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Law Certificate > Chapter 7 - Consequences of incorporation > Flashcards

Chapter 7 - Consequences of incorporation Flashcards

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1
Q

T/F
Under CA 2006 court may lift veil of incorporation and find directors personally liable for debts of a plc where the company has traded without a trading certificate

A

True

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2
Q

T/F
Under the insolvency act 1986, a court may lift the veil of incorporation and find directors personally liable for the debts of their company in respect of fraudulently but not wrongful trading

A

False - fraudulent AND wrongful tradgin

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3
Q

T/F
the court will lift the veil of incorporation to find directors who act in contravention of the company directors disqualification act 1986 personally liable for their companies debts

A

True

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4
Q

T/F
the veil of incorporation means groups of companies will be regarded by the courts as a single entity

A

False

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5
Q

t/F
the veil of incorporation may be lifted by a court in order to collect excise duty from a sub within a group

A

True

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6
Q

T/F
A court may lift the veil of incorporation to recover a tax liability

A

True

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7
Q

T/F
a court may lift the veil of incorporation in order to identify the nationality of. a compnay

A

True

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8
Q

T/F
A company has a separate legal identity from its members and is in law a person in its own right

A

True

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9
Q

T/F
The liability of a company itself is limited

A

False - it is always unlimited

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10
Q

Salomon v Salmon & Co 1897

A

C had carried on business as leather merchant for years, decided to form limited company to purchase business, he and six members each subscribed for one share, company purchased business. Company did not prosper and was wound up, liabilities > assets. Liquidator claimed business was in effect C’s as owned all but 6 issued shares and payment of debenture debt to him postponed until creditors paid
HL judgement overruled CA, C not liable to company or creditors, company legal entity in own right

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11
Q

What is a personal guarantee

A

where lenders require directors and or members to agree to repay loan out of personal wealth if company defaults on debt

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12
Q

What is owed on winding up on a company limited by shares

A

any outstanding amount of nominal value of any share that has not been paid either by original/subsequent holder of the shares. Any premium will be owed to extent not paid

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13
Q

What is owed on winding up of a company limited by guarantees

A

the amount they guarantee to pay in the event of winding up

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14
Q

Is the veil of incorporation lifted in the following circumstance
Group of companies where subsidiary can be regarded as agent of holding company

A

Yes

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15
Q

Is the veil of incorporation lifted in the following circumstance
To reduce tax liability

A

Yes

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16
Q

Is the veil of incorporation lifted in the following circumstance
to give entitlement to compensatoin

A

Yes

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17
Q

Is the veil of incorporation lifted in the following circumstance
to prevent evasion of excise duty

A

Yes

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18
Q

Is the veil of incorporation lifted in the following circumstance
to reveal national identity and expose illegality

A

Yes

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19
Q

Is the veil of incorporation lifted in the following circumstance
in a quasi-partnersehip

A

Yes

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20
Q

Is the veil of incorporation lifted in the following circumstance
where a company is a sham

A

Yes

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21
Q

Is the veil of incorporation lifted in the following circumstance
to prevent an evasion of obligations

A

Yes

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22
Q

Is the veil of incorporation lifted in the following circumstance
to reveal a national identity

A

yes

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23
Q

Is the veil of incorporation lifted in the following circumstance
legislation to confer a personal liability on those who run a company for breach of obligations imposed on the compnay

A

Yes

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24
Q

Is the veil of incorporation lifted in the following circumstance
Where a director is disqualified

A

Yes

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25
Q

Is the veil of incorporation lifted in the following circumstance
Fraudulent or wrongful trading

A

Yes

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26
Q

Is the veil of incorporation lifted in the following circumstance
Trading without a trading certificate

A

Yes - directors personally liable

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27
Q

What kind of limitation is described:
Liability is limited to the amount of the nominal value if unpaid on members shares held by them including any premium payable by the current owner in respect of them

A

Limited by shares (public or private)

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28
Q

What kind of limitation is described:
Liability is limited to such amount as the members undertake to contribute to the company’s assets in the event of it being wound up

A

Limited by guarantee - cannot be registered with share capital and Is usually a charity or trade association

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29
Q

What kind of limitation is described
There is no limitation on members liability, they can be compelled to contribute as much as may be necessary to pay the company’s debts in full

A

Unlimited

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30
Q

Does an unlimited liability company need to file annual accounts subject to certain conditions (not sub or parent of limited company)

A

No

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31
Q

How many times may a company alter status

A

ONce

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32
Q

How can company alter liability status

A

limited to unlimited with consent of all members
unlimited to limited by passing special resolution to that effect and specifying whether to be limited by shares or guarantee

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33
Q

What is a public company

A

limited company registered as a public company under the act

34
Q

What is a private company

A

any registered company that is not a public limited company

35
Q

Which is subject to more stringent rules - public or private companies

A

Public company

36
Q

Public company liability

A

Must be limited

37
Q

Private company liability

A

may be limited or unlimited

38
Q

Public share capital

A

subject to authorised minimum currently 50k

39
Q

private share capital

A

no minium

40
Q

public company ability to commence trading

A

must have trading certificate

41
Q

private company ability to commence trading

A

may commence as soon as incorporated

42
Q

public company public offers

A

can offer securities to public and may obtain listing from stock exchange etc

43
Q

private company public offers

A

prohibited from offering securities to the public

44
Q

Public company name

A

must end with public limited company or PLC

45
Q

private company name

A

must end with limited or ltd

46
Q

Public company loans

A

loans to persons connected with directors, quasi loans and credit transactions to directors or connected persons need members approval

47
Q

Private company loans rules

A

only loans made directly do directors need approval

48
Q

Public company directors requirements

A

must have at least two

49
Q

private company director reqiurements

A

must have at least one

50
Q

public company - company secretary

A

must have one

51
Q

private company - company secretary

A

Do not need one

52
Q

Public company - written resoluation

A

N/A

53
Q

Private company written resolutions

A

may pass written resolution instead of calling meetings

54
Q

Which needs to hold AGM Public or Private companies

A

Public

55
Q

Deadline for public company filing accounts and reports

A

six months - must lay before general meeting

56
Q

Deadline for private company filing accounts and reports

A

9m

57
Q

Which companies can qualify as SME and take advantage of audit exemptions and less stringent regime for filing

A

Private

58
Q

How often must public company appoint auditors

A

each year if necessary

59
Q

How often do private companies appoint auditors

A

existing auditors may deemed to be reappointed subject to conditions

60
Q

Which type of company (public/private) can exclude pre-emption rights

A

Private

61
Q

Public company rules for payment of shares

A

additional rules including at least by 1/4 paid up and concerning valuation for non-cash consideration

62
Q

Public company how can capital be reduced

A

special resolution confirmed by court

63
Q

How can private company reduce captital

A

special resolution and directors solvency statement

64
Q

What kind of company has the power to redeem or purchase shares out of company

A

Private

65
Q

What is described
memorandum in prescribed form stating that the subscribers wish to form a company and agree to become members of the company and (if share cap) agree to take at least one share each. Must be authenticated by each subscriber

A

Memorandum of association

66
Q

What must an application to form a company state

A

Company proposed name
whether liability limited (Shares/guarnatee)
private/public
registered office Eng Wales, Scot NI
Intended address of registered office

67
Q

Statement of capital and initial shareholding must state

A

total number of shares, aggregate nominal value, details of classes of shares and amounts to be paid and unpaid on each

68
Q

What must a statement of guarantee state

A

maximum amount each member undertakes to contribute tot he net assets of company if company wound up while they are member/one year after

69
Q

What must statement of proposed officers give

A

particulars of and consent of
first director and first company secretary

70
Q

What is a statement of compliance

A

statement requirements of the act have been complied with

71
Q

What is issued by registrar if they are satisfied the requirements of the act re registration have been complied with

A

certificate of incorporation

72
Q

To obtain a trading certificate, what must a public company submit

A

application stating nominal value of share cap is not less than minimum and statement of compliance

73
Q

What happens if no trading certificate is obtained within a year of incorporation

A

may result in compulsory winidn gup

74
Q

Advantages of off the shelf companies

A

quicker company ready to go
avoids liabilities from pre incorporation contracts as company already exists

75
Q

Disadvantages to off the shelf companies

A

change of name
transfer of shares
change of director and company secretary
alternation of rticles

76
Q

Who sells of the shelf companies

A

enterprises specialising in registering a stock of companies ready for sale

77
Q

T/F
off the shelf companies are founded by the registrar off companies and are available to purchase from the companies house website

A

False

78
Q

what is a promoter

A

any person who takes procedural steps to get a company incorporated, includes anyone who makes business preparations for the company

79
Q

Duties owed by promoter

A

general duty to exercise reasonable care and skill
fiduciary duty to disclose personal interest in transaction and account for monies received

80
Q

What is a legitimate profit made by a promoter

A

a profit made by a promoter who acquires interest in property before promoting a company and makes a profit when they sell the property to the promoted company provided hey disclose it

81
Q

what is a wrongful profit

A

made by a promoter who enters into and makes profit personally in a contract as a promoter in breach of fiduciary duty

82
Q

What happens if a promoter makes a pre incorporation contract

A

the company cannot ratify it
the company is not bound by it
the company cannot enforce it
the promoter is personally liable

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