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(FLK1) Business Law and Practice > Company Formation > Flashcards

Company Formation Flashcards

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1
Q

What are the Three Types of Corporate Forms allowed under the Companies Act 2006?

A
  • Unlimited Company.
  • Company Limited by Shares.
  • Company Limited by Guarantee.

Companies Act (CA) 2006 — §3.

The most common is the Company Limited by Shares, which we will default to henceforth.

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2
Q

What is an Unlimited Company?

A

A company whose Members do not have Limited Liability.

§3(4) — CA 2006.

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3
Q

What is a Member?

A

A person whose name is on a company’s Register of Members, and enjoys any associated rights.

CA 2006 — §112.

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4
Q

What is Limited Liability?

A

The restriction of Members’ liability to the extent dictated by the company’s Constitution.

CA 2006 — §3(1).

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5
Q

What is the Company’s Constitution?

A

The body of documents that govern:
* Its operation; and
* The relationship between Shareholders, Directors, and Management.

CA 2006 — §17.

This includes the Memorandum of Association (MOA), Articles of Association (AOAs), and any Shareholder Agreements or Resolutions that affect either criterion.

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6
Q

What is the Memorandum of Association?

A

A statement by Subscribers that they wish to:
* Form a company;
* Become Members thereof; and
* Hold at least one share each in.

CA 2006 — §8.

A Subscriber is a merely a person who signs the MOA. The MOA must follow the prescribed form and be authenticated by each Subscriber.°

° Sch. 1 — Companies (Registration) Regulations 2008.

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7
Q

What are the Articles of Association?

A

The set of rules governing the relationship between the company and its Members.

CA 2006 — §18(1), §33(1).

Always start with the Model Articles° to ensure compliance with the Act’s minimum standards and add or detract from there.

° Sch. 1 — Companies (Model Articles) Regulations 2008.

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8
Q

How are the Articles of Association construed?

A

According to the ordinary principles of contract law,° with a mind to give them reasonable business efficacy.°°

° Cosmetic Warriors v Gerrie [2017] EWCA Civ 324.
°°Palmer’s Company Law — Para. 2.1112.

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9
Q

Can the Articles of Association be amended?

A
  • Yes, either through:
    • A Special Resolution;°
    • A Written Resolution (LLCs only);°° or
    • The Duomatic Principle.°°°
  • The Registrar must be notified within 15 days on pain of criminal fines.°°°°

This assumes no Entrenchment and bona fide intentions and outcomes.

° CA 2006 — §21(1).
°° CA 2006 — §281(1).
°°° Cane v Jones [1980] 1 WLR 1451.
°°°° CA 2006 —§26(1).

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10
Q

What is the Duomatic Principle?

A

Assent by all Shareholders entitled to attend and vote at a General Meeting to a matter within their authority functions as a binding Resolution.

Re Duomatic [1969] 2 Ch 365.

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11
Q

What is Entrenchment?

A

Any condition that increases the threshold for an amendment beyond what a Special Resolution would require.

CA 2006 — §22(1).

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12
Q

When can an Entrenchment Provision be added to the AOAs?

A
  • Either at formation; or
  • By a Resolution with the unanimous consent of all Members.

Notice of such provisions must be given to the Registrar.

CA 2006 — §22(b).

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13
Q

When can an Entrenchment Provision be superseded?

A
  • Either by court order; or
  • By a Resolution with the unanimous consent of all Members.

CA 2006 — §22(c).

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14
Q

What is a Company Limited by Shares?

A

A company whose Members’ liability is limited to the amount, if any, unpaid on their shares.

CA 2006 — §3(2).

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15
Q

What is a Company Limited by Guarantee?

A

A company whose Members’ liability is limited to fixed amount they have contributed.

CA 2006 — §3(3).

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16
Q

Which of the Three Corporate Forms may be either Private or Public?

A

The Company Limited by Shares. Both others may only be private.

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17
Q

What is a Private Company?

A

Any company that is not a public company.

CA 2006 — §4(1).

18
Q

What is a Public Company?

A

A company able to:
* Offer or allot securities to the public;° and
* Satisfy the Minimum Capital Requirement of £50,000.°°

° CA 2006 — §755.
°° CA 2006 — §761, §763.

19
Q

When is a Company Formed?

A

When the Registrar of Companies (Registrar) issues its Certificate of Incorporation.

CA 2006 — §15.

Attaining a Certificate of Incorporations results from filing the necessary documents° and paying the required fee at Companies House.

° CA 2006 — §9-§13.

20
Q

What Documents are Needed to Form a Company?

A
  • An MOA.
  • An IN01 Form.
  • An SH50 Form (PLCs only).
21
Q

What Information is included in an IN01 Form?

A
  • AOAs.
  • Proposed name.
  • Type and intended business activities.
  • Details of the Registered Address.
  • Details of the Registered Email Address.
  • Details of the Directors and Secretary.
  • Statement of Capital.
  • Statement of Compliance.
  • Statement of Initial Shareholdings.
  • Statement of Initial Significant Control.

CA 2006 — §9-13.

22
Q

What is the Registered Office?

A

The location to which all communications and notices may be addressed.

CA 2006 — §86.

23
Q

What is a Statement of Capital?

A

A document outlining the:
* Total number of shares held by Subscribers;
* Aggregate nominal value of those shares; and
* Aggregate sum left unpaid on those shares, if any, whether on account of their nominal value or by way of premium.

24
Q

What is a Statement of Initial Shareholdings?

A

A document outlining the:
* Class and number of shares held by Subscribers;
* The nominal value of each share;
* The amount to be paid up or left unpaid, if any, for each share.

For public companies, shares and any premium thereon are technically taken, not alloted, at incorporation and must be paid up in cash.°

° Zavarco v Sidhu [2022] EWCA Civ 1040.

25
Q

What is a Statement of Initial Significant Control?

A

A document outlining the presence, or absence, and particulars of any Persons with Significant Control (PSCs).

26
Q

What is an SH50 Form?

A

An application to acquire a trading certificate.

27
Q

Following Incorporation, what should be addressed at the First Board Meeting?

A
  • Novating pre-incorporation business contracts.
  • Completing all incorporation formalities.
  • Appointing and approving the Board of Directors.
  • Appointing lawyers, bankers, and accountants.
  • Sorting issues of tax, insurance, and intellectual property.
  • Approving Subscribers’ registration and share transfers or allotments, and authorising the share issue.

Incorporation formalities include:
* (1) Reporting incorporation;
* (2) Approving incorporation costs;
* (3) Selecting an Accounting Reference Date (ARD) using Form AA01;
* (4) Selecting a business name; and optionally
* (5) Adopting a company seal.

28
Q

Following the First Board Meeting, which Documents should be filed with the Registrar?

A
  • Any Special Resolutions passed.
  • Any Resolutions passed on the authority to allot shares.
  • In case of a new Director, Form AP01 or AP02.
  • In case of a new Secretary, Form AP03.
  • In case of a Director resignation, Form TR01.
  • In case of a Secretary resignation, Form TR02.
  • In case of a change to the ARD, Form AA01.
  • In case of a Share Allotment, Form SH01 and a Statement of Capital.°
  • In case the company changes its Regsitered Office, Form AD01.
  • In case company records and registers are moved from the reigstered office, Form AD02 and AD03.

° CA 2006 —§555.

29
Q

What must a company keep Records of?

A
  • PSCs.°
  • Charges.
  • Names and addresses of Directors.°°
  • Names and addresses of Members.°°°
  • Resolutions and Shareholder Meetings.°°°°
  • Directors’ service contracts or memonranda of terms.°°°°°

° CA 2006 — §790M.
°° CA 2006 — §162-§166.
°°° CA 2006 — §113-§114.
°°°° CA 2006 — §358.
°°°°° CA 2006 — §228.

30
Q

What is the Object of a Company?

A

The purpose for which the Company was formed.

The 1985 Act requries the inclusion of an Objects clause in the AOAs, whereas the 2006 Act does not, and until that clause is removed by resolution, it will continue to bind the Company.

31
Q

What are the Rules around Business names?

A

S. 53(b): It must not be offensive.
S. 54-55: It must be approved if it suggests a connection with a public body or contains sensitive words.
S. 59: It must end in an abbreviation indiciating the Company’s form.
S. 66: It must not be the ‘same as’ another on the index of company names.
S. 53A: It must not constitute an offence of dishonesty or deception.
S. 56A: It must not suggest a connection with a foreign government or its off-shoots.
S. 57A: It must not consist of or include compute code.
S. 76: It must not give a misleading indication of its activities.
S. 76A: It must not have been used or intended to be used for criminal activities.
S. 82: It must be displayed in certain locations, namely its registered office, business premises, and company documents and correspondences.

CA 2006.

32
Q

How can an Overseas Company (OC) trade in the UK?

A
  • Redomiciliation.
  • Incorporating a UK Subsidiary.
  • Registering a UK Establishment.
  • Appoint an Agent.
  • Appoint a Franchisee or Distributor.
  • Enter into a Partnership with a local firm.
  • Enter into a Joint Venture with a local firm.

Agents, Franchising & Distribution, Partnerships, and Joint Ventures are all addressed in the Corporate Law — Commercial Agreements class.

33
Q

What is Redomiciliation?

A

The process of moving a company’s domicile to a new jurisdiction.

Because redomiciliation is so committal, it is usually only done if a company favors another jurisdiction’s legal, commercial, and political environment more than its own.

34
Q

What is a UK Subsidiary?

A

A UK company that is entirely or mostly owned by another company.

The owner, in this case the OC, is the called the Parent Company.

35
Q

What is a UK Establishment?

A

Any registered place of business that is located in the UK .

Accordingly, an Establishment is not a separate legal entity but rather part of the same legal entity as the OC.

36
Q

What are the Advantages and Disadvantages of using a UK Subsidiary to trade?

A

Advantages:
* Limited liability.
* Local credibility.
* Greater autonomy for the branch.
* Greater potential for expansion.
* Greater perception of committment.

Disadvantages:
* Regulatory compliance.
* Greater initial and operating costs.
* Greater degree of control for the Parent.

37
Q

What are the Advantages and Disadvantages of using a UK Establishment to trade?

A

Advantages:
* Lesser cost and complexity.
* Access to consolidated accounting.
* Greater degree of control for the Parent.

Disadvantages:
* Unlimited liability.
* Lesser autonomy for the branch.
* Lesser perception of committment.

38
Q

What are the Regsitration Particulars for a UK Establishment?

A
  • OC’s legal name.
  • Proposed UK trading name, if any.
  • Certified copies of OC’s constitutional documents and latest set of accounts.
  • Details of OC’s Board of Directors.
  • Details of the UK Establishment, including name, address, nature of business, etc.
  • Details of OC’s legal form, including home jurisdiction, registration number, accounting requirements, etc.

The relevant form is Form OS IN01. It must be delivered to the Registrar within one month of opening the Establishment. Any changes must be notified reasonably quickly, and any closures must be notified through Form OS DS01.

39
Q

What Information must be displayed by a UK Establishment at its business location?

A

The OC’s legal name and country of incorporation.

Overseas Company Regulation (OCR) 2009 — Reg. 60.

This must also be displayed at the service address of anyone authorised to accept service of documents on the OC’s behalf.

40
Q

What Information must be displayed by a UK Establishment in its general communications?

‘General Communications’ should be taken to mean any commercial communication imaginable.

A

The OC’s legal name and country of incorporation.

OCR 2009 — Reg. 62.

If a Director’s name is mentioned other than as a signatory in any business letter, all sitting Directors’ must also be named.°

° OCR 2009 — Reg. 64.

41
Q

What Additional Information must be displayed by a UK Establishment in business letters, order forms, and websites?

A

The OC’s:
* Legal form.
* Legal name.
* HQ address.
* Solvency status.
* Country of incorporation.
* Enjoyment of limited liability, if any.
* Registry of incorporation and registration number.

OCR 2009 — Reg. 63.

(FLK1) Business Law and Practice (13 decks)

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