Company Secretarial Applications Flashcards
The process by which a company is created is described as formation, registration and incorporation. Define these terms.
FORMATION of a company happens when the application for REGISTRATION is
approved by the Registrar, and a certificate of INCORPORATION is issued.
s. 1(1) … ‘company’ means a company formed and registered under this Act…
s. 9(2) The application for registration must state…
s. 14 If the registrar is satisfied that the requirements of this Act as to registration
are complied with, he shall register the documents delivered to him.
s. 15(1) On the registration of a company, the registrar of companies shall give a
certificate that the company is incorporated
Each particular word has a specific meaning with the effect that Companies Act
companies are formed under the Act , incorporated in the United Kingdom and
registered in England & Wales, Scotland or Northern Ireland
What are the four main types of company that may be incorporated under the Companies Act?
Public limited by shares
Private company limited by shares
Private company limited by guarantee
Private unlimited company
What considerations should be undertaken when considering a company name?
COMPANY NAME AND BUSINESS NAME
Check index of company names held by Registrar of Companies not to be same or ‘too like’ another
Check against Trade Marks Register
‘Limited’, ‘PLC’, etc , only at the end of name
‘SE’ only used for SE companies can be at beginning or end (Societas europaea)
Must not be offensive
Use must not constitute criminal offence
Use of names with sensitive words designated by BEIS requires permission from Secretary of State full list at Companies House:
implying pre eminence or authoritative status (Institute, Tribunal, etc
Implying Government connection
represent regulated activity or controlled by legislation
imply specific objects or functions (Assurance, Fund, Stock Exchange, Trade Union)
Qualifying charities, non-profit making organisations and CICs may apply for exemption from the requirement to use the word “limited” or its alternatives
Approval may also be required from a relevant body for example, the FCA for use of the word ‘bank’.
Why is it important to thoroughly research a suitable company name?
The Registrar has the power to order a change of name:
within 12 months of registration if the name is the same as or too like a name in the existing index of company names (CA2006, s. 67(1))
within five years of registration if misleading information was given on registration (CA2006, s. 75)
at any time if use of the name is misleading and is likely to cause harm to the public (CA2006, s. 80)
Under CA2006, ss. 69 - 74 complaints can also be made where a company name has been registered with the intention of extracting money from a complainant or preventing the registration of a company name in which a person or business has some goodwill (sometimes referred to as an opportunistic registration ’).
Under these provisions, a Company Names Tribunal has been established as part of the UK Intellectual Property Office to review objections. Any person or company may object to a company name. The Company Names Tribunal has the power to order a change of name and, if the company fails to comply, it may select a new name for the company. These provisions are separate and in addition to the Registrar’s powers to order a change of name.
What documentation should be lodged with the Registrar in connection to company formation, registration and incorporation?
- Memorandum of association.
Must be at least one subscriber to the memorandum, who agrees to take at least one share or agree to be a member if the company is not to have a share capital. The number of shares which each subscriber has agreed to take is shown against their name in the memorandum. One witness must sign against the name of each subscriber.
2.Articles of association.
All companies must register Articles:
(a) to adopt the relevant set of Model articles in their entirety;
(b) to adopt the relevant set of Model articles with modification ;
or
(c) to adopt an entirely bespoke set of articles
3.Form IN01
Proposed name,
situation of the registered office,
details of the proposed secretary (if any) and directors,
together with their service address.
4.Name approval.
Formal approval of the name of the company (if required).
5.Registration fee
Payment of registration fee either by cheque for paper filings or by account if using the software filing or WebFiling facilities.
IF ALL OK the Registrar will issue a
certificate of incorporation bearing the date of incorporation, the company’s registered number and stating the company type. A private company may commence business as soon as it is incorporated.
What additional requirements would need to be considered in connection with a public company formation?
Public companies -
must have at least two directors (CA2006 s. 154) and a company secretary .
A public company cannot immediately commence business on the issue of the
certificate of incorporation or exercise any of its borrowing powers. The company must also deliver an application for a borrowing certificate using Form SH50, then the Registrar will issue the trading certificate , confirming that the company complies with CA2006 s. 761.
This application includes confirmation that the authorised minimum share capital has been subscribed. The authorised minimum requires that each share issued by a public company must be paid up as to a minimum of 25% of its nominal value and 100% of any premium (CA2006 s. 761).
If the company commences its business and exercises any of its borrowing powers before the issue of the trading certificate, the company and any officer in default may be liable to criminal penalties and are jointly and severally liable to indemnify any affected third party for any loss or damage suffered as a result of the failure to comply with s. 761. The transactions
themselves are not affected by the failure to comply with CA2006 s. 761
Can companies re-register?
Yes - Provided certain conditions are met, most companies can change their type.
The following are permitted:
Private to public (unless previously re registered as unlimited ) (CA2006 90).
Public to private limited (CA2006 s. 97).
Private limited to unlimited (unless previously re registered as limited ) (CA2006
s. 102).
Public to unlimited (unless previously re registered as limited or unlimited )
(CA2006 s.109)
Unlimited to limited (unless previously re registered as unlimited ) (CA2006 s.
105).
It is not possible to change a company’s type:
to or from that of a company limited by guarantee; or
from being a CIC company
What is the process of re-registering a private company to a public company?
A special resolution is required to re-register a private company to a public company and
a copy of the resolution, together with an application form (RR01), must be delivered to
the Registrar within 15 days of the resolution being passed.
The Articles should also be reviewed as part of the process and amendments made as needed for shareholder approval.
What is the process of re-registering a public company to a private company?
Re-registering a public company as a private company and a special resolution must be
passed and form RR02 filed.
However, if members representing not less than 5% in nominal value or not less than 50 members object, under CA2006, s. 98 they may apply to the court to cancel the resolution within 28 days of it being passed.
If the share capital of a public limited company falls below the statutory limit, action must be taken to either increase the capital or to re register as a private company.
What is the process of re-registering a public or private company to an unlimited company?
Re- registration of either a public or a private limited company to an unlimited company
requires unanimous shareholder consent .
Again, resolutions and forms should be filed at Companies House and the Articles should be reviewed for amendments.
List the 3 ways you can file company returns?
Online filing : Quicker / cheaper (online filing fees are usually lower than the paper based
equivalent filing) / rejection rates are lower due to inbuilt checks, pre population of data /
automatic confirmation of filing; and provides an environmentally friendly alternative.
Can opt in to receive email reminders for submission of annual accounts and confirmation statement and can also opt in to the PROtected Online Filing service (PROOF). PROOF combats corporate identity theft by making changes of registered office or director only notifiable using either WebFiling or software filing.
WebFiling. Registering is simple.
Software filing. Allows companies to file most Companies House forms, some forms of accounts as well as incorporation documents using an approved third party software package or by developing their own bespoke solution in house. Requires registration with Companies House and the setting up of an account for the payment of any fees which are invoiced monthly.
Prosecution for late or no filing is rare, but could lead to criminal record.
What is a merger by absorption and a merge by formation?
A merger ‘by absorption’ means a situation where the undertaking, property and liabilities of one or more public companies are to be transferred to another existing public company.
A merger ‘by formation’ is the same process but where there are two or more transferor public companies and the transferee company is a newly incorporated company, whether public or private (CA2006 s. 904).
What is a division arrangement?
A division is a scheme where the undertaking, property and liabilities of the company are to be divided among and transferred to two or more companies each of which is either an existing public company or a newly incorporated company, whether public or private (s. 919).
Provide a summary of key points around mergers.
The legislation regulating mergers between public companies is extremely complex and
designed to ensure that the members of all companies involved in the scheme are
either provided with copies of or given access to a number of documents and reports
to ensure that they have full disclosure of relevant facts.
A minimum set of disclosure documents specified in CA2006 ss. 905 and 908
911 must be made available, either by making them available at the company’s registered office or making them available on a website for a period of at least one month prior to any
member or class meetings to approve the transaction , and notice must be given to the
Registrar of the availability of the draft merger agreement for publishing in the
Gazette.
The members of each class of shares of the merging companies must approve the terms
of the scheme by special resolution requiring approval of 75% of the members present,
in person or by proxy, at the general or class meeting convened to consider the
resolutions.
The directors of each company that is merging must report (i) to their members at the
meeting(s) convened to consider the merger arrangements and (ii) to the directors of
the other merging companies of any material changes to the property and liabilities of
their company between the date the draft terms were approved and the date of the
members’ meeting(s) (CA2006 s. 911B)
Provide a summary of key points around divisions.
Provisions relating to the division of a company’s property and liabilities among one or more other companies only applies where the company being divided is a public company and the companies acquiring those assets and liabilities are either public companies or newly incorporated companies whether public or private.
The documents listed (CA2006 ss. 920 - 925) must be made available either by making them
available at the company’s registered office or making them available on a website for a period of at least one month prior to any member or class meetings to approve the transaction and notice must be given to the Registrar of the availability of the draft division agreement for publishing in the Gazette.
The members of each class of shares of the companies involved in the division must approve the terms of the scheme by special resolution requiring approval of 75% of the members present, in person or by proxy, at the general or class meeting convened to consider the resolutions CA2006 (s.922).
The directors of each company that is involved in the division must report (i) to their members at the meeting(s) convened to consider the division arrangements and (ii) to the directors of the other companies involved in the division of any material changes to the property and liabilities of their company between the date the draft terms were approved and the date of the members’ meeting(s) (CA2006 s. 927).
What is a scheme of arrangement / reconstruction?
An acquisition of one company by another may be affected by a liquidation under the provisions of IA1986 s. 110 or a scheme of compromise or arrangement under the provisions of CA2006 ss.895-901.
Alternatively, the offeror company may acquire the undertaking of the offeree company for cash or the issue of shares in the acquiring company. Schemes of arrangement useful where it is desired to acquire 100% of the offeree company but, because of the nature of the business, it would not be possible to obtain the required 90% level of acceptances that would enable the offeror company to effect compulsory acquisition (see later). The approval of the court is required and consequently the legal advisers of both companies will be involved in settling the necessary documentation.
Meetings to approve schemes of compromise or arrangement are convened under the authority of the court (CA2006 s. 896). Where meetings are to be convened under the authority of the court rather than the directors application must be made to the court setting out the nature of the proposed transaction. The court will provide detailed information on the required content of the notice convening the members’ meeting and accompanying circular. The contents of the notice and all accompanying documentation must be approved in its final form before being issued to members. The meeting itself will be managed by the directors and company secretary in the same way as any general meeting and afterwards a report of the meeting and votes cast will be submitted to the court.
Any notice convening a meeting of the members or creditors must be accompanied by a
statement complying with the provisions of CA2006 s. 897 explaining the effects of the
compromise or arrangement, and in particular any material interests of any director and the
impact of the scheme on those interests (CA2006 s. 897). Provided 75% of the members or 75% of the creditors, by value of claim, approve the terms of the scheme the court may sanction the scheme of compromise or arrangement (CA2006 s. 899).
What is the definition of a takeover?
Takeover - the acquisition by a company of the whole or majority of the share capital of another in exchange for an issue of shares, cash or combination of the two
What are the 4 main types of takeover transactions?
- Share sale agreement - formal agreement made with the shareholders.
Usually where small number shareholders (often private companies). Need
to check Articles and shareholder agreements to for pre emption rights. - Public Purchase - acquisition of individual blocks of shares (stake building)
to build up holding. - Takeover offer - public offer to shareholders to purchase at stated terms sent to shareholders (most common)
- Scheme of Arrangement or Compromise - court approved agreement
between company and shareholders or creditors
Explain the process of a takeover when “agreements are made with individual members”.
Agreements with individual members
A simple way by formal agreement effected by the exchange of consideration for transfer of share certificates.
Usually, a formal agreement is entered into, drawn up by lawyers. Agreement should cover full details of the shares to be acquired, the consideration to be paid, time for completion and set out who will be responsible for paying legal costs, duty and any other related expenses.
Often warranties are required from the directors of the offeree company containing financial
information about the offeree company, the title to its property, pending litigation, etc., including any changes affecting the company that may have occurred since the date of the last balance sheet.
