Chapter 7 - Company Law Flashcards
Legal personality
A company is a separate legal entity to its shareholders and its directors. This means:
- It is an artificial person
- Its members have limited liability
- It has the ability to hold property
- It continues in existence known as continual sucession
Amount owed by member at winding up - Company limited by shares
Fully paid shares: No further liability to contribute
Partly paid shares: Any outstanding amount
Share premium: Any unpaid premium
Amount owed by member at winding up - Company limited by guarantee
The amount they guaranteed to pay
Veil of incorporation
Drawn between the members and the company, separating them for the purpose of liability and identification.
When may the court lift the veil of incorporation?
- Groups of companies
- To produce tax liability
To prevent tax evasion - To give entitlement to compensation
Differences between private and public companies - Share Capital
Private - No minimum
Public - Authorised minimum (£50,000)
Differences between private and public companies - Ability to commence trading
Private - Once incorporated
Public - Must have trading certificate
Differences between private and public companies - Public offers
Private - Prohibited from offering its shares to the public
Public - Can offer its shares to public (stock exchange)
Differences between private and public companies - Name
Private - Must end with ‘Limited’ or ‘ltd’
Public -Must end with ‘public limited company’ or ‘plc’
Differences between private and public companies - Loans etc
Private - Rules do not apply
Public - Need members’ approval
Differences between private and public companies - Directors
Private - Must have at least 1
Public - Must have at least 2
Differences between private and public companies - Company secretary
Private - Do not need one
Public - Must have one
Differences between private and public companies - Written resolutions (votes)
Private - May pass written resolutions instead of calling meeting
Public - not applicable
Differences between private and public companies - AGMs
Private - Need not hold
Public - Must hold
Differences between private and public companies - Accounts and reports
Private - Must file within 9 months
Public - Must lay before general meeting and file within 6 months
Differences between private and public companies - Small and medium audit exemptions
Private - May qualify
Public - Not applicable
Differences between private and public companies - Appointment of auditors
Private - Existing auditor may be reappointed
Public - Must appoint each year if necessary
Differences between private and public companies - Payment of shares
Private - Not applicable
Public - Shares must be at least 1/4 paid up
Differences between private and public companies - Reduction of capital
Private - Needs only special resolution and directors solvency statement
Public - Needs special resolution
“Off the shelf” company - Advantages
- Quicker way of achieving results as it is ‘ready to go’
- It avoids liability from pre-incorporation contracts
“Off the shelf” company - Disadvantages
- Change of name
- Transfer of subscribers’ shares
- Change of directors
- Alteration of articles
Formation of a company
In order to form a company documents must be sent to the Registrar of Companies and then they issue a certificate of incorporation
Documents to be submitted for formation
- Memorandum of association
- Application
- Statement of capital and initial shareholdings (if limited by shares)
- Statement of guarantee (if limited by guarantee)
- Statement of proposed officers
- Statement of compliance
Documents to be submitted for formation - Memorandum of association
Prescribed form stating that the subscribers wish to form a company and agree to become members
