Intro to Company Law Flashcards
Partnerships
Advantages
Easy to set up
Confidentiality
All partners can participate in the management of the partnership
Disadvantages
Partners can be jointly and severally liable for all debts of business – Liability unlimited
Restrictions on financing (difficulties re. floating charges)
Continuity affected by death
Difficult to dispose of partnership shares
Higher tax rates (personal tax rate)
Limitation on number of partners
Sole trader
Advantages
Easy to set up
No need to publish accounts publicly
Not subject to oversight unless imposed by particular profession
Disadvantages
Personally liable for the debts of the business – Liability unlimited
Not a separate legal entity to the sole trader
Restrictions on financing (difficulties re. floating charges)
Higher tax rates (personal tax rate)
Difficulties obtaining outside investment / difficulties with succession
Types of Registered Companies
LTD - Private company limited by shares
DAC - Designated activity company
CLG - Company limited by guarantee
PLC - Public limited company
LTDs under CA 2014
Name: Must end with Limited / Ltd / Irish equivalent (s26)
Directors: Only needs one director and one secretary (s128) + (s129)
Shareholders: Can have between 1 and 149 shareholders (s17)
Offers to the Public: Cannot offer any securities (shares / bonds) to the public and cannot apply for securities to be admitted to trading on a stock exchange (s68)
Limited Liability: Liability of shareholders is limited (s17)
Constitutional Documents: Single document – “Constitution” (s19)
Capacity: Unrestricted objects – contractual capacity of natural person (s38)
Resolutions: Written resolutions and written AGM possible (s194)
DACs under CA 2014
Shares: Must have an authorised share capital (s967)
Directors: Must have at least 2 directors (s985)
Constitutional Documents: Must have a memorandum and articles of association (“constitution”) (s967)
Capacity: Must have an objects clause (must only carry out permitted objects) (s972)
Meetings: Cannot dispense with physical AGM unless it is a single member DAC (s988)
Securities: Can issue wholesale listed bonds (but not listed shares) (s981)
CLGs under CA 2014
Constitutional documents: Have memorandum and articles of association (“constitution”)
Capacity: Constitutional documents must have an objects clause
Audit: Can avail of audit exemption
Directors: Minimum 2 directors
PLCs under CA 2014
Shares:
A company that can offer securities to the public and trade securities on the stock market
Minimum capital requirements: issued share capital of at least €25,000
Shareholders: Only needs to have one (but no upper limit) (s1006)
Directors: Must have at least 2 directors (s1088)
Constitutional Documents: Must have a memorandum and articles of association (“constitution”) + objects clause (s1006) + (s1011)
Financial Statements: Must be published and audited yearly (s1117)
Implications of Incorporation
Incorporation is the legal process of creating a company as a separate legal entity
Process of incorporation by registration - s25(2) CA 2014 – body corporate
Legal personality, body corporate and perpetual succession
Limited liability of the shareholders
Transferrable shares
Taxation
Corporate personality and perpetual succession
Implications of separate corporate personality
Separate legal entity from its members
Can enter into contracts, own assets, sue and be sued
Debts and liabilities owed by company, not shareholders
Perpetual succession (transferability of ownership)
Raise money in its own name
Create a floating charge
Limited Liability
Members liable to company to pay for their shares, but do not owe money to creditors.
The company is liable to creditors (i.e. limited liability applies to members not the company – the company’s liability is not limited).
Extent to which member liable to co:
LTD, PLC, DAC: s17(2) CA 2014:“in the case of a company limited by shares, no contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member”.
CLG: Liable to pay amount guaranteed when company is being wound up
Separate legal personality v limited liability
Corporate personality (also called ‘separate legal personality’) and limited liability are related, but distinct, concepts
Separate legal personality: status of the company in law, arises by operation of law as a result of a company’s incorporation under the Companies Acts.
Limited liability: relationship between the company and its members, something that the government has granted to companies.
Remember that the expression ‘limited liability’ refers to the liability of the members towards the company, rather than towards the company’s creditors.
Limited Liability
Benefits:
Encourages business
Encourages innovation and risk-taking
Encourages investment in companies
Issues:
Position of creditors
Encourages irresponsible behaviour
Transferability of Interests and Taxation
Members’ interests can be easily transferred
Once a members’ interest is transferred and registered to another person, that new member steps into the shoes of the old member.
Companies are subject to corporation tax, rather than income tax
