Company Formation

Question 1

What are the required constitutional documents for a company under CA 1985 v CA 2006?

Answer 1

1985 = Articles of Association and Memorandum.

2006 = Only Articles of Association.

Question 2

Must the articles comply with CA 2006?

Answer 2

yes, they must comply with the minimum provisions (legality test). Some provisions in the CA2006, like the right to demand a poll vote, override anything in the Articles.

Question 3

How can the Articles be amended?

Answer 3

By special resolution of the shareholders. Alterations must be made bona fide in the interests of the company as a whole.

Question 4

How does incorporation from scratch happen?

Answer 4

Deliver to Companies House:
- Memorandum;
-Articles
-Fee
-Application form for registration (IN01)

Then the certificate of incorporation will be sent.

Question 5

What does form IN01 contain?

Answer 5

The company’s proposed name and registered office - must be an ‘appropriate address’;

• Whether the company is to be private or public;
• Whether the company is to be limited by shares (or guarantee);
• A statement of capital and initial shareholdings (s 10) (or if it is to be limited by guarantee, details must be given of the guarantee (s 11));
• A statement of the company’s proposed officers ie directors and company secretary (s 12) and persons with significant control (s 790); and
• A statement of compliance (s 13).
• A statement of lawful purpose.

Question 6

What does the certificate of incorporation contain?

Answer 6

Name, registered number, date of incorporation.

Question 7

How does incorporation by converting a shelf company work?

Answer 7

This is an already incorporated company -

the client will change
NAME: with form NM01 and special resolution and fee filed at Companies House,

OFFICE: Appropriate address, file form AD01.

ARtICLES: File Amended Articles and Special Resolution.

MEMBERS, DIRECTORS(AP01), AND SECRETARY(AP03).

Question 8

Company name considerations?

Answer 8

Can be offensive, end in ltd for private company.
Must not be same as another.
Obtain approval if it suggests a connection with government or public authority.

ALSO not ok if SOS considers it to be dishonest, is a. computed code, connection with foreign government, gives misleading indication of its activities.

Question 9

What are the post-incorporation steps?

Answer 9

1. Elect chairperson? Will they have a casting vote? MA provides that they do.
2. Accounting reference date - can be changed with form AA01.
3. Appoint auditor - by board resolution.
4. Tax registrations - for corporation, Vat, PAYE, National Insurance.
5. Shareholders agreement - not required but useful

Question 10

Pre-incorporation contracts - the rules under s51 CA 2006.

Answer 10

The agent purporting to act for the company will be bound by the contract, they are personally liable. Companyy cannot subsequently ratify a contract made before it came into existence.

Can novate one.

Question 11

Who can demand a poll vote?

Answer 11

The chairperson of the meeting, the directors, two or more people with right to vote on resolution, a person or persons representing at least 10% of the total voting rights of all the shareholders entitled to vote.

Question 12

What are the rules for voting on a written resolution?

Answer 12

Only private companies can use written resolution procedure.

Every member has one vote in respect of each share held by them.

Remover of directors and auditors cannot be passed by written resolution.

Question 13

Who calls a BM? What is the notice period? Quorum? Voting?

Answer 13

Ma9: any director.

Reasonable notice is necessary.

MA11(2) quorum 2.

Voring: Show of hands and each director has one vote, chairperson may have casting vote.

Question 14

Who calls a GM?

Answer 14

Usually the board.

Question 15

What are the notice requirements for a GM?

Answer 15

14 clear days notice. Inform shareholders where and when. the board must approve the form of notice and then authorise the circulation to the shareholders.

Question 16

Can the notice period for a GM be shortened?

Answer 16

Private company - can be short notice if this is agreed by a majority in number of the shareholders who together hold shares with a nominal value of not less than 90% of the total nominal value of the shares which give the right to attend and vote at the GM.

Question 17

When will a written resolution lapse?

Answer 17

If the company has not received a sufficient number of responses by 28 days fromthe circulation date.

Question 18

What is the sequence of events for a short-notice GM?

Answer 18

1. BM is held to resolve to convene/call GM to approve the form of notice for the GM and the form of consent to short notice, and authorise their circulation to shareholders. Notice and form of consent given to shareholders.
2. GM takes place immediately following adjournment of Bm, shareholders vote on resolutions set out in notice.
3. BM is then reconvened, directors are informed as to how the shareholders voted.
4. PMMS

Question 19

A contractor has been approached to carry out building works at the offices of a limited liability partnership. A formal contract is to be entered into in respect of the works.

From the contractor’s perspective, which of the following best describes with whom the contractor will be entering into a contract?

a) The contract will be with each of the members of the LLP.

b) The contract will be with all the partners, each of whom will be jointly and severally liable.

c) The contract will be with all the partners.

d) The contract will be with the LLP as an entity.

e) The contract will be with the partners delegated by the LLP as having authority to bind it.

Answer 19

d

Question 20

A group of friends have an idea for a business they would like to run together. They have been advised that they could run their business through a partnership, a limited liability partnership or a company.

Which one of the following correctly describes the implications of running a business as either a partnership, a limited liability partnership or a company?

a) A partnership, a limited liability partnership and a company will all be required to register their formation.

b) A partnership, a limited liability partnership and a company will all be liable to pay tax on any profits they make. i

c) A partnership, a limited liability partnership and a company will all have a legal personality separate to their owners.

d) A partnership, a limited liability partnership and a company can all raise finance from external sources in the future.

e) A partnership, a limited liability partnership and a company all need to be owned by two persons or more.

Answer 20

D

Question 21

A client would like to set up her own music business, which she will run as a sole trader. Whilst she would like to work alone, the client needs to raise funds to start and run the business.

Which of the following best describes an option available to the client to raise funds for her new business?

a) The client could issue shares in her business.

b) The client could borrow money from a third party.

c) The client could act as a guarantor on a loan by her bank to a third party.

d) The client could issue bonds in order to raise funds.

e) The client could take a loan from a bank in return for a floating charge over all her assets.

Answer 21

b Anyone can choose to lend to an individual operating as a sole trader. A lender will make its decision to lend based on the creditworthiness of the borrower. The client would be required to demonstrate her solvency, ability to repay any loan and may be required to provide security.

Question 22

A person is investing in shares being issued by a public company. The nominal value of each share is £1. The price at which each share is being issued is £5.

Which of the following, based on regulatory requirements, is the minimum amount for each share which the investor must pay on allotment to them of the shares?

a) £2.

b) £4.25.

c) £1.25.

d) £5.

e) £1.50.

Answer 22

b . On allotment of shares in a public company, a shareholder must pay at least 25% of the nominal value (25p) and the whole of any premium (£4).