Companies

Question 1

Directors owe their duties to …

Answer 1

… the company

Question 2

Shareholders usually have rights against …

Answer 2

…the company

Question 3

What statute enshrines the concept of limited liability?

Answer 3

s.74 Insolvency Act 1986

Question 4

Companies can raise finance by …

Answer 4

… issuing shares

Question 5

A company’s share capital os divided into individual shares.

What does s.542 CA 2006 require.

Answer 5

Each share has a fixed nominal value (par value).

Nominal value doesn’t usually bear any relationship to the market value of that share

Question 6

What does PSC mean?

Answer 6

People with significant control

Question 7

The PSC regime obliges most UK companies/LLPs to maintain a register of PSCs.

Where is the PSC regime set out?

Answer 7

Part 21A CA 2006

Question 8

What does Part 1 of Schedule 1A CA 2006 set out?

Answer 8

5 conditions (1 or more) that must be satisfied for an individual to be considered a PSC

Question 9

What does RLE mean?

Answer 9

Relevant Legal Entity

Question 10

What statute imposes a duty on companies to take reasonable steps to identify their PSCs and RLEs?

Answer 10

Section 790D CA 2006

Question 11

Define a shareholder

Answer 11

1) Own the company
(their investment is at risk)
2) Exercise ultimate control
3) Receive a financial return on their investment

Question 12

How does a shareholder exercise their control?

Answer 12

1) By determining the company’s constitution

2) By voting on shareholder resolutions

Question 13

What forms the company’s constitution?

Answer 13

The Articles of Association

Forms the basis of a ‘contract of membership’) between company and the shareholders / shareholders themselves

Question 14

What does the AoA determine?

Answer 14

The company’s internal management

Question 15

The AoA gives control to …

Answer 15

… the shareholders (enables them to prescribe how company is run)

Question 16

Directors aren’t party to the ‘contract of membership’. But what does s.171 CA 2006 say?

Answer 16

Directors have a duty to act in accordance with their company’s constitution

Question 17

From which laws are:

a) Model A
b) Table A

Answer 17

a) CA 2006

b) CA 1985

Question 18

What does the Memorandum of Association govern?

Answer 18

The relationship between the company and the outside world

CA 2006: records agreement of founding shareholders to form company

Question 19

What is the objects clause? (MoA)

Answer 19

Enables shareholders to restrict the company’s powers in dealing with 3rd parties

(CA 2006: redundant)

Question 20

What is the statement of the company’s authorised share capital? (MoA)

Answer 20

Puts a limit on the number of shares the company could issue

CA 2006: Now in AoA

Question 21

Shareholder resolutions may be by …

Answer 21

a) Ordinary resolutions (s.282 CA 2006), or

b) Special resolutions (s.283 CA 2006)

Question 22

What is a dividend?

Answer 22

A distribution of the company’s profits to the shareholders

Question 23

What are final dividends?

Answer 23

Those recommended by the directors after the end of the financial year

Question 24

What are interim dividends?

Answer 24

Those declared by directors during the financial year (don’t require shareholder approval)

Question 25

What ways can shareholders seek a financial return?

Answer 25

1) Dividends
2) Sell shares to a 3rd party
3) Investment returned when company is wound up

Question 26

What do the directors do?

Answer 26

Manage the company on behalf of its shareholders on a day-to-day basis

Question 27

Financial reward for directors are in the form of …

Answer 27

… payment for services rendered

Question 28

What is an executive director?

Answer 28

1) A director who is also an employee of the company (payment in the form of a salary).
2) Acts as the agents of the company
3) Can delegate their powers and functions

Question 29

If the director is not an employee (a non-executive director), he will receive …

Answer 29

… director’s fees

Question 30

How do directors make decisions?

Answer 30

As a board of directors.

Resolutions passed by simple majority