Companies Flashcards
Directors owe their duties to …
… the company
Shareholders usually have rights against …
…the company
What statute enshrines the concept of limited liability?
s.74 Insolvency Act 1986
Companies can raise finance by …
… issuing shares
A company’s share capital os divided into individual shares.
What does s.542 CA 2006 require.
Each share has a fixed nominal value (par value).
Nominal value doesn’t usually bear any relationship to the market value of that share
What does PSC mean?
People with significant control
The PSC regime obliges most UK companies/LLPs to maintain a register of PSCs.
Where is the PSC regime set out?
Part 21A CA 2006
What does Part 1 of Schedule 1A CA 2006 set out?
5 conditions (1 or more) that must be satisfied for an individual to be considered a PSC
What does RLE mean?
Relevant Legal Entity
What statute imposes a duty on companies to take reasonable steps to identify their PSCs and RLEs?
Section 790D CA 2006
Define a shareholder
1) Own the company
(their investment is at risk)
2) Exercise ultimate control
3) Receive a financial return on their investment
How does a shareholder exercise their control?
1) By determining the company’s constitution
2) By voting on shareholder resolutions
What forms the company’s constitution?
The Articles of Association
Forms the basis of a ‘contract of membership’) between company and the shareholders / shareholders themselves
What does the AoA determine?
The company’s internal management
The AoA gives control to …
… the shareholders (enables them to prescribe how company is run)
Directors aren’t party to the ‘contract of membership’. But what does s.171 CA 2006 say?
Directors have a duty to act in accordance with their company’s constitution
From which laws are:
a) Model A
b) Table A
a) CA 2006
b) CA 1985
What does the Memorandum of Association govern?
The relationship between the company and the outside world
CA 2006: records agreement of founding shareholders to form company
What is the objects clause? (MoA)
Enables shareholders to restrict the company’s powers in dealing with 3rd parties
(CA 2006: redundant)
What is the statement of the company’s authorised share capital? (MoA)
Puts a limit on the number of shares the company could issue
CA 2006: Now in AoA
Shareholder resolutions may be by …
a) Ordinary resolutions (s.282 CA 2006), or
b) Special resolutions (s.283 CA 2006)
What is a dividend?
A distribution of the company’s profits to the shareholders
What are final dividends?
Those recommended by the directors after the end of the financial year
What are interim dividends?
Those declared by directors during the financial year (don’t require shareholder approval)
What ways can shareholders seek a financial return?
1) Dividends
2) Sell shares to a 3rd party
3) Investment returned when company is wound up
What do the directors do?
Manage the company on behalf of its shareholders on a day-to-day basis
Financial reward for directors are in the form of …
… payment for services rendered
What is an executive director?
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
If the director is not an employee (a non-executive director), he will receive …
… director’s fees
How do directors make decisions?
As a board of directors.
Resolutions passed by simple majority
