seconds every 3 minutes.`

47
Q

Does a company require a seal?

A

No, CA S 45 provides that a company may have a seal, but need not have one.

48
Q

What is a sealing register?

A

A record of all documents to which the common seal of the company has been affixed.

49
Q

What alternative to using a seal is available?

A

Signature from two directors, or one director and secretary.

50
Q

Is a seal required to execute a deed?

A

No, provided that is is made clear that the document is being executed as a deed.

51
Q

What minimum criteria must a private company meet to re-register as public?

A

1 At least one shareholder
2 At least two directors
3 A suitably qualified secretary
4 Issued at least £50,000 share capital, with 25% paid up.

52
Q

What is the procedure for re-registering a private company as a public company?

A

1 Board resolves to convene a general meeting
2 Board addresses any deficiencies such as too little capital, no secretary, or documents are held with companies house.
3 Special resolution is passed to re-register
4 Documents are delivered to registrar

53
Q

Why might a public company be required to re-register as private?

A

If ordered by the court following a reduction in issued share capital falling below the statutory minimum.

54
Q

What documents must be filed with the Registrar following re-registration? When must they be filed?

A

1 Form RR01
2 Copy of signed special resolution
3 Copy of revised articles
4 Copy of balance sheet with unqualified auditors report
5 Auditors’ statement that at the balance sheet date, assets were not less than aggregate of called up shares
6 A valuation report on any non-cash shares

55
Q

Which form must be completed for re-registration from private to public?

A

RR01

56
Q

Who may object to a resolution to re-register a public company as private?

A

Members representing not less than 5% nominal value or not less than 50 members, under s 98 CA.

57
Q

Which form must be completed for re-registration from public to private?

A

RR02

58
Q

Following a resolution to re-register, how soon must documents be delivered to the Registrar?

A

Within 15 days

59
Q

Can a public company re-register as an unlimited company?

A

Yes, provided that it has not been previously re-registered.

60
Q

What resolution is required to re-register as an unlimited company?

A

Agreement by all members

61
Q

What documents must be filed with the Registrar within one month of establishing an overseas company?

A
  • form OS IN01 (+ fee)
  • copy of constitutional documents
  • latest audited accounts
62
Q

What resolution is required to change a company name?

A

Special resolution (CA 77, 78)

63
Q

How quickly should a resolution to change a company name be filed at companies house?

A

15 days

64
Q

How is a name-swap achieved?

A

Respective special resolutions are passed to change each company name, and these resolutions and sent to the Registrar along with an explanatory letter.

65
Q

What must be delivered to CH for a same-day service name swap?

A
  • a certified copy of the special resolution of the change of name
  • a copy of the CH approval for the new name (if already obtained)
  • 2 sets of fees for the two same-day name changes
66
Q

Is it necessary to obtain shareholder approval to change the registered address?

A

No, resolution of the directors is sufficient.

67
Q

Can a company change its registered address to a different domicile?

A

No, any change of address must be to the same domicile.

68
Q

What steps must be taken to change registered office? (5 steps)

A

1 Board resolution
2 Notify change to registrar on form AD01
3 Amend any stationary and signage to reflect change
4 Notify bank, tax office, auditors, customers, etc.
5 Arrange mail redirection

Corporate Secretarial Practice (20 decks)

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