Company Law Flashcards
What is a company?
A legal entity, separate from its shareholders and directors, that can enter into contracts, own property, and sue or be sued in its own name.
What is meant by separate legal personality?
When a company is a distinct legal entity from its shareholders and directors.
What is meant by limited liability?
Where shareholders are generally only liable for the amount unpaid on their shares.
What is perpetual succession?
When a company’s existence is not affected by changes in its membership.
What is meant by transerability of shares?
When ownership in a company can be easily transferred through the sale of shares.
What is a limited by shares company?
Liability of members is limited to the amount unpaid on their shares.
What is meant by limited by guarantee?
Liability of members is limited to the amount they agree to contribute in the event of the company’s winding up.
What is an unlimited company?
Members have unlimited liability for the company’s debts.
What is a private company?
A company that cannot offer shares to the public.
What is a public company?
A company that can offer shares to the public and are typically listed on a stock exchange.
What is the process for registering a company?
Certain documents, including the ‘Memorandum of Association’ and the ‘Articles of Association’, must be filed with the Registrar of Companies.
What are the constitutional documents of a company?
The Memorandum of Association and the Articles of Association are the constitutional documents of a company and they outline the company’s rules and regulations.
What is the role of the Memoradum of Association?
Under the Companies Act 2006, it is a short document that states the founders’ intention to form a company and their agreement to become members.
What is the role of the Articles of Association?
It governs the internal management of the company, including shareholder rights, director duties, meetings, and the issuance of dividends.
What is the ‘ultra vires’ doctrine?
This, now largely abolished, previously stated that a company could not act beyond the scope of its stated objects.
What are the main duties of company directors?
The Companies Act 2006 codifies directors duties to act within their powers, promote the success of the company, exercise independent judgement, and demonstrate reasonable care, skill, and diligence.
What is an Annual General Meeting?
Required for public companies to discuss financial statements and elect directors.
What is an Extraordinary General Meeting?
Convened to deal with urgent matters or those requiring shareholder approval.
What is a Class Meeting?
Held for specific classes of shareholders to vote on matters affecting their rights.
What are the disclosure requirements for companies?
Public companies have more stringent requirements regarding financial information and director dealings; they must public annual reports, accounts, and prospectuses when offering shares to the public.
What is insider dealing?
Using confidential information about a company for personal gain by trading its shares - criminal offence.
What is market abuse?
Involves manipulating or distorting financial markets for unfair advantage, including practices like insider dealing, spreading false rumours, or engaging in misleading behaviour.
How are charges ranked in company insolvency?
In order of priority, with fixed charges taking precedence over floating charges.
What are the remedies available to minority shareholders?
Certain protections, including the right to bring derivative claims on behalf of the company, petition for unfair prejudice, or seek a ‘just and equitable’ winding up of the company.
What are substantial property transactions?
Involve the sale, purchase, or lease of assets exceeding a certain value threshold, requiring shareholder approval under the Companies Act 2006.
What is the role of the UK Corporate Governance Code?
Provides best practices for corporate governance in areas like leadership, board effectiveness, accountability, remuneration, and shareholder relations.
What is the ‘comply or explain’ principle in corporate governance?
Companies can deviate from the Corporate Governance Code is they explain their reasons to shareholders.
What are the different ways a company can raise capital?
Equity financing - Issuing fairs to investors.
Debt financing - Borrowing money from lenders.
What is debt financing?
Involves borrowing money with an obligation to repay principal and interest.
What is equity financing?
Involves selling ownership shares in the company, giving investors a claim on future profits.
