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ICAEW LAW > Chapter 7 - Company Law > Flashcards

Chapter 7 - Company Law Flashcards

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1
Q

Legal personality

A

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
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2
Q

Amount owed by member at winding up - Company limited by shares

A

Fully paid shares: No further liability to contribute

Partly paid shares: Any outstanding amount

Share premium: Any unpaid premium

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3
Q

Amount owed by member at winding up - Company limited by guarantee

A

The amount they guaranteed to pay

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4
Q

Veil of incorporation

A

Drawn between the members and the company, separating them for the purpose of liability and identification.

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5
Q

When may the court lift the veil of incorporation?

A
  • Groups of companies
  • To produce tax liability
    To prevent tax evasion
  • To give entitlement to compensation
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6
Q

Differences between private and public companies - Share Capital

A

Private - No minimum
Public - Authorised minimum (£50,000)

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7
Q

Differences between private and public companies - Ability to commence trading

A

Private - Once incorporated
Public - Must have trading certificate

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8
Q

Differences between private and public companies - Public offers

A

Private - Prohibited from offering its shares to the public
Public - Can offer its shares to public (stock exchange)

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9
Q

Differences between private and public companies - Name

A

Private - Must end with ‘Limited’ or ‘ltd’
Public -Must end with ‘public limited company’ or ‘plc’

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10
Q

Differences between private and public companies - Loans etc

A

Private - Rules do not apply
Public - Need members’ approval

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11
Q

Differences between private and public companies - Directors

A

Private - Must have at least 1
Public - Must have at least 2

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12
Q

Differences between private and public companies - Company secretary

A

Private - Do not need one
Public - Must have one

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13
Q

Differences between private and public companies - Written resolutions (votes)

A

Private - May pass written resolutions instead of calling meeting
Public - not applicable

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14
Q

Differences between private and public companies - AGMs

A

Private - Need not hold
Public - Must hold

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15
Q

Differences between private and public companies - Accounts and reports

A

Private - Must file within 9 months
Public - Must lay before general meeting and file within 6 months

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16
Q

Differences between private and public companies - Small and medium audit exemptions

A

Private - May qualify
Public - Not applicable

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17
Q

Differences between private and public companies - Appointment of auditors

A

Private - Existing auditor may be reappointed
Public - Must appoint each year if necessary

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18
Q

Differences between private and public companies - Payment of shares

A

Private - Not applicable
Public - Shares must be at least 1/4 paid up

19
Q

Differences between private and public companies - Reduction of capital

A

Private - Needs only special resolution and directors solvency statement
Public - Needs special resolution

20
Q

“Off the shelf” company - Advantages

A
  • Quicker way of achieving results as it is ‘ready to go’
  • It avoids liability from pre-incorporation contracts
21
Q

“Off the shelf” company - Disadvantages

A
  • Change of name
  • Transfer of subscribers’ shares
  • Change of directors
  • Alteration of articles
22
Q

Formation of a company

A

In order to form a company documents must be sent to the Registrar of Companies and then they issue a certificate of incorporation

23
Q

Documents to be submitted for formation

A
  1. Memorandum of association
  2. Application
  3. Statement of capital and initial shareholdings (if limited by shares)
  4. Statement of guarantee (if limited by guarantee)
  5. Statement of proposed officers
  6. Statement of compliance
24
Q

Documents to be submitted for formation - Memorandum of association

A

Prescribed form stating that the subscribers wish to form a company and agree to become members

25
Q

Documents to be submitted for formation - Application

A

Must state:
- Name
- Liability of members (shares or by guarantee)
- Public or private
- Registered office

26
Q

Documents to be submitted for formation - Statement of capital and shareholdings

A

Must state:
- Total number of shares
- The aggregate nominal value
- Details of individual classes
- Amount to be paid and unpaid

27
Q

Documents to be submitted for formation - Statement of guarantee

A

Must state the maximum amount which each member undertakes to contribute

28
Q

Documents to be submitted for formation - Statement of proposed officers

A

Must give particulars of and consent of:
- The first director(s)
- The first company secretary

29
Q

Documents to be submitted for formation - Statement of compliance

A

Statement that the provisions of the act have been met

30
Q

What is a Promoter?

A

In addition to the person who takes the procedural steps to get the company incorporated, the term ‘promoter’ includes anyone who makes business preparations for the company

31
Q

Duties the promoter owes to the company

A
  1. Reasonable care and skill
  2. A fiduciary duty to disclose any personal interest
32
Q

Pre-incorporation contracts

A

A contract which the promoter enters into purportedly in the name of the company before the company has come into existence

33
Q

Pre-incorporation contracts - Consequences

A
  • The company has no capacity to enter into contracts and therefore cannot be bound
  • The company cannot ratify the contract since it did not exist when the contract was made
  • The company cannot enforce the contract against the third party
34
Q

Articles of association

A

The rules for how a company and shareholders interact

35
Q

Can you make alterations to the articles?

A

Yes if it passes a special resolution meaning >75% agrees to the changes

36
Q

Company records

A

A company is required to keep the following records:
- A register of members
- A register of directors and company secretaries
- A register of people with significant control
- A register of directors’ residential addresses
- Copies of directors’ service contracts
- Records of resolutions and minutes
- Directors’ statement and auditor’s report
- A register of charges and copies of charges

37
Q

The Registrar of Companies

A

It maintains a ‘registrar’ in respect of each company. It contains:
- The certificate of incorporation
- The trading certificate
- Certificates of registration of charges

38
Q

Confirmation statement

A

Certain information must be confirmed to the registrar every year in a confirmation statement.

They include changes of:
- Address
- Type of company
- Share capital
- Details of members
- Changes to those with significant control
- Changes to directors and secretaries

39
Q

Accounting records

A

Company must keep ‘adequate accounting records’ that are sufficient to show the company’s financial position

40
Q

Annual accounts

A

Companys must prepare annual accounts that show a ‘true and fair view’

Must be approved and signed and filed within 9 months

41
Q

Director’s Report

A

Must be prepared in respect of the financial year and must include:
- Names of directors
- Principal activities
- Statement that the auditor is not unaware of any relevant information

42
Q

Auditor’s report

A

Where accounts are audited the report must:

  • Identify the accounts audited
  • Describe scope of the audit
  • State that the accounts give a true and fair view
  • State that the directors’ report is consistent with the accounts
43
Q

Strategic report

A
  • Large and medium sized must prepare one of these
  • Includes a fair review of the company’s business as well as a description of the risks and uncertainties
  • Its purpose is to allow members to perform how the directors have performed
    -Must also report on environmental matters
44
Q

Company Secretary

A
  • An employee
  • An ‘officer’ of the company
  • Will convene the meetings, issue agenda and draft minutes
  • Responsible for the various statutory registers and for filing documents

ICAEW LAW (10 decks)

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