Company Law Formation

Question 1

Who is a promoter

General definition

Answer 1

One who undertakes to form a company with reference to a given project and to get it going and who takes the necessary steps to accomplish that purpose

Question 2

Solutions to promoter problems of personal liability

Answer 2

Incorporate the company before making contracts
Postponing finagling contracts until company is formed
Purchase an “off the shelf” company

Question 3

Off the shelf company

Answer 3

A company that has already been registered

Cheap and simple
Can trade immediately
Avoids pre incorporation contractual problems

Question 4

Registration procedure

Answer 4

1 constitutional documents are drawn up in the company behalf
2 application submitted and registered
3 registrar examines documents
4 the registrar issues the certificate of incorporation
5 a notice is published in Edinburgh gazette

Question 5

Trading certificate

Answer 5

If a plc starts to trade before the granting of a trading certificate
1 the company are liable to a fine
2 criminal offence
3 any transactions are valid and company must comply within 21days of being asked to obtain a TC or directors become jointly and server ally liable for those obligations
4 it is grounds for winding up if a TC Is not obtained within on year

Question 6

Ultra vires doctrine

Answer 6

Resulted in the contract with 3rd parties being void and also the shareholders couldn’t ratify the contract retrospectively is the directors hadn’t acted within the powers given to them

Question 7

Bona fide

Answer 7

Without intention to deceive

Question 8

Alterations

Answer 8

Changed must comply with the requirements of the act and be bona fide for the benefit of the company as a whole

Question 9

Restrictions on alterations

Answer 9

Articles cannot be altered for the following purposes :
1 to contravene the provisions of company legislation
2 to impose a liability in members to take more shares than they already hold such an alteration would be contrary and thus, void.
3 to deprive members of rights given to them by the court
4 to undertake any act which is not “bona fide” for the benefit of the company as a whole

Question 10

Breaches of contract arising from alterations of articles

Answer 10

The company may be liable to the party to the original contract for damages for breach of contract