Company Law - Types of Companies

Question 1

What are the different types of companies?

Answer 1

Registered, chartered, statutory and european

Question 2

What is a registered company?

Answer 2

A corporation and, as such, has an existence, rights and duties which are distinct from those persons who are, from time to time, its members and those who manage it, the directors

Question 3

What are the main effects of incorporation?

Answer 3

That the registered company is a persona at law, that it has perpetual succession, and limited liability

Question 4

What is perpetual succession?

Answer 4

When the company’s existence is independent of its members who may be replaced due to death or for some other reason

Question 5

What does ss 7-16 in Companies Act 2006 include?

Answer 5

That a company is formed by registration at Companies House and is incorporated when the Registrar has issued a Certificate of Incorporation

Question 6

What does s 16 state?

Answer 6

That a company is a body corporate (in contract to a partnership or sole trader)

Question 7

In the case of limited liability companies, members are referred to as what?

Answer 7

Shareholders

Question 8

What does s 3(2) state?

Answer 8

It limits the shareholders liability to any value remaining unpaid on their shares

Question 9

What does the company and shareholders have to agree on?

Answer 9

The level of guarantee in the memorandum of association and this amount is stated in the application to have the company registered

Question 10

What does s 755-760 state?

Answer 10

A private limited company is prohibited from offering shares or debentures to the public

Question 11

What does s 271 state?

Answer 11

A public limited company must appoint a company secretary but a private limited company may choose whether to

Question 12

What does s 154 state?

Answer 12

A private company need only have one director while a public limited company must have two

Question 13

What must the name of a public company have?

Answer 13

Must end in the words “public limited company” or Plc

Question 14

What must the name of a private company have?

Answer 14

Must end in the words “limited” or Ltd

Question 15

What is an unlimited company?

Answer 15

They have separated legal identity - however, if the company assets are insufficient to meet its liabilities, all members are liable to contribute without limit towards paying its debts and the costs of liquidation - they also do not need to be audited

Question 16

What are chartered companies?

Answer 16

Charter granted by the Crown under certain provisions e.g. BBC

Question 17

What are statutory companies?

Answer 17

Formed by Act of Parliament, e.g. utilities companies prior to privatisation

Question 18

What are European companies?

Answer 18

Implementation into UK law - The European Public Limited Company Regulations 2004

Question 19

What does separate legal person mean?

Answer 19

It means the company is a separate legal entity from its shareholders, directors and managers

Question 20

What does limitation of liability mean?

Answer 20

The company, as a persona at law, is liable, without limit, for its debts

Question 21

What does the phrase “lifting the veil of incorporation” mean?

Answer 21

In certain circumstances the courts may look through the company to identity of the shareholders and office bearers

Question 22

What is the result of lifting the veil of incorporation?

Answer 22

Members and directors become personally liable for the company’s debts (through statute or decisions of the court)

Question 23

What are some statutes that will allow intervention to lift the veil?

Answer 23

The Company Directors Disqualification Act 1986, s 15, the Insolvency Act 1986, s 213 and The Company Act 2006, s 399

Question 24

What does The Company Directors Disqualification Act 1986, s 15 state?

Answer 24

A person who acts in contravention of the Act by taking part in the management of a company following disqualification will be personally liable for the debts of the company?

Question 25

What does The Company Act 2006, s 399 state?

Answer 25

It sets out the duty to prepare group accounts and the form and content of such accounts

Question 26

What does the Insolvency Act 1986, s 213 cover?

Answer 26

Fraudulent trading rule

Question 27

What does judicial lifting mean?

Answer 27

Where the courts may decide to lift the veil

Question 28

When can the veil be lifted?

Answer 28

Sham companies: Only where “special circumstances exist indicating that it is a mere facade concealing the true facts
Trading with the enemy/public policy: in times of war
Groups: each company within group is separate legal entity