Companies: The consequences of incorporation Flashcards
Can an LLP create floating charges, sue and be sued?
Yes
What is the veil of incorporation?
How the company is a separate legal ‘person’ to its shareholders
What dies the veil of incorporation mean for companies?
- can enter into contracts, sue and be sued in its own name
- owns property in its own name
- has perpetual succession
- separation of management and control
- members have limited liability
If a company fails, the liability of its shareholders are limited to…
- amount unpaid on their share capital, or
- any amount they have agreed to contribute
Why might the veil of incorporation be lifted?
- groups of companies where subsidiary acts as agent to parent
- to reveal national identity (war)
- sham companies
- quasi-partnerships (registered as business but run as partnership)
What are statutory examples to lift the veil?
- disqualified directors still working
- fraudulent trading
- wrongful trading
What are the 2 types of company?
- public
- private
What is the main characteristic of a public company?
- limited by shares
What are the 2 types of private company?
- unlimited
- limited - by shares or guarantee
What are the main characteristics of a plc?
- at least 2 members
- minimum share capital of £50k
- shares must be at least 25% paid up
- must have trading certificate pre trade
- company secretary required
- file accounts within 6 months and must be audited
What are the main characteristics of a ltd?
- can have 1 member
- company secretary optional
- file accounts within 9 months
What documents must be submitted in order to form a company?
- memo of association
- application
- articles
- statement of capital and initial shareholdings
Or - statement of guarantee
- statement of proposed officers
- statement of compliance
Registrar checks docs and issues certificate of incorporation - company exists from here.
What must be included in the application part of company formation?
- proposed name of company
- liability of members
- private or public
- details and address of office
What must be included in the statement of capital and initial shareholdings part of company formation?
- number of shares
- their aggregate nominal value
- details of each class of share
- how much has been paid up on each share
Pre-incorporated contracts…
- company not liable, promoter is
- company cannot ratify
- avoidance: postponing finalisation, buying off-shelf company, entering agreement of novation
- promoter owes fiduciary duty to company
