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CGI (all) > Company Law Part 1-5 > Flashcards

Company Law Part 1-5 Flashcards

1
Q

Individual definition

A

Tends to refer to a natural person

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2
Q

Person definition

A

Tends to refer to natural person and legal person (company, LLP)

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3
Q

De jure director

A

Person validly appointed as director

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4
Q

De facto director

A

Acts as director - not validly appointed

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5
Q

Shadow director

A

S.251

A person in accordance with whose directions and instructions directors of the company are accustomed to act

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6
Q

Alternate director

A

Appointed as director on behalf of another director (due to illness)

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7
Q

Nominee director

A

Appointed to board to act on behalf of another person (shareholder, creditor)

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8
Q

Director

A

S.560

Includes any person occupying the position of director, by whatever name called

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9
Q

Limited liability definition

A

Condition by which shareholders are legally responsible for the debts of the company - only to the extent of the nominal value of their shares

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10
Q

What are the 3 types of membership remedies?

A
  • Derivative claim
  • Unfair prejudice claim
  • Petition for winding up
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11
Q

Rules for the removal of a director under s.168 of the Companies Act (2006)

A
  1. Resolution to take place at a meeting - written resolution procedure cannot be used (CA 2006, s. 288(2)(a)).
  2. Special notice of a s.168 resolution is required - namely 28 days.
  3. A copy of the resolution must be send to directors whose resignation is sought.
  4. The director whose removal is sought has the right to protest against his removal and, to that end, may address the meeting (s. 169(2)) and circulate written representations to the meeting (s. 169(3)-(5)).
  5. While s. 168 allows a company to remove a director, it will not deprive the director that has been removed of any compensation payable as a result of the removal (s. 168(5)(a)).
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12
Q

Who has the power to appoint a director?

A
  • First directors appointed upon the companies incorporation
  • It is then a matter for the articles
  • If articles are silent, model articles apply
  • Ordinary resolution (if articles excluded) or decision of directors
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13
Q

Order of distribution in a liquidation?

A
  • Moratorium debts
  • Liquidation expenses
  • Preferential debts (pension schemes, employees salary up to £800 pp)
  • Debts secured by a floating charge (minus prescribed part)
  • Unsecured creditors
  • Deferred debts
  • Members
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14
Q

Proper claimant principle

A

If a wrong is committed against a company - only the company can sue for redress

(Foss v Harbottle (1843) claim failed)

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15
Q

Irregularity principle

A

Cannot bring a claim to an irregularity that could be remedied or ratified by a simple majority of members

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16
Q

Prima facie meaning

A

Based on first impression/ evidence (derivative claim)

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17
Q

What is a contract of novation?

A

A tripart transaction in which parties in original agreement together with company enter into a new agreement (company, promoter, third-party)

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18
Q

The 5 ways a director can be removed from office

A
  1. Resignation
  2. Vacation in accordance with articles
  3. Removal (including removing via articles)
  4. Disqualification
  5. Retire by rotation (larger companies)
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19
Q

How can a director be removed from office

A
  1. Passing an ordinary resolution s.168 (1)
  2. Exercising power of removal in the articles
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20
Q

How can shares be reduced in a public company?

A
  • Passing a special resolution
  • Approval from the court to reduce share capital
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21
Q

How can shares be reduced in a private company?

A
  • Passing a special resolution
  • Supported by a solvency statement
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22
Q

Nominal value definition

A

A fixed value which is attached to all the shares in a limited company.

Nominal value represents the minimum value that a share can be alloted for

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23
Q

Purpose of a nominal value

A
  • Minimum value that a share can be allotted for
  • Helps determine how much a shareholder will be required to contribute upon the company’s liquidation – if the shareholder has paid the nominal value, he will not be required to contribute any more.
24
Q

Alloted share capital

A

The total nominal value of shares that a company has allotted

Person acquires right to be included in register of members

25
Q

Paid-up share capital

A

The combined total of the nominal value of shares that has actually been paid.

26
Q

Ultra vires

A

‘Beyond one’s powers.’

27
Q

What are the three methods of appointing an administrator?

A
  • by the company or its directors
  • by a qualifying floating chargeholder
  • by court order
28
Q

What is a CVA?

A

An insolvency procedure that allows a company to enter into a binding
arrangement with its creditors.

29
Q

What are the three principal functions of the Takeover Panel?
The Takeover Panel has three broad functions:

A
  • Make rules giving effect to the rules, through the City Code on Takeovers and Mergers (the Takeover Code).
  • The Takeover Panel may give rulings on the interpretation, application or effect of the Takeover Code (s. 945(1)).
    These rulings are binding (s. 945(2)).
  • The Takeover Panel may provide directions in order:
    – to restrain a person from acting, or continuing to act, in breach of the Takeover Code;
    – to restrain a person from doing, or continuing to do, a particular thing, pending determination of whether that or
    any other conduct of his is or would be a breach of the Takeover Code; or
    – otherwise to secure compliance with the TAkeover Code (s. 946).
30
Q

What are the three insider dealing offences?

A

Section 52 of CJA 1993 sets out the three insider dealing offences:

  • dealing in price-affected securities on the basis of inside information;
  • encouraging another person to deal in price-affected securities on the basis of inside information; and
  • disclosing inside information.
31
Q

What are the three key characteristics of a floating charge?

A
  • charge taken over a class of assets present or future
  • that class of assets is one which, would be changing from time to time (such as stock in trade); and
  • the company is free to use the charged assets - until some future step is taken by the charge holder (unlike with a fixed charge)
32
Q

What is the usual three-stage process for paying a final dividend?

A
  • the directors will recommend an amount of distributable profit to be distributed by way of dividend;
  • the company will ‘declare’ the dividend by the members passing a resolution;
  • the dividend will be paid out based on the rights of the members.
33
Q

What are the five types of company that can be created under the CA 2006?

A
  • a public company limited by shares
  • a private company limited by shares
  • a private company limited by guarantee
  • a private unlimited company with a share capital
  • a private unlimited company without a share capital
34
Q

4 reasons case law still constitutes an extremely important source of company law

A
  1. case law creates company law and little or no legislative involvement.
  2. Well-established case law principles may be codified into statute (e.g. the general duties found in ss. 171–77 of the CA 2006).
  3. Legislation empower the courts to grant remedies and punishments.

The scope and application of these remedies and punishments is often determined via case law.

  1. Legislative rules need to be interpreted and applied.

Statutory rules may be made purposely broad and vague in some cases to afford the courts sufficient flexibility

35
Q

Public companies

A
  • Limited by shares.
  • Shares can be offered to the public by advertisement.
  • Name must include PLC.
  • ‘‘Trading Certificate’’ is required before business can commence (i.e. the company must allot at least £50,000 of shares of which 25% must be paid up).
  • Minimum requirement of 2 directors and a qualified company secretary.
36
Q

Private companies

A
  • Limited by shares or guarantee
  • Shares can only be taken by founder members or personal invitation.
  • Name must include LTD.
  • Company can commence with a one pence share.
  • 1 director and unqualified secretary.
37
Q

Difference between a derivative claim and an unfair prejudice claim?

A

A derivative claim can generally only be brought by minority shareholders, whereas any person who is a member of a company – including majority shareholders – can bring an unfair prejudice claim.

38
Q

What is a quorum? s.318

A

Minimum number of members of an assembly necessary to conduct business of the group

One “qualifying person” in the case of a single member company and –

as a default – two “qualifying persons” in any other case.

39
Q

What is a share purchase order (remedy)

A

Requires directors to buy out director of a company at a fair price fixed by the court

40
Q

What are three characteristics of a quasi-partnership?

A

Ebrahimi v Westbourne Galleries Ltd [1973] (HL), Lord Wilberforce stated that the characteristics of a quasi-partnership company are:

  • Association formed or continued on basis of a personal relationship,
    – pre-existing partnership has been converted into a limited company;
  • Agreement some of the shareholders shall participate in the conduct of the business; or
  • Restrictions upon the transfer of the members’ interest in the company – so that if confidence is lost, or one member is removed from management, they cannot take out their stake and go elsewhere.
41
Q

When can s.33 apply?

(Member rights)

A
  • Shareholder membership rights
  • Right to a dividend
  • Right to vote at a meeting
42
Q

Stage 1 and 2 of the derivative claim

A
  • Stage 1, the court will determine if, based on the evidence provided, there is a prima facie case for granting permission to continue the claim (s.261(2)).
  • Stage 2, the court will decide whether permission to continue should actually be granted.
    Section 263(2) sets out
    certain circumstances in which permission must be refused.

Section 263(3) and (4) sets out factors that must be taken into account by the court when deciding whether to grant permission for the claim to continue.

43
Q

Principle purpose of the Takeover Code

A
  • Ensure shareholders in an offeree company are treated fairly
  • Are not denied an opportunity to decide on the merits of the takeover
  • Shareholders in the offeree company of the same class are afforded equivalent treatment by an offeror
  • Code provides an orderly framework within which takeovers are conducted
  • Promote the integrity of the financial regime
44
Q

Transactions that require member approval

A

Long term service contracts

Substantial property transactions

Loans, quasi loans and other credit transactions

Remuneration and payments for loss of office

45
Q

Issued share capital definition

A

Total value of shares that have been issued

Alloted - ROM - Issued
Once shares allotted that persons name has been entered into the register of members those shares have been issued

46
Q

Called up share capital definition

A

Paid up share capital plus the amount called for/ instalment amount due

47
Q

Difference between standard contract and s.33 contract - 6 factors

A
  1. Binding between
  2. Alteration of terms
  3. Can be enforced by third party
  4. Enforcement of terms
  5. Rectification of of contract
  6. Defeasible on certain grounds
48
Q

Order of liquidation + sections and info

A
  1. Moratorium debts - Winding up proceedings commenced within 12 weeks end of moratorium first debts paid by liquidator
  2. Liquidation expenses - s.115 IA
    Liquidation expenses are paid in priority to all other claims. Insolvency Rules state they include liquidators fees, charges and other expenses incurred
  3. Preferential debts - Must pay as identified in s. 175 Schedule 6 IA 1986
    Pay claims - employees can claim salaries due in 4 months prior maximum amount £800 per employee
  4. Floating charge + prescribed part
    Under s.176A IA prescribe part must be set aside for unsecured creditors.
    Article 3 of IA: net assets over £10k, 50% first £10k, 20% of the balance
    Below £10k - 50% of property
  5. Unsecured debts - if not enough remaining funds to pay all unsecured creditors it will be distributed pari passu
  6. Deferred debts - (dividends)
  7. Members - Any remaining sums paid to creditors
49
Q

Reducing preferential dividends relates to what?

A

A variation of class rights

50
Q

Cancelling preference shares relates to what?

A

Reducing share capital

51
Q

Two reasons a company cannot reduce share capital

A
  1. No members holding shares other than redeemable shares
  2. One person would end up holding all the shares in the company s.641
52
Q

Lord Denning Foss v Harbottle stated

A

Some means must be found for company to sue

53
Q

What is share expropriation?

A

Article provision stating shareholder can be forced to sell shares

54
Q

3 types of loan

A
  • Term loan
  • overdraft
  • debt security
55
Q

What is a secured loan

A

Right or interest has been secured

CGI (all) (6 decks)

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