Company Law Part 3- Promoters

Question 1

Promoters

Answer 1

1. Promoters are personally liable on pre-incorporated contracts.
2. Promoters have fiduciary relationships and cannot make profit without disclosing it to the independent board of directors/members.
3. Failure to disclose can enable company to rescind contract and claim damages.

Question 2

Pre incorporation contracts

4 points

Answer 2

1. Company not in existence when formed
2. Company not bound
3. Company cannot adopt
4. Promoter personally liable

Question 3

How can promoters avoid liability?

Answer 3

1. Buy an off the shelf company (company already in existence)
2. Delay any contracts until certificate of incorporation obtained
3. Enter into agreements ‘subject to contract’
4. State they will bear no responsibility for contract

Question 4

Areas covered in the Articles of association/companies constitution?

Answer 4

1. Appointment/removal of directors
2. Powers/responsibilities/liabilities of directors
3. Directors meetings
4. Members rights
5. Dividends
6. Issue of shares
7. Documents/records

Question 5

What is required to alter the articles?

Answer 5

1. Special resolution (75%)
2. Copy of new arts to registrar <15 days
3. Be in the best interest of the company

Question 6

What records of the company must be kept?

Answer 6

1. Accounting
2. Money
3. Assets/liabilities
4. Statement of year end stocks
5. Statement of all goods sold and purchased
6. Year end accounts
7. Balance sheet and profit + loss
8. Directors report
9. Auditors report

Question 7

What are the three company meetings, their deadlines and their notices?

Answer 7

1. AGM- <6 months from year end- 21 days notice
2. GM- as required- 14 days notice
3. Class- to consider variation- 14 days notice

Question 8

Three types of companies resolutions?

Answer 8

1. Special
2. Ordinary
3. Written

Question 9

Special resolution

Answer 9

1. 75% required
2. Send notice to registrar <15 days
3. Purpose is to alter name, objects or articles, reduce share capital, or wind up company

Question 10

Ordinary resolution

Answer 10

1. 51% required
2. Notify to registrar only if required
3. Purpose is used whenever law or articles do not require special resolution

Question 11

Written resolution

Answer 11

1. Required is same as general meeting
2. Notify registrar if 75% majority
3. Purpose can be used for anything not requiring special resolution. Must be passed within 28 days of its circulation

Question 12

What needs to be submitted to a registrar to register a company?

Answer 12

1. Memorandum of association (signed by all future members)
2. Application form
3. Articles of association
4. Statement of capital
5. Statement of proposed officers
6. Statement of guarantee
7. Statement of compliance with Company Act 2006
8. Registration fee of £20

Question 13

What does incorporated and unincorporated mean?

Answer 13

Incorporated= seperate person in law

Unincorporated= not a separate person in law

Question 14

Removal of a director or auditor?

Answer 14

Ordinary resolution with special notice (28 days)

Question 15

Procedures at meetings:
Quorum
Voting
Poll
Proxy

Answer 15

1. Min 2 members to validate business
2. Show of hands
3. Demanded by members holding 10% of voting rights or 5 members having right to vote
4. A proxy can attend meetings, vote, and speak on behalf of a member (appointed by the member)