Company Law Vocab Flashcards
(162 cards)
1
Q
Adjudication order
A
Adjudication order (or bankruptcy order): order by which the court declares a person bankrupt.
2
Q
Administrative receiver
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Administrative receiver: a qualified insolvency practitioner appointed to take control of the assets, such as those subject to a floating charge, for the benefit of creditors with these assets as security.
3
Q
Administrator
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Administrator: this is a qualified insolvency practitioner appointed by an administration order in an attempt to save the company as a going concern rather than wind it up.
3
Q
Administrative receiver
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Administrative receiver: a qualified insolvency practitioner appointed to take control of the assets, such as those subject to a floating charge, for the benefit of creditors with these assets as security.
4
Q
Agent
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Agent: a person given the authority by a principal to enter into contracts on his behalf.
5
Q
Alternative director
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Alternative director: this is a person appointed by a director to act in his place.
6
Q
Annual accounts
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Annual accounts: a detailed record of a company’s financial situation that must be produced each year.
7
Q
Annual general meeting (AGM)
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Annual general meeting (AGM): meeting of the shareholders of a company which takes place once a year.
8
Q
Application for registration
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Application for registration: document in the English system which must be registered in order to incorporate a company. It must state such matters as the company name, its registered office and address, whether it is limited by shares and whether it is a
public or private company. Certain other documents must accompany the application. These include a statement of capital and initial shareholding, a statement of the company’s proposed officers and a statement of compliance.
9
Q
Articles of association
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Articles of association: constitutional document which regulates the way a company’s affairs are managed. It consists of regulations governing the rights of the members and the structure of the company.
10
Q
Articles of incorporation
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Articles of incorporation: document filed in the United States to incorporate a company. It is sometimes referred to as the corporate charter.
11
Q
Articles or deed of partnership
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Articles or deed of partnership: written agreement setting out the structure of a partnership. It is not a legal requirement.
12
Q
Assets
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Assets: property owned by a person or company that has monetary value.
13
Q
Auditor
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Auditor: a member of a recognised body of accountants who examines (or audits) company accounts. Auditing is the process by which the financial situation of the company is examined in order to draw up the annual accounts.
14
Q
Authorised share capital
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Authorised share capital: this is the amount of capital a company can raise by selling its shares. A company cannot issue more shares than is authorised by its constitution.
15
Q
Bankruptcy
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Bankruptcy: where an individual is unable to pay his debts.
16
Q
Board of directors
A
Board of directors: this board comprises the individual directors. It is the ultimate decision-making body of a company and determines the delegation of power.
17
Q
Bond
A
Bond: a certificate issued by the government or public company promising to repay borrowed money at a fixed rate of interest at a specified time and to repay the original sum in full after a specified term. In the United Kingdom, the term debenture is used to denote a domestic secured bond.
18
Q
Breach of directors’ duties
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Breach of directors’ duties: where a director has acted in a way inconsistent with the general duties of care and skill and fiduciary duties owed to the company.
19
Q
Business judgment rule
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Business judgment rule: see under Duty of care.
Duty of care: in the United States, a duty of care is also referred to as the business judgment rule. It means that a director must not be negligent in the management of his company, but he will not be liable for mere errors of judgment. The US business judgment rule will protect managers from liability if they have made an informed decision after a reasonable investigation, there is no conflict of interest and the managers have a rational basis for believing that the decision is in the best interest
of the corporation.
20
Q
Bylaws
A
Bylaws: in the United States, the structural aspects of the corporation are set out in bylaws, which do not have to be filed. These bylaws supplement the articles of incorporation by defining more precisely the powers, rights and responsibilities of the corporation, managers and shareholders.
21
Q
Called up share capital
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Called up share capital (paid-up capital): the sum that shareholders have already paid in return for shares.
22
Q
Capital
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Capital: the net worth of a company; money, property and any other assets.
23
Q
Certificate of incorporation
A
Certificate of incorporation: this is issued on incorporation. In England, it states the name and registration number of the company, the date of incorporation, whether it is limited (by shares or guarantee) or unlimited, whether it is a private or public company and the location of the registered office.
24
Chairman
Chairman: an appointed director who presides over meetings of the board of directors and general meetings.
25
Charge
Charge: a charge on property means that the property is not free, but it has a certain liability attached to it.
26
Charitable Incorporated Organisation (CIO)
Charitable Incorporated Organisation (CIO): under English law, a new optional legal structure for charities. It gives trustees the benefit of limited liability and separate legal identity outside the company law framework. It is a corporate body with a constitution, registered with and regulated by the Charity Commission.
27
Class meeting
Class meeting: is where a class of shareholders meet to decide matters which affect their particular class of shares.
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Class rights
Class rights: rights attaching to different classes of shares.
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Close corporation
Close corporation: a form of corporation found in the United States consisting of a single individual or a very small group of individuals. It is typically managed by the stockholders themselves.
30
Company
Company: in English law, an association of persons formed for the purposes of an undertaking or business carried on in the name of the association. It is legally incorporated and is a legal person, separate from its individual members. In the United States, the word applies to a wide range of activities and can be used to describe private corporations as well as partnerships.
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Company constitution
Company constitution: in English law, the constitution of a company is primarily governed by the articles of association.
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Company secretary
Company secretary: in England, every public company must have a company secretary who is responsible for the administration of the company’s affairs. A company secretary is optional for private companies.
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Conflict of interest
Conflict of interest: where there is a conflict of interests between a director’s personal interests and those of the company, those of the company must prevail.
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Contributory
Contributory: is someone who is liable to contribute to the assets of a company on a winding up.
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Corporate governance
Corporate governance: term often used to describe the way in which companies are directed and controlled.
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Corporate veil
Corporate veil: the legal recognition of the company’s independence from its owners: the shareholders.
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Corporation
Corporation: in English law, a legal body, such as a limited company or public authority, which has been incorporated. It is often used to indicate a large company. Likewise, in the United States, the term also means an association of shareholders that has a legal identity entirely separate and distinct from those who compose it.
38
Creditor
Creditor: one to whom a debt is owed. A debenture holder is a creditor, whereas a shareholder is a member of the company.
39
Crystallise
Crystallise: a floating charge is said to crystallise, in other words, be triggered, if the debtor is in default.
40
Debenture
Debenture: a document acknowledging a debt for a capital sum that is to be repaid on a certain date, with interest payable at a fixed rate. In the London financial markets, the word debenture is used primarily to denote a secured loan. Reference may be made to a naked debenture, which is a debt without security. In the United States, a debenture is usually an unsecured loan.
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Debenture holder
Debenture holder: is a creditor of the company.
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Debenture stock
Debenture stock: credit certificates issued in a similar way to an issue of shares.
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Debenture trust (or indenture)
Debenture trust (or indenture): a deed setting out the terms of the loan. For example, it sets out what constitutes default on the part of the company, what the rights of the debenture holders are upon default and it may place restrictions on the ability of the company to issue other debt securities.
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Defunct
Defunct: a defunct company is a company that has ceased to trade.
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Derivative action
Derivative action: an action by a minority shareholder (or minority shareholders) is a derivative action if the shareholder is suing on behalf of the company.
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Director
Director: in English law, there is no legal definition of director, but according to legislation, the term director includes any person occupying the position of director, by whatever name called.
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Directors’ duties
Directors’ duties: include the duty of care, skill and diligence, and fiduciary duties. English law refers to seven types of general directors’ duties: to act within powers; to promote the success of the company; to exercise independent judgment; to exercise reasonable care, skill and diligence; to avoid conflicts of interest; not to accept benefits from third parties; and to declare interests in proposed transactions or arrangements. In the United States, these duties are categorised as duty of care and duties of loyalty.
48
Disclosure
Disclosure: to disclose involves revealing details about an act or transaction. In return for limited liability, companies are required to make certain information about their constitution and financial status available to the public. Directors are under a duty to disclose any personal interest that could lead to a conflict of interest situation.
49
Disqualification order
Disqualification order: order by which a person is not allowed to act as a company director. The grounds for a disqualification order include: a conviction for an indictable offence, breaches of company law, fraud and unfitness to manage a company. An order on the grounds of unfitness can only be made if the company is insolvent.
50
Dissolution
Dissolution: here, the term refers to bringing a business organisation to an end.
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Dividend
Dividend: a sum paid to shareholders by a company when in profit, the amount being in proportion to their shareholding.
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Duty of care
Duty of care: in the United States, a duty of care is also referred to as the business judgment rule. It means that a director must not be negligent in the management of his company, but he will not be liable for mere errors of judgment. The US business judgment rule will protect managers from liability if they have made an informed decision after a reasonable investigation, there is no conflict of interest and the managers have a rational basis for believing that the decision is in the best interest of the corporation.
53
Duty of loyalty
Duty of loyalty: term used in the United States. It refers to directors’ fiduciary duties, which include duties not to self-deal, not to usurp a corporate opportunity and not to oppress the minority shareholders.
54
Enlightened shareholder value
Enlightened shareholder value: this UK principle requires a company to take into account various stakeholders. It needs to take the interests of its employees into account, as well as the impact of its operations on the community and the environment, its relationship with its suppliers and customers, and the importance of maintaining a high reputation for the integrity of its business practices.
55
Event of default
Event of default: an event either specified by statute or specified in a debenture document that means a charge on property secured by the debenture is activated.
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Executive director
Executive director (United States: inside director): this is usually a full-time officer employed by the company to manage company business.
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Extraordinary general meeting
Extraordinary general meeting: in addition to the AGM, shareholders may be asked to vote on special business if required by a sufficient number of the members.
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Fiduciary duties
Fiduciary duties: a director is under an obligation to exercise his powers for the benefit of the company and not for his own benefit. He owes a general duty of trust, honesty and integrity towards the company.
59
Filing
Filing: in the United States, reference is made to filing rather than registering.
60
Firm
Firm: partnerships are referred to in English law as firms and the name under which their business is carried on is called the firm name. In the United States, the word company is used synonymously with firm, whereas in English law a firm is never a company.
61
Fixed charge
Fixed charge: a charge on a particular asset or property.
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Fixed interest securities
Fixed interest securities: securities with a fixed rate of interest, such as a bond.
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Floating charge
Floating charge: this type of charge attaches to a class of assets, which in the ordinary course of a company’s business would be changing from time to time. The company does not need the holder’s permission to deal with these assets, if in the ordinary course of business. It ‘floats’ above the property until some event occurs which triggers the charge. A similar charge is available in the United States: this may be referred to as a floating lien.
64
Flotation
Flotation: also known as an initial public offering. This is where the shares in a company are issued for the first time on a stock market by means of an offer document called a prospectus.
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Fraudulent trading
Fraudulent trading: where a person continued trading even though he knew the company could not pay its debts and the business is carried on with the intent to defraud creditors (or for any fraudulent purpose). A dishonest intent on the part of that person must be proved.
66
Group accounts
Group accounts: group accounts must be drawn up by a holding company where there is a parent/subsidiary relationship.
67
Hire purchase agreement
Hire purchase agreement: a form of credit agreement where the payment is in instalments.
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Holding company
Holding company (or parent company): the business of a holding company consists wholly or mainly in holding shares or securities in one or more companies within the group, which are its subsidiary companies.
69
Incorporation
Incorporation: the issue of an incorporation certificate creates an independent legal personality.
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Insider dealing/trading
Insider dealing/trading: using confidential information about a company in order to buy or sell its securities at a profit.
71
Insolvency practitioner
Insolvency practitioner: is someone qualified to conduct the affairs of companies that are in default or insolvent, for example, an administrative receiver or a liquidator.
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Insolvent
Insolvent: a company is insolvent if it can no longer pay its debts. Insolvency procedures will then be followed.
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Issued capital
Issued capital: that part of a company’s authorised share capital that has actually been issued to the shareholders.
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Joint and several liability
Joint and several liability: partners may be collectively liable and individually liable.
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Legal person
Legal person: once registered, a company becomes a separate person in law. This artificial legal person can own property, commit crimes and torts and conclude contracts.
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Lien
Lien: in general, a charge upon the property of another until the debts associated with that property have been paid off.
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Lifting the veil
Lifting the veil (piercing the veil in the United States): process by which the courts may lift the veil of corporate secrecy and look at the underlying economic reality. The company is then no longer treated as a separate entity.
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Limited liability company
Limited liability company: in England, a registered company where the shareholders’ liability in the event of a winding up is limited to any amount that has not yet been paid for their shares. It is the most usual form of trading company. The American limited liability company is not the direct equivalent of the English limited liability company, as it is something of a hybrid between a corporation and a partnership.
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Limited liability partnership
Limited liability partnership: is a separate legal entity, giving its members the benefit of limited liability while retaining the internal structure of a partnership.
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Limited partnership
Limited partnership: one where a distinction is made between general partners and limited partners. Limited partners have invested in the company but have no active function. These limited partners are not personally liable for the debts of the partnership beyond the capital they have invested already.
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Liquidation
Liquidation: process by which a company is brought to an end, often because of insolvency.
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Liquidator
Liquidator: the one appointed to supervise the winding up of a company. A receiver may become the provisional liquidator until the creditors have met to decide upon a permanent liquidator.
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Listed company
Listed company (or a quoted company): is one that is listed on the Stock Exchange.
84
Listing particulars
Listing particulars: document offering shares or debentures to the public where the company is listed already.
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Loan capital
Loan capital: capital that has been obtained on credit.
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Majority shareholder
Majority shareholder: one who holds sufficient shares in a company to influence the decision-making.
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Management
Management: those who direct or run a business.
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Managing director
Managing director (or chief executive officer): a director in charge of the management of a company.
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Members
Members: the members of a company are the shareholders. The term member, not partner, is also used to refer to those who operate within the structure of a limited liability partnership (LLP).
90
Membership contract
Membership contract: special contract which binds the company to the members and regulates the relationship between the members.
91
Memorandum of association
Memorandum of association: legal document which records the fact of incorporation, stating that the subscribers wish to form a company and agree to become members of the company.
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Minority action
Minority action: an action brought by a single shareholder or small number of shareholders.
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Minority shareholder
Minority shareholder: one who does not hold sufficient shares in a company to command an influential position.
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Minutes
Minutes: an official written record of the discussion points and decisions made during a meeting.
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Moratorium
Moratorium: a suspension of payments is initiated for a fixed period so that no-one except the administrator can deal with the assets of a company during that period.
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Natural person
Natural person: this is a human being rather than an artificial person, such as a registered company. A natural person has the right to participate in a wider variety of legal transactions than a legal person.
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Negative pledge clause
Negative pledge clause: it prohibits the company from using any assets as security in the future if that would be disadvantageous to the existing debenture holder’s security.
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Negotiable
Negotiable: where a document, such as shares and debentures, may legally be transferred to another.
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Nominal value
Nominal value: the face value of a share rather than its market value. The nominal value of a share, once established, remains fixed and does not change in the normal course of events.
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Non-executive director
Non-executive director (United States: outside, independent or non-management): this is not a salaried employee and he is not actively involved in daily management.
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Novation
Novation: a new party to a contract is substituted for an original party with the agreement of the remaining party. The existing contract is replaced by the new contract.
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Objects clause
Objects clause: a clause setting out the purpose for which the company was incorporated.
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Officer
Officer (of a company): one invested with authority for a particular position. In English law, a director is an officer of a company, as is a company secretary.
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Official receiver
Official receiver: a government official appointed by the court to act as an interim receiver or a provisional liquidator.
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Order of priority
Order of priority: the liquidator must pay creditors according to a list of priorities. Certain factors can interfere with this list, such as a retention of title clause, a lien or a trust device.
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Ordinary course of business
Ordinary course of business: a partnership will be bound by contracts entered into by an individual partner if covering the usual type of business conducted by the firm.
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Ordinary resolution
Ordinary resolution: a simple majority vote by shareholders.
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Ordinary share
Ordinary share (or equity share): holders of ordinary shares are entitled to be paid a dividend depending upon how well the company is doing. The ordinary shares of English companies nearly always give their holders the right to vote in general meetings and on important matters regarding the running of the company.
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Owners
Owners: the owners of a company are the shareholders.
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Partnership
Partnership: the relationship between persons carrying on a business in common with a view to profit. It is unincorporated and therefore not a separate legal person.
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Partnership property
Partnership property (or capital): is property that is jointly owned by the partners. Assets that have not been transferred to the partnership remain the property of the individual partners.
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Personal liability
Personal liability: where an individual is held liable, for example, a sole trader is held liable for the debts of his business.
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Petition
Petition: certain actions are commenced by petition, for example, a winding up petition is presented to the court in order to liquidate a company.
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Pre-emption rights
Pre-emption rights: the right to purchase (shares) before others.
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Preference share
Preference share: this is a share that pays a dividend at a fixed rate. This fixed amount of dividend is paid out before ordinary shareholders are paid a dividend.
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Preferential creditor
Preferential creditor: one paid out before certain other categories of creditors in a winding up.
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Pre-incorporation contract
Pre-incorporation contract: where a person enters into a contract on behalf of a company which has not yet been formed.
118
Premium
Premium: when shares are issued above their nominal value, the whole of the premium is placed in a share premium account.
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Private company
Private company: a company that may not offer its shares and debentures to the public.
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Promoter
Promoter: one who organises the setting up of a new company. This includes the process of incorporating the company and may involve raising initial capital.
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Prospectus
Prospectus: document in which shares or debentures are offered to the public for the first time.
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Provisional liquidator
Provisional liquidator: see liquidator.
Liquidator: the one appointed to supervise the winding up of a company. A receiver may become the provisional liquidator until the creditors have met to decide upon a permanent liquidator.
123
Proxy
Proxy: here, a person appointed by a shareholder to vote in his place at a company meeting.
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Public company
Public company: a public company must have a minimum subscribed share capital. It may seek finance by offering its shares and debentures to the public. If it is a public limited company, it is one incorporated with limited liability. The term publicly held corporation is often used in the United States to indicate a corporation which may offer its shares and debentures to public investors.
125
Quasi loans
Quasi loans: here, where the company pays a sum to, or reimburses, another on behalf of a director, although the director repays the company later.
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Ratify
Ratify: to approve officially, for example, to ratify the alteration of the articles by special resolution.
127
Receiver
Receiver: when the company has failed to repay a debt to a creditor, a receiver will take control of the property in question for the benefit of the creditor. He is not appointed to wind up a company.
128
Register
Register: to be noted on an official list, such as the Companies Registry.
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Registrar
Registrar: the Registrar of Companies keeps an official record of all incorporated businesses.
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Relief
Relief: a remedy or assistance provided by the court.
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Reserve capital
Reserve capital: a part of the uncalled share capital set aside as a fund for paying unsecured creditors should the company be wound up.
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Resolution
Resolution: a formal proposal, usually voted upon at a meeting.
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Restrain
Restrain: attempt to prevent someone carrying out a certain action, for example, to prevent a director from acting beyond his powers.
134
Retention of title clause
Retention of title clause (also referred to as a Romalpa clause): this is a clause inserted into a contract of sale stipulating that the seller remains the legal owner of the goods he sells until the buyer has paid for the goods in full.
135
Self-dealing rule
Self-dealing rule: if a director has an interest in a contract between the company and a third party, he must disclose this to the company as a possible conflict of interest situation.
136
Shadow director
Shadow director: a person is termed a shadow director if he controls the other directors, even though he is not officially a director of the company. In certain circumstances, he can be liable as a director.
137
Share capital
Share capital: the total amount which a company’s shareholders have contributed or are liable to contribute as payment for their shares.
138
Shareholder
Shareholder: one who holds shares in a company. Shareholders are also commonly referred to as members, owners and stockholders.
139
Shares
Shares: interest held by a shareholder in a company, measured by a sum of money for the purposes of liability and dividend. There are various types of shares. Two of the most common are preference shares and ordinary shares. Shares can also be referred to as equity securities.
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Sole proprietorship
Sole proprietorship: the American term for a sole trader.
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Sole trader
Sole trader: an unincorporated, one-man business, where the owner of the business is personally liable for any losses arising from his business.
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Special resolution
Special resolution: a company resolution, which is only valid if approved by 75% of the votes cast at a meeting.
143
Stock
Stock: in England, stock is used to describe a member’s holding expressed in monetary terms rather than in terms of the number of shares held.
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Stockholders
Stockholders: in the United States, shareholders are often referred to as stockholders (as they own one or more shares of stock).
145
Subscriber shares
Subscriber shares: the first shares issued when a new company is formed.
146
Subsidiary
Subsidiary: a subsidiary company is one that is held by a parent company. It exists as a separate legal entity in its own right. However, there are situations when a parent company may be held liable for a subsidiary. For example, under recent English law, a parent company may under certain circumstances hold a duty of care to its subsidiaries’ employees. For accounting purposes, the parent company and its subsidiaries are treated as a single entity.
147
Substantial non-cash asset
Substantial non-cash asset: non-cash asset covers a wide range of property, tangible and intangible. Substantial refers to a value exceeding a certain percentage of the company’s net assets as determined in its last accounts.
148
Supervisory board
Supervisory board: in some countries, companies may have a supervisory board that advises and supervises the board of management. The United States and England do not have a two-tier system of management, although they may well use advisory
committees.
149
Trading certificate
Trading certificate: once registered, a public limited company has to wait for a trading certificate before it can commence business.
150
Trustee in bankruptcy
Trustee in bankruptcy: this trustee manages the assets of a bankrupt and pays off the creditors according to their priority.
151
Ultra vires
Ultra vires: Latin phrase meaning to act in a way which exceeds legal powers or authority.
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Uncalled share capital
Uncalled share capital (unpaid capital): if the shares that have been issued have not required the shareholders to pay for them in full, the amount outstanding is unpaid capital.
153
Underwriter
Underwriter: a person (or institution) who takes up shares or debentures not taken up by the public.
154
Undischarged bankrupt
Undischarged bankrupt: a person subject to a bankruptcy order that is still in force.
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Unincorporated
Unincorporated: a business organisation that is not incorporated is not a separate legal person.
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Unissued share capital
Unissued share capital: the difference between the nominal value of a company’s authorised share capital and the nominal value of the issued share capital, minus any amounts of issued capital that have not been called up by the company.
157
Unsecured trade creditor
Unsecured trade creditor: a category of general creditors without security. This category does not have a high position on the order of priorities in a winding up.
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Voluntary arrangement
Voluntary arrangement: rather than enter into winding up proceedings, a company can make a voluntary arrangement with its creditors for repayment, if supervised by a qualified insolvency practitioner. A composition or a scheme of arrangement can be drawn up.
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Winding up
Winding up: process by which a registered company is dissolved. A winding up can be compulsory or voluntary. A voluntary winding up may be either a members’ winding up or a creditors’ winding up. A compulsory winding up is by court order upon the presentation of a winding up petition.
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Written resolution
Written resolution: this dispenses with the need for a meeting by a private company. A written resolution is passed when the required majority have signed their agreement.
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Wrongful trading
Wrongful trading: where a person went on trading although he ought to have realised that the company could not pay its debts. That person knew or ought to have known that there was no reasonable prospect of avoiding insolvent liquidation. It is established by proving negligence, as that person failed to take reasonable steps to protect creditors.
