Company Law Flashcards
What is a Corporation sole?
a public office occupied by a living person, death of the person doesn’t effect the public office it continues by choosing another person
What is Corporation aggregate?
a group of like minded people that set themselves as a company with a separate legal identity
What are the three ways of forming a company?
1) Royal charter
2) Statute
3) Registration
What is formation by Royal charter?
company is created by asking the monarch
What is formation by Statute?
parliament create a company by statute
What is formation by registration?
company is formed by registration with registrar of companies
What is a Public quoted company?
public company limited by shares not guarantee and share price quoted on recognized stock exchange
What is a Public unquoted company?
public company limited by shares but not quoted on stock market
What defines a public company?
- is limited by shares
- the constitution (articles of association) states that its public
- ends in public limited company or PLC
- has an allotted share capital of no less than £50,000
- of which no less than 25% is credited as paid up
- together with whole of share premium
- although exists from date of incorporation but cant trade until it has the trading certificate
Who issues the trading certificate?
The registrar
What does the company need to state in the application for trading certificate?
- nominal value of allotted shares are not less than £50,000
- what the formation expenses were/are
- to who the formation expenses have been paid to/payable to
What must accompany an application for a trading certificate?
a statement of compliance
What happens if a public company fails to obtain a trading certificate within 12 months of incorporation?
the court on application can grant a liquidation order against the company
What is meant by lifting the veil?
When court looks behind the veil of incorporation, and deals with the person rather than the company
Why is the veil lifted on corporations?
to prevent fraud, illegality and oppression
What company in France is similar to a UK public company?
Societé Anonyme (SA)
- no less than 6 members
- between 3-12 directors
- must have auditor
What company in France is similar to a UK private company?
société à responsabilité limitée (SaRL)
- does not have share capital
- financing divided into parts which holders cant sell to public
- commonly used for family companies
What company in Germany is similar to UK public company?
Aktiengesellschaft (AG)
What company in Germany is similar to a UK private company?
Gesellschaft mit beschränkter Haftung
What is a Societas Europaea (SE)?
a european public company
- members limited liability
- minimum capital € 120,000
- registered in state of administrative headquarters
What are the four ways of establishing a European company by companies from at least 2 EU states?
- merger
- formation of new holding company
- formation of new subsidiary
- transforming a company in 1 EU state which owns a subsidiary for at least 2 years in another EU state
Who creates a company?
a promoter
Who is liable for pre incorporation contracts?
the promoter
Who can be a promoter?
anyone no qualifications required
Who pays for the formation expenses of a company
the promoter because the company does not exist yet
What is the streamlined company registration scheme?
the information necessary to form a company is sent to all relevant agencies as well as Companies house
What does a Memorandum state?
that subscribers wish to form a company, agree to be members and agree to take at least one share each
What does a company’s constitution consist of?
- articles of association
* resolutions and agreements affecting the articles
What are the 2 major areas on articles of association?
1) the contractual force
2) the alterability
What is contractual force?
when a person becomes a member of a company its though they have formed a contract with the company and other members. so members are binded to each other as well as to the company
What is alterability?
articles can only be changed for benefit of the company as a whole and the members
What is the procedure of alteration?
- special resolution
- 75% majority
- 14 days notice
- resolution copy sent to registrar within 15 days
- amended articles sent to registrar
- alteration binding on all members
- articles can state that affected member must be present
- affected member can prevent alteration by not attending
- articles can require more than 75% majority
- can never be drafted to prevent amendment
What is a director?
is anyone who occupies the position of director by what ever name called
What is a shadow director?
a person who’s instructions a director follows
What is a de facto director?
a person who portrays to act as if they are a director
What is an alternate director?
a person appointed by a director who is unable to attend board meetings
What are non-executive directors?
non-executive directors act in a supervising role over executive directors, bringing an independent view, help with effective leadership and maintain financial honesty
What is the minimum amount of directors in a private company?
1
What is the minimum amount of directors in a public company?
2
In order to be a director, what must that person be clear of?
- must not be disqualified under CDDA
- not be bankrupt
- not be unsound of mind
What happens if a director is absent from board meetings for more than 6 months?
they will loose office
How long is the disqualification period of a director?
up to 15 years
What happens if a disqualification order of director is broken?
up to 2 years in prison
What happens if a director is involved in more than 2 insolvent liquidations in a period of 5 years?
director is disqualified
What happens if a director fails to notify the registrar of changes persistently 3 offences in 5 years?
director is disqualified
Where are the first directors named?
in the documents sent to the registrar before incorporation
After the first directors are appointed who can appoint further directors?
- members in general meeting
- other directors to fill temp vacancy
- the court
- a lender if part of loan agreement
- administrator under admin order
What happens to directors appointed on casual term?
they have to resign at next general meeting and submit self for re-election
What is the 1/3 rotation procedure?
Is when after the first annual general meeting all directors resign, thereafter on general meetings 1/3 of the directors resign and submit for reelection
What is the registrars gazette?
the registrars newspaper
How are directors appointed?
through ordinary resolution
How many days before meeting is notice of ordinary resolution given to director?
28 days
How many days before the meeting must members be notified?
21 days
Why is the director given 28 days notice of resolution?
to have the opportunity to make written representations which is handed out to members at same time as 21 days notice
What is required of the top 350 public quoted companies each year at the general meeting?
all directors to resign
How much notice is required with special resolution?
requires 75% majority and 14 days notice
How much majority is required for a ordinary resolution
simple majority with special notice
Who approves directors service contracts that are longer than 2 years?
the members
Who are persons with significant control (PSCs)?
- have >25% of company shares
- have >25% voting rights
- have right to appoint and remove majority of board of directors
- individuals that have right to excersize control over company
Who can appoint an auditor?
- the promoter
- the directors
- the members
- secretary of state
When should the first AGM be held after incorportation?
no more than 18 months after incorporation
When should subsequent AGM meetings be held?
no more than 15 months after previous
How many days notice is required to hold an AGM?
21 days
In an AGM what ordinary business is discussed?
1) formal presentation of financial statements
2) reappointment of directors
3) reappointment of auditors
4) approval of divedend proposed by directors
