Company Law: Nature and Structure of Companies Flashcards
What are the aims and objectives of this part of the course?
Introduce students to the general principles governing:
(i) types of companies;
(ii) separate legal personality;
(iii) limited liability;
(iv) subsidiaries;
(v) incorporation of companies;
(vi) “piercing the corporate veil” – exceptions to separate legal personality
(vii) the regulation of companies;
(viii) the company’s constitution: memorandum, articles and objects;
(ix) company details: name, registered office and number;
(x) company meetings: board meetings and shareholder meetings (ordinary and extraordinary);
(xi) shares;
(xii) directors’ and their duties (including directors’ personal liability and disqualification);
(xiii) insider dealing and “market abuse”;
(xiv) capital maintenance (especially financial assistance);
(xv) shareholder remedies (especially minority protection, and, in particular, “unfair prejudice”); and
(xvi) take-overs, and their effects.
Familiarise students with the leading cases, and the basic statutory and non-statutory materials governing these areas; and Enable students to apply knowledge gained in this part of the course to solve practical problems on a range of issues relating to the above aspects of company law.
By the end of these lectures, and having attended the relevant tutorials and undertaken private study, students should be able to:
Articulate correctly the principles governing:
(i) types of companies;
(ii) separate legal personality;
(iii) limited liability;
(iv) subsidiaries;
(v) incorporation of companies;
(vi) “piercing the corporate veil” – exceptions to separate legal personality
(vii) the regulation of companies;
(viii) the company’s constitution: memorandum, articles and objects;
(ix) company details: name, registered office and number;
(x) company meetings: board meetings and shareholder meetings (ordinary and extraordinary);
(xi) shares;
(xii) directors’ and their duties (including directors’ personal liability and disqualification);
(xiii) insider dealing and “market abuse”;
(xiv) capital maintenance (especially financial assistance);
(xv) shareholder remedies (especially minority protection, and, in particular, “unfair prejudice”); and
(xvi) take-overs, and their effects.
Demonstrate an appreciation of the operation of the general legal principles, and the statutory and non-statutory provisions in these areas, and the problems which can arise; and Answer: (i) multiple choice questions, and (ii) problem-based questions on the above areas, in a logical and coherent fashion, to the satisfaction of University examiners.
When did the Companies Act 2006 come into force?
This is the current piece of legislation dealing with companies. It was the result of a lengthy consultation. The Act received Royal Assent towards the end of 2007, after multiple amendments and a flurry of activity. It is, apparently, the biggest Act in United Kingdom legislative history. There has been a lot of secondary legislation accompanying the 2006 Act (of which the Model Articles 2008 are but one example).
The 2006 Act does introduce changes to the law, but is, in essence, a consolidating and clarifying Act. It has, amongst other things, reworked various sections of the CA 85 to make them more readable. However, curiously, some provisions of the 1985 Act have not been repealed and remain in force (see Parts XIV and XV, ss 431-457 CA 85), instead of being consolidated into the 2006 Act: see Schedules 14 and 16 of the 2006 Act. These are set out in Blackstone’s Statutes on Company Law 2014-2015, 18th edn.
Tables of “Destinations” (the 1985 Act) and “Origins” (the 2006 Act)
If you would like to see where the provisions of the 1985 Act went to, look at the “Table of Destinations”.
http://www.opsi.gov.uk/acts/acts2006/related/ukpgatod_20060046_en.pdf
If you would like to see where the provisions of the 2006 Act came from, look at the “Table of Origins”.
http://www.opsi.gov.uk/acts/acts2006/related/ukpgatoo_20060046_en.pdf
As indicated above, the course will be taught on the basis of (i) the Companies Act 2006, and (ii) the Model Articles of Association 2008.
Which statute will we be examined on?
For examination purposes, you will be examined on the Companies Act 2006, the surviving provisions of the Companies Act 1985 and the Model Articles, as well as any other relevant statutes or statutory instruments, eg, the Insolvency Act 1986, or the Financial Services and Markets Act 2000.
THE WHOLE OF THIS HANDOUT IS EXAMINABLE, AS IS THE MATERIAL IN TUTORIALS.
Where is company law codified?
Much of company law is now codified in the Companies Act 2006. It consolidates previous legislation and seeks to clarify it.
Company Law is not a devolved matter under the Scotland Act 1998; neither, generally, is corporate insolvency (which you will look at in Commercial Law (Ordinary)).
What is the distinction between natural and juristic persons?
There is a distinction between natural and juristic persons.
- (a) Natural (physical) persons. “Individuals.”
- (b) Juristic (legal, artificial, moral) persons. “Corporations”. “Bodies corporate”.
⁃ A company is a juristic person.
What is the capacity of a juristic person?
??
Do they have the capacity to commit a crime?
Crime: Transco plc v HMA 2004 SLT 41 – but see Section 1 of the Corporate Manslaughter and Corporate Homicide Act 2007 (a statute of the UK Parliament).
VTB Capital plc v Nutritek International Corp [2013] UKSC 5; [2013] 2 AC 337; [2013] 2 WLR 378, para 138
per Lord Neuberger PSC, who refers to a company being like “a human being”, except it will act through human agents, with the company as “principal”.
What are the main forms of business?
Business can be carried on through the following different ‘vehicles [There is a distinction between the thing that makes money (the business) and the vehicle through which it is done (e.g. companies, partnerships etc).
So a company is a vehicle through which business is done: it is separate from the business: (ie, the provision (or receipt) of goods and/or services).]’:
⁃ Sole trader
⁃ Ordinary partnership (Partnership Act 1890)
⁃ Limited partnership (Limited Partnerships Act 1907)
⁃ Limited liability partnership (Limited Liability Partnerships Act 2000)
⁃ Company (Companies Act 2006 and previous Companies Acts)
Remember: a company is a vehicle through which business is done: it is separate from the business: (ie, the provision (or receipt) of goods and/or services).
Why is a company needed?
Companies play in an important role in the economic life of a country, as they are the main commercial vehicle for doing business. Not only are they responsible for the production of goods and the provision of goods and/or services, but they can also be used as an investment.
As an investment, they provide a return on that investment in the form of income (dividends), and capital growth (an increase in the value of the company, which is reflected in its share price).
This is important in relation to pensions, as fund (or asset) managers, who look after pension funds, invest in companies.
See too Lord Sumption JSC, in Prest v Petrodel Resources Ltd [2013] UKSC 34; [2013] 2 AC 415; [2013] 3 WLR 1, para 8 on the importance of the company in “commercial life”.
What are the core characteristics of a company?
It has been suggested that by Professor Davies [Introduction to Company Law (2010), at pp 10-11 and 21-22] that there are 5 core, structural features of company law:
⁃ 1) “separate corporate personality”.
⁃ 2) “limited liability”.
⁃ 3) “centralised management under a board structure”
⁃ 4) “shareholder control”
⁃ 5) “free transferability of shares”.
Standard Chartered Bank v Pakistan National Shipping Corpn [2003] 1 AC 959, at paras 36 and 37, Lord Rodger of Earlsferry
who refers to the commercial importance of companies, due to their being separate legal entities, which can be involved in transactions, own property, and bring legal proceedings, as well as having limited liability of members of the company. Due to this last reason, companies can raise money as risk to investors is reduced; also, because of this, the corporate veil should only be pierced exceptionally, with shareholders being made personally liable.
Prest v Petrodel Resources Ltd [2013] UKSC 34; [2013] 2 AC 415; [2013] 3 WLR 1, para 8
Lord Sumption JSC referred to the separate legal personality of a company being “a fiction”, which underlies “company law”, as well as “insolvency law”.
What are the types of company?
There are a number of different types of company:
⁃ 1) Unlimited company (s 3(4) CA 2006)
⁃ No limit on the liability of members - there are very rare so the lectures will not consider them at all
⁃ 2) Private limited company (ss 3(1)-(3) and 4(1) CA 2006)
⁃ The liability for the company’s debts are limited by the company’s constitution and the membership is not open to the general public. Examples are ‘family companies’ etc. Virgin Group is an example of a large private limited company.
⁃ 3) Public limited company (ss 3(1)-(3) and 4(2) CA 2006)
⁃ Again the liability of the company is limited. However membership of the company is open to the general public - shares are tradable on a market.
⁃ 4) Company limited by guarantee (ss 3(1), 4(1)-(2), 5 CA 2006)
⁃ This means there are no shares but the members liability is limited under the Constitution of the company to guaranteeing a certain amount if the company is in financial difficulty. An example is a members club where members may be required to guarantee a certain amount when winding up.
