Forming a company Flashcards
Types of company
- companies limited by shares
- companies limited by guarantee
- companies with unlimited liability
- community interest companies
People who take steps to incorporate a company
Promoters
How long are promoters called promoters?
Until the company is incorporated and the first directors take over - Twycross v Grant 1877
Things needed for incorporation
- memorandum and articles
- form IN01
- registration fee
What do the objects of a company do?
Set out the purpose of the company and the scope of its permissible activities
s39 CA - does an ultra vires act invalidate the act?
No
Who needs to sign the memorandum of association?
The subscribers
The role of the memorandum
It’s the document used to bring the company into existence but it is important in that it evidences the intention of the subscribers of the memorandum to form a company and become members of that company on incorporation
Wood v Odessa Waterworks Co 1889
Read in conjunction with the memorandum, the company’s articles are regarded as a contract between the company and the members and between the members themselves
Re Duncan Gilmour and Co Ltd 1952
In cases of conflict between the articles and the memorandum, the memorandum will always prevail
Durham Fancy Goods Ltd v Michael Jackson (Fancy Goods) Ltd and another 1968
Failure to comply with s82-4 CA (i.e. name appearing on docs and office) will render the company and any officer liable to a fine
Who will a shareholders’ agreement bind?
The parties (not future members)
Russell v Northern Bank Development Corp Ltd 1992
An agreement only bound future shareholders (enforceable) but it also constituted an undertaking fettering the company’s statutory power to increase share capital (unenforceable)
Dear and Griffith v Jackson 2013
It’s very important that the shareholders’ agreement and articles do not contain contradictory trerms
Rock Advertising Ltd v MWB Business Exchange Centres Ltd 2018
No oral modification clauses (common in shareholders’ agreements) are legally effective
In most private companies where the directors are the majority shareholders, it is advisable to provide the directors with…
A general and unconditional authority to allot shares for the amount of unissued share capital at the date of its grant of creation
What is the maximum period of authority to allot shares?
Five years - s551 CA
Where the directors have authority, generally or otherwise, to allot shares under s551, the members may by special resolution…
Authorise the directors to allot shares on a particular occasion as if s561 did not apply
Lien
A right to retain possession of an asset until discharge of an obligation owed by the owner of that asset
Re Smithand Fawcett 1942
The court will not interfere with the directors’ discretion to refuse to register a transfer of shares unless it is proved that the director was not acting bona fide in the interest of the company
Cadbury Shweppes plc and another v Halifax Share Dealing Ltd and another 2006
Reaffirmed that the issue of share certificates by a company amounts to a statement by the company that the individuals named on the certificates are legally entitled to the shares specified on the certificate
Bushell v Faith 1970
Articles providing special voting rights which have the effect of preventing majority shareholders from removing a director against their will lawful
The issue of a certificate of incorporation by Coho amounts to what?
Confirmation of the company’s existence in law
Example agenda for the first board meeting (9)
- appoint the chair of the board
- appoint auditors
- fix accounting reference date
- adopt (if wanted) the common seal
- appoint bankers
- receive applications for shares
- allot shares
- issue share certificates
- register for the purposes of VAT
Neptune (Vehicle Washing Equipment) Ltd v Fitzgerald 1995
Held that before a decision can properly be taken by a sole director in a matter in which he has personal interest, he must go through the routine of summoning and holding a meeting consisting only of himself, making a formal and full disclosure to himself and ensure that this is duly recorded in board minutes (Art 14 has to be disapplied)
Newborne v Sensolid (GB) Ltd 1953
A contract by a non-existent company and the execution of supporting documents by its purported officers in its name is nullity
Kelner v Baxter 1866
Where promoters enter into a contract under which they are personally liable until incorporation, there must be a new contract following the incorporation, the company cannot assume liability by ratification after incorporation
