Formation of a company Flashcards
Companies Act require companies to have what?
Articles
- S18 all companies must have it
- The purpose is to regulate the relationship between the shareholders, the directors and the company.
- Contents include:
- No of directors needed to form a quorum
- Powers of directors
- Method of appointment of directors
- Any special rights attaching to shares
- How shareholder meetings are to be conducted
- Any special rights attaching to shares
Some CA provisions which overriding anything in companies’ articles
How can you alter companies articles?
Once a company has articles its able to alter them at any future date by SPECIAL resolution of the shareholders.
- Basic rule is that to be valid any alteration must be made bona fide in the interests of the company as a whole.
- S22 permits entrenchment of specific provisions within a company’s articles – an entrenched provision can only be amended or repelled if specific conditions are met
- Provisions in company’s articles bind the company and its members to the same extent as if there were covenants on the part of the company and each member is to observe those provisions.
Incorporation of a company? From scratch?
- Application must be made to registrar of companies to have new company registered. The following must be delivered to company’s house:
- A copy of company’s memorandum
- Articles
- The fee
- Application form for registration form 1n01. Which contains:
- The companies proposed name
- Whether it’s limited by shares
- A statement of capital and initial shareholdings
- Statement of compliance
Once registrar has approved application – company is sent a certificate of incorporation authenticated by registrar’s official seal.
Becomes a legal identity from date of certificate of incorporation is issued by company’s house.
Incorporation of a company by converting a shelf company?
Change the following:
Name – Form NM01 with any SPEICAL RESOLUTION needs to be filed at company’s house
Registered office – Form AD01 needs to be filed at company’s house
Articles – common for a shelf company to have been incorporated with MA. – amended articles need to be filed at CH – special resolution.
Members, directors and the company secretary - The first director(s) and company secretary (if there was one) resign. Forms TM01 (directors) and TM02 (company secretary) are required to be filed at Companies House. The order that appointments and resignations are made is very important; the company will always need at least one director appointed to be CA 2006 compliant if it has unamended MA.
Post- incorporation steps?
- Chairperson – board needs to decide whether to elect a chairperson and whether the chairperson should have a casting vote in the event of tied board resolution. MA 13 provides for this.
- Accounting refence date – s39(4) provides default accounting date will be last day of the month the company was incorporated, often changed to fit alongside their financial years.
- Auditor – s394 all companies must prepare annual accounts and therefore usually appoint auditors a485
- Tax registrations – company will need to register for corporation tax, VAT and PAYE
- Shareholders agreement – not required
Pre- incorporation contracts?
If the contract is entered into before the company is incorporated, then as the company did not exist at that point as a legal person, it is not possible for the company to have legal rights or duties under the contract because it had no legal capacity at that point. Therefore, an important issue arises as to who can be liable under a ‘pre-incorporation contract’.
Contract rights of third parties act 1999 – does not apply.
S51 CA 2006 – seeks to protect third parties who believe they are entering into a contract with a company which is incorporated and registered by making pre-incorporation contracts enforceable against persons purporting to act on company’s behalf.
- Made personally liable
Company decision making?
Directors
Board resolutions taken at board meetings
Each director has one vote.
Board resolutions
- Each director has one vote
- Passed by simple majority MA7 unless directors have agreed that a particular decision requires unanimity MA8
- Can also pass a written board resolution
Shareholder resolutions
- At a GM or in writing unless its to remove a director or an auditor
- Ordinary resolutions – over 50%
- Special resolutions – 75% or more
Shareholder meetings?
Shareholder voting
- Show of hand – one vote each
- Poll – one vote is respect of each share held by them
- MA 44 - sets out that a poll on a resolution can be demanded either in advance or at GM before show of hands or immediately after that result. It sets out who can demand:
o Directors
o Chairpersons of the meeting
o Two or more persons having the right to vote on the resolution
Voting on a written resolution
- As if it’s a poll vote
- Can appoint a proxy to vote in- stead
- Under s281 – only private companies may pass shareholder resolutions by way of the written resolution procedure.
- S284 states that where a co has share capital, every member has one vote in respect of each share held by them when voting on a written resolution.
Company meetings? Board meetings?
Who calls a BM? MA9 provides any director may call it, fairly informal
Notice? Browne v La Trinidad – held reasonable notice of the BM was whatever is necessary.
Quorum – directors may not validly consider business sunless a minimum number of directors entitled to vote are present, MA 11 requires 2 directors be present
Voting – simply majority on show of hands
Company meetings? General meetings?
- Board will usually convene a GM – circulate a notice to all shareholders – 14 clear days in between
- Notice – 14 clear days’ notice s307
- S1147 if notice is posted or emailed it is deemed to be served 48 hours after sending
- Must inform SH where and when
- Board must approve the form of notice of the GM and authorise its circulation to the SH
Where a shareholder vote is required
- A BM is first called to call the GM
- A GM is then required for SH to vote
- A further BM is required to put into effect the outcome of the shareholder vote
- May be post meeting matters
Shortening notice for a GM?
- CA allows for GMs to be called if sufficient members agree. S307(4,5,6) provides that for a private company a GM may be called on short notice:
- if agreed by majority of SH
- who together hold shares with a nominal value not less than 90% of total nominal value of shares.
- This percentage could be increased to 95% in articles
Written resolution procedure?
Written resolution procedure
S288-300 contain general provisions applying to written resolutions.
- A WR can be proposed by directors or members of a private company
- Required majority depends on whether its ordinary or written
- If co does not receive a sufficient number of responses to pass the WR it will lapse, for a company with MA 28 days is the lapse period.
- Resolutions to remove directors or auditors cannot be passed by WR
- Must be recorded in minute books of the company in the same way as minutes of a GM
There are then two options of how to proceed:
(i) If the shareholders are available immediately, the BM is adjourned. The approval of the
WR takes place immediately following the adjournment of the BM and the shareholders
vote on the resolutions set out in the WR by signing to signify their agreement or not
signing or abstaining (both of which constitute votes against the resolution); or
(ii) If the shareholders are not available immediately, the BM is closed. The WR is circulated
to the shareholders. The WR is passed once it receives the relevant required majority of
shareholder support or it will deem to lapse after 28 days for a MA company.
3: Company formation 61
* The BM is then reconvened (if used option (a) above) or a second BM is called (if used option
(b) above. The Board are informed as to how the shareholders voted and will authorise the
company secretary (if there is one) or a director (if not) to take the relevant action and deal
with the post-meeting matters. The PMMs will then be carried out.
Post meeting matters?
categories
- Internal
- Minutes of all meeting need to be kept for 10 years
- Updating statutory books
- Filing at company’s house
- All special resolutions must be filed – NOT ORIDNARY UNLESS (but there are some exceptions to this such as an authority to allot shares under s 551).
- Amended articles must be filed
- Record keeping – directors service contracts at companies house
