Company Law: The Basics

Question 1

Tom has transferred his business to Tom Ltd, a company limited by shares. Who is liable for the debts and liabilities?

Answer 1

Tom Ltd is fully liable for all the debts and liabilities of the business incurred after the date of transfer

Question 2

What is the minimum amount that a public company must receive in respect of its issued share capital, before it can commence business?

Answer 2

The nominal value of issued share capital must be £50,000, its paid-up share capital must be at least £12,500 (i.e. 25% of the nominal value) plus the whole of any premium

Question 3

True or false, if a business does not register bespoke articles of association, model articles may apply by default?

Answer 3

True

Question 4

S.206 CAA 2001 required capital expenditure for private use to be allocated to a separate pool. How does this apply to a company in respect of assets used privately by directors?

Answer 4

The company, being the person carrying on the trade, does not use the assets privately and so will never allocate any expenditure to a separate pool

Question 5

You start a business and wish to use the model Articles. How should this be treated on your application?

Answer 5

Nothing needs to be included related to the Articles on the application

Question 6

Monarch Ltd has only one subsidiary, Royal Ltd, of which it holds more than 50%. Royal has its own subsidiary, Knave Ltd.

What percentage of the voting rights does Royal Ltd need to have in Knave Ltd in order for Knave Ltd to count as a subsidiary of Monarch Ltd?

Answer 6

More than 50%

Question 7

What would be the most suitable vehicle for a charitable enterprise?

Answer 7

A company limited by guarantee

Question 8

True or false, the corporate veil affords protection to the owner of a company?

Answer 8

True

Question 9

True or false, sole traders have a comparative ease of raising finance?

Answer 9

False

Question 10

In addition to a Memorandum of Association, what else is needed to register a company?

Answer 10

Deliver a statement of capital, proposed officers, initial significant control and compliance

Question 11

True or false, a public company must have a company secretary?

Answer 11

True

Question 12

True or false, a private company must have a minimum of two directors?

Answer 12

False

Question 13

True or false, a member may appoint a proxy to attend and vote on their behalf when a company gives notice of its annual general meeting?

Answer 13

True

Question 14

How much notice must be given of an Annual General Meeting whereby a resolution with special notice is required?

Answer 14

28 days

Question 15

If a shareholder chooses not to go to the AGM, and an ordinary resolution is passed, what happens?

Answer 15

They lose their right to vote

Question 16

What type of resolution and how much notice is required for a public company to change its Articles of Association?

Answer 16

Special resolution with 14 days notice

Question 17

True or false, an ‘off the shelf’ company can be purchased from a formation agent?

Answer 17

True

Question 18

True or false, the purchaser of an off the shelf company can only change the name of the company?

Answer 18

False

Question 19

Once a company’s constitution has been registered, the articles of association are regarded under company law as forming a contract.

True or false, the company and its members are contractually bound to each other by the articles?

Answer 19

True

Question 20

Once a company’s constitution has been registered, the articles of association are regarded under company law as forming a contract.

True or false, the individual members are contractually bound to each other by the articles?

Answer 20

True