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Corporate Secretarial Practice > Mailing #1 Notes > Flashcards

Mailing #1 Notes Flashcards

1
Q

What are the three basic types of business organisation?

A

Sole trader
Partnership
Limited company

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2
Q

What is the most important defining quality of a limited company?

A

Is has separate legal personality.

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3
Q

Which Act governs partnerships?

A

Partnership Act 1890

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4
Q

What is the definition of a partnership?

A

The relation which subsists between persons carrying out business in common view of profit.

(Partnership Act 1890)

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5
Q

In what 2 scenarios can a partnership be formed?

A

1) By express agreement when Articles of Partnership are drawn up and signed.
2) By implication if the courts find that the definition of partnership is met.

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6
Q

What are 4 advantages to forming a partnership?

A

1) Pooling of skills and experience
2) Sharing risk
3) Conduct is secret (unlike public company)
4) No formalities required to start partnership

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7
Q

Is a partnership a separate legal personality?

A

No, the partners are personally liable.

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8
Q

What are the 2 main downsides to forming a limited company?

A

1) Government regulation

2) Publicity

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9
Q

What are the two general characteristics of the limited company?

A

1 Independent legal personality

2 Limited liability

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10
Q

What are the 8 key differences between a limited company and a partnership?

A

1 Members of a company have limited liability, partners are fully liable
2 Companies are separate in law
3 Company are formed by registration, partnerships by agreement
4 Certain company documents are open to inspection, partnerships are private
5 No member of a company can contract unless appointed, partners have implied authority.
6 Company powers are determined by constitution, a partnership can do whatever the partners wish.
7 Company is managed by directors, all partners can manage
8 Company is dissolved when the registrar cancels its registration, but partnerships are dissolved by agreement or the court

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11
Q

What are the two primary purposes of company law?

A

Protect investors

Protect creditors

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12
Q

Why do companies limited by guarantee often have little working capital?

A

The members promise to contribute an amount on winding up.

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13
Q

Which body has responsibility for registering CIOs?

A

The Charity Commission

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14
Q

When might a limited company’s members lost limited liability?

A

1 The company trades with less than the minimum number of members
2 Engages in fraudulent or wrongful trading
3 The veil is lifted

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15
Q

Which subsection of CA 2006 classifies public and private companies?

A

S 4

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16
Q

Which companies may be limited by either shares or guarantee?

A

Private (not public)

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17
Q

Which companies may offer shares to the public?

A

Public (not private)

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18
Q

Which companies require a trading certificate?

A

Public

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19
Q

Which companies must have a minimum of 2 directors?

A

Public (private only need one)

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20
Q

Which companies must have a secretary?

A

Public (private do not need one)

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21
Q

What is the collective name for a holding company and all its subsidiaries?

A

“The group”

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22
Q

Can a subsidiary company be a member of its holding company?

A

No

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23
Q

Which case sets out that a holding company is not responsible for the debts of its subsidiary?

A

Prest v Petrodel (2013)

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24
Q

What is an OEIC?

A

Open-Ended Investment Company

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25
Q

What must be the purpose of an OEIC?

A

To invest in transferable securities with the aim of spreading investment risk and giving shareholders the benefits of the results.

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26
Q

What is the definition of an overseas company?

A

A company registered outside the UK (s1046 CA).

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27
Q

What information must an overseas company provide to the registrar when establishing a UK branch?

A

1 Memorandum and articles
2 Details of directors and secretary
3 Name and address of a UK resident willing to accept notices for the company.

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28
Q

To which companies is the “capital lock” applicable?

A

Community Interest Companies

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29
Q

What is a capital lock?

A

The assets of a CIC cannot be disposed of without prior consent of the registrar to ensure assets are used for the benefit of the community.

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30
Q

Which regulations give authority for Societas Europaea?

A

European Public Limited Company Regulations (2004)

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31
Q

What must a Societas Europaea’s name end in?

A

“SE”

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32
Q

How may an SE be formed?

A

1 Merging two or more public companies
2 Transforming a public company which has had a European subsidiary for over two years
3 Creating a subsidiary from companies in two or more EU countries.

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33
Q

What must be sent to the Registrar of Companies on registration?

A

1 Memorandum of association
2 Articles of association
3 Form IN01
4 Fee

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34
Q

What is the memorandum of association?

A

A statement that subscribers to the memorandum wish to form a company and agree to take at least one share each.

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35
Q

What are the three sets of model articles?

A

1 For private companies limited by shares
2 For private companies limited by guarantee
3 For public companies

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36
Q

What will the registrar issue on incorporation?

A

A certificate of incorporation (s15 CA)

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37
Q

What are the three effects of registration of a company, set out in s 16 CA?

A

1 Subscribers become members of the company from the date of incorporation
2 The company has limited liability for its members
3 The certificate of incorporation is conclusive evidence that the Act has been complied with

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38
Q

How is a trading certificate obtained for a public company?

A

By applying to the register following allotment of the minimum statutory share requirement (£50,000, 1/4 paid up)

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39
Q

What records must a company maintain for the inspection by its members?

A

Register of members
Register of charges
Minutes of proceedings of company, directors and managers
Accounting records
Register of directors and secretaries
Register of interest in voting shares (for public companies)

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40
Q

When MUST a public company re-register as private?

A

Where there is a serious loss of capital, i.e. where net assets are less than half the called-up share capital.

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41
Q

What are the requirements for re-registration from private to public?

A

1 Special resolution to change status
2 Submission of documents to registrar, including
- proposed name
- proposed secretary
- copy of special resolution
- copy of articles
- copy of balance sheet and unqualified auditors report
- valuation report on any recent non-cash consideration for shares
- statement of compliance

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42
Q

What are the requirements for re-registration from public to private?

A 
1 Special resolution to change status
2 Submission of documents to registrar
 - proposed name
 - copy of special resolution
 - copy of proposed articles
 - statement of compliance
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43
Q

What are the requirements for re-registration from private limited to unlimited?

A

1 All members consent
2 Company has not been previously re-registered as limited
3 Submission of docs to registrar including
- proposed name
- assent of all members on prescribed form
- statement of compliance

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44
Q

What are the requirements for re-registration of unlimited company to private limited company?

A

1 Special resolution stating whether limited by shares or guarantee
2 Company has not been previously re-registered as unlimited
3 Submission of docs to registrar including
- proposed name of registration
- copy of special resolution
- copy of proposed articles
- statement of compliance

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45
Q

What are the requirements for re-registration of public company to unlimited company?

A

1 All members consent
2 Company has not previously been re-registered as limited or unlimited
3 Company must make changes in name and articles
4 Submission of documents:
- proposed name on registration
- assent of all members on prescribed form
- copy of amended articles
- statement of compliance

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46
Q

Where must company names be displayed?

A

1 Place of business

2 On letters, notices, invoices, receipts and negotiable instruments.

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47
Q

What is the “domicile clause”?

A

A clause within the company’s objects which state whether it wishes to be registered in England and Wales, Wales, Scotland or Northern Ireland.

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48
Q

Why is it significant that any company registered in the UK is “British”?

A

Because the UK Government offers protection to British companies operating overseas.

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49
Q

Why is the domicile of a company significant?

A

The domicile determined which regional law affects the company. E.g. English v Scottish

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50
Q

What is stated by s86 CA regarding the registered office?

A

All companies must have a registered office to which all communications can be addressed.

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51
Q

Can a registered office be changed?

A

Yes

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52
Q

For what two reasons is the registered office important?

A

1 Company’s official address for legal service

2 Place where documents can be inspected.

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53
Q

What key document must be available for inspection at a company’s office?

A 
1 Register of charges
2 Register of directors and secretaries
3 Register of members
4 Minutes of general meetings
5 Copy of directors service contracts
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54
Q

Are the objects of a company restricted?

A

No, unless specified within the articles (S 31 CA)

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55
Q

What information must be included in the “statement of capital” upon incorporation?

A

1 Total value of shares allotted (in £)
2 Total nominal share value allotted in other currencies
3 Total number of shares issued and total nominal value

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56
Q

What is the “statement of compliance”?

A

A statement from every person subscribed to the memorandum confirming that they have complied with the CA 2006.

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57
Q

Upon change of address, for how long must a company maintain both addresses?

A

14 days

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58
Q

What is the process for alteration of company name?

A

1 Check the new name is available
2 Board adopt new name
3 Convene general meeting for passing special resolution
4 If pass, resolution is send to CH and printed on all memoranda
5 Registration of new name and certifcate of incorporation

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59
Q

What is the process for increase of share capital?

A

1 The company must have authority of the members (ordinary resolution).
2 Notice given to the registrar within one month

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60
Q

What is the process for a reduction in share capital?

A

Private - special resolution supported by solvency statement

Public - special resolution confirmed by the court.

61
Q

What is the purpose of the articles according to S 17 CA?

A

To act as the company’s constitution.

62
Q

What does s 33 CA state with regards to the articles?

A

The articles bind the company to its members as though they had individually covenanted to obey the provisions.

63
Q

What is “entrenchment” of the articles?

A

Articles may be restricted such that they may only be amended if certain provisions are met.

64
Q

How many articles be altered?

A

By special resolution.

65
Q

What are the main roles of companies house?

A
  • incorporate new companies
  • receive and register statutory documents
  • provide information to the public
  • dissolve and remove companies
  • prosecute
66
Q

Which case sets out Comapnies House’s duty of care?

A

Serby v Companies House, where a company was incorrectly wound up.

67
Q

From 30 June 2016, what new process replace the annual return?

A

Confirmation statement - the company checks and confirms the information held by CH.

68
Q

How did the statement of capital change after 30 June 2016?

A

Only the aggregate unpaid amount on the total number of shares need to be displayed (instead of the amount unpaid on each individual share)

69
Q

What statutory records must every company keep? (9 points)

A
  • register of members
  • register of directors
  • register of director’s residential addresses
  • register of secretaries
  • register of interests in shares (if public)
  • PSC
  • minutes of general meetings
  • minutes of board meetings
  • accounting records
70
Q

What information must the register of members contain?

A
  • name and address of member
  • date that person became a member (and ceased to be)
  • number class and amount paid up on shares
  • extra details where shares have been converted to stock (share warrants)
71
Q

Is data protection registration with the ICO required for the register of members?

A

No, so long as only information required by statute is recorded.

72
Q

When may an entry be removed from the register of members?

A

Once a member has ceased to be a member for 10 years

73
Q

When may the court order rectification of the register under S 125 CA?

A
  • if a member who has not agreed to take shares is entered
  • if a lawful member has been omitted
  • default or unnecessary delay in altering the register
74
Q

What is the difference between an overseas company and an overseas branch register?

A

An overseas company is one registered outside the UK but with a UK office. An overseas branch register is a company operating in the UK that operates a register of members outside the UK.

75
Q

What information must be included in the register of directors?

A
  • full names (including previous names)
  • nationality
  • service address
  • country or state of residency
  • date of birth
  • business occupation
76
Q

What information must be included in the register of directors if the director is a body corporate?

A
  • corporate or firm name
  • registered principal office
  • the legal form of the firm and law by which it is governed,
77
Q

How quickly must a change of director be notified to the Registrar?

A

14 days

78
Q

When must a person notify a traded company of their percentage of voting rights he holds as a shareholder under DTR 5.1.2?

A

At 3% or each 1% threshold thereafter

79
Q

Within what time period must a member notify a public company of a change in their share under DTR 5.1.2?

A

2 trading days

80
Q

What does s 793 CA allow a public company to do regarding a person’s interest in its shares?

A

To give notice requiring them to confirm their status and state their intentions with the company’s shares.

81
Q

What qualifies as an “interest in shares” for a public (non-traded) company under s 820 CA?

A
  • an interest of any kind

- includes beneficiaries under a trust, spouses, civil partners and any infant children

82
Q

What is the purpose of the Market Abuse Regulations Article 19?

A

To set out the notification obligations in respect of transactions conducted on their own shares of the company or any related financial instruments.

83
Q

Who is affected by the Market Abuse Regulations Article 19?

A

Companies and managers and their connected persons

84
Q

What is a “closed period” for the purpose of MAR Article 19?

A

A period in which directors must not trade, commencing 30 days before the announcement of a financial report.

85
Q

How promptly must a director notify their dealing in company securities under MAR Article 19, and to who?

A

3 business days, to the company and to the FCA.

86
Q

Which law requires the maintenance of insider lists?

A

Market Abuse Regulations Article 19

87
Q

What information must be included in an insider list?

A
  • who has access to information

- the date and time that access was gained/lost

88
Q

When did MAR come into effect?

A

July 2016

89
Q

Who qualifies as PSC?

A
  • owns more than 25% shares
  • holds more than 25% voting rights
  • can appoint or remove a majority of directors
  • can or does exercise significant influence or control
  • can or does exercise significant control over a trust or company that meets one of the above.
90
Q

What changes to the PSC regime were brought about by the EU Fourth Anti-Money Laundering Directive?

A
  • AIM companies must comply with PSC requirements

- companies must keep a PSC register and update it within 14 days of any change.

91
Q

What are the 4 markets of the London Stock Exchange?

A

1 Main market
2 AIM
3 Professional securities market
4 Specialist Fund Market

92
Q

What are the 4 advantages of going to the stock market?

A

1 Access to capital
2 Founders can sell shares
3 Director’s profits increase
4 Company’s own shares can be used as consideration for a take-over bid.

93
Q

What are the 7 disadvantages of going to the stock market?

A

1 Stock market rules
2 Criticism from financial press
3 Directors management can be criticised at AGMs
4 Risk of takeover
5 Less financial stability
6 Expensive
7 Success may not be good for the company or directors

94
Q

What is “SETS” on the LSE?

A

Stock Exchange Electronic Trading Service

95
Q

What is a “market maker” on the LSE?

A

Someone who is guaranteed to buy or sell certain company shares.

96
Q

What is SEATS PLUS on the LSE and who uses it?

A

Stock Exchange Alternative Trading Service - used by AIM companies.

97
Q

What is MiFiD?

A

EU Markets in Financial Instruments Directive (MiFiD)

98
Q

What is “dark pool trading”?

A

Large institutions using MiFiD authorised platforms to gain anonymity in trading.

99
Q

How are “dark pools possible?

A

MiFiD allowed companies to trade elsewhere other than regulated stock exchanges.

100
Q

What are the three sets of rules with which companies wishing to list on the main market must comply?

A

1 The Listing Rules (LR)
2 The Disclosure Rules (DR)
3 The Prospectus Rules (PR)

101
Q

In what ways may securities be offered to the public? (11 types)

A 
1 Offer to the public
2 Offer for sale
3 A placing
4 Vendor consideration placing
5 Introductions
6 Rights offers
7 Open offers
8 Capitalisation or bonus issues
9 Exchanges and conversions
10 Options
11 Employee share schemes
102
Q

Once a company’s securities are being listed on the stock exchange, what are the six listing principles which govern the company?

A

1 Ensure directors understand their role and duty as directors
2 Ensure it has proper controls in place to comply with obligations
3 Act with integrity to its members
4 Prevent false markets
5 Ensure all shareholders are treated equitable
6 Cooperate openly with the FCA.

103
Q

What are the three insider dealing offences under Part V CJA 1993?

A
  • the dealing offence
  • the encouraging offence
  • the disclosure offence
104
Q

What is insider information?

A

Information that

  • relates to particular securities
  • is specific
  • has not been made public
  • would have a significant effect on share price if made public
105
Q

What are the defences to insider dealing?

A
  • the individual did not expect to profit
  • the individual reasonably believed the information had been disclosed
  • the individual would have acted as he did anyway
  • the individual was a market maker
106
Q

What is the penalty for insider dealing?

A

The FCA can impose unlimited civil fines.

107
Q

Where is it set out that companies must keep “adequate accounting records”?

A

s 386 CA 2006.

108
Q

What are the consequences of failing to keep adequate accounts?

A

Criminal offence of breach of duty - every officer is liable and the maximum penalty is two years.

109
Q

How does CA 2006 s 391 define the accounting reference period?

A

The period of more than 6 months but not more than 18 months after incorporation, ending with its accounting reference date, followed by successive 12 month periods.

110
Q

What does s 414 require regarding annual accounts?

A

They must be approved by the board of directors.

111
Q

How does preparation of accounts differ for small or micro companies?

A

They can claim exemption from audit (s 477 CA)

112
Q

What is the time limit for filing accounts? (Hint: different for private v public)

A

s 442 CA:
Private - nine months from the end of the relevant accounting reference period
Public - 6 months after the end of the relevant accounting reference period.

113
Q

Which section of CA requires preparation of a directors’ report?

A

s 415 CA.

114
Q

What information must be contained within the directors’ report?

A
  • principal activities and review of the business
  • significant events in the company year
  • company activities in research and development
  • significant changes in the values of fixed assets and land
  • name and interests of directors
  • company share purchases
  • charitable and political contributions
  • employment of disabled persons
  • health and safety
  • employee development
115
Q

What part of the CA sets out the need to prepare a strategic report?

A

Chapter 4 A

116
Q

Which companies must prepare a strategic report?

A

All but small companies, who are exempt.

117
Q

Listed companies have additional requirements for annual reporting. Where is this requirement set out?

A

FCA Handbook DTR 4.1

118
Q

What additional information must a LISTED company’s strategic report contain?

A
  • description of company strategy
  • description of business model
  • breakdown of the number of persons of each sex who were directors of the company
119
Q

Which section CA requires listed companies to prepare a directors’ remuneration report?

A

CA S 420.

120
Q

What information must be included within half-yearly reports?

A
  • condensed financial statements
  • interim management report
  • responsibility statements
121
Q

How are auditors appointed?

A
  • by the directors any any time before the first AGM

- by the AGM until the end of the next AGM

122
Q

Who is disqualified from acting as an auditor?

A
  • employee of officer of the company
  • a partner or employee of a company officer
  • a person who is disqualified
123
Q

What are the three duties of the auditor? (3 duties)

A
  • report to the members on the accuracy of the accounts
  • to report on a private company giving assistance for the purchase of its own shares
  • to report on particulars of assets and liabilities, profits and dividends
124
Q

What rights do auditors have? (4 rights)

A
  • free access to books, accounts and vouchers
  • demand any relevant information from company officers
  • receive same notices as members
  • attend and speak on relevant matters at general meetings
125
Q

How may an auditor be removed before his retirement?

A

Ordinary resolution with special notice of 28 days

126
Q

In what ways may a company be dissolved?

A
  • striking off the register
  • cancellation of registration for illegal purpose
  • compromise or arrangement
  • take-overs
  • administration order under IA 1986
  • winding up under IA 1986
127
Q

What is the process for striking a company off the register?

A

CA S 1000:

  • registrar send a letter to a company he believes is not carrying out business
  • no reply in 1 month then notice intending to strike off is issues and published in the Gazette
  • 2 months notice after which company is struck off and dissolved
128
Q

Which section CA 2006 allows a voluntary striking off?

A

S 1003

129
Q

What was the only case where a company has been cancelled for illegal purpose?

A

Attorney-general v Lindi St Claire (Personal Services) Ltd (1980) - prostitute tried to create a limited company.

130
Q

What is the objective of an administration order ?

A

Either save the company as a going concern, or create the best outcome for creditors.

131
Q

When should s110 IA be used for a compromise arrangement?

A
  • during voluntary liquidation

- if the board of the companies are willing for a merger to take place

132
Q

When should s988 be used for a compromise arrangement?

A

When not all members or creditors agree (but at least 75% of them do).

133
Q

What are the 4 main types of takeover according to ICSA?

A

1 Purchase by formal agreement with shareholders
2 Purchase by buying individual blocks of shares
3 Purchase by public offer
4 Under the provisions of s 899 CA.

134
Q

What are the 3 functions of the Panel on Takeovers and Mergers?

A

1 Draft the takeover code
2 Interpret the takeover code
3 Investigate and enforce the takeover code

135
Q

How many principals and rules doe the Takeover Code have?

A

6 principles, 38 rules

136
Q

What are the 6 principles of the Takeover code?

A

1 All shareholders treated equally
2 Shareholders given sufficient time to make an informed decision
3 Board of the offeree company must act in the best interests of the company
4 False markets must not be created
5 An offeror must announce they have sufficient cash for a bid
6 An offeree company must not be hindered in the conduct of its affairs for longer than neccessary

137
Q

What is a “squeeze out” in reference to takeovers?

A

s 979 CA:
An offeror who has acquired 90% of shares may give note to the remaining shareholders that he wishes to acquire those shares. He is entitled and bound to aqcuire them.

138
Q

What is a “sellout” in relation to takeovers?

A

s 983 CA:
The holder of shares who has not accepted a purchase offer may require the offer to acquire the shares if the offerer has acquired 90% of shares already

139
Q

What is the basic procedure for an administration order?

A

1 Petition presented to court by company, directors or creditors
2 Administrative receiver appointed
3 Court satisfies itself that the company is unable to pay its debts as per s 123 CA

140
Q

What are the three aims of administration?

A

1 Resucing the company as a going concern
2 Achieving a better results for the company’s creditors than otherwise
3 Realising property in order to make a distribution to one or more preferential creditors.

141
Q

What are the two methods of winding up according to s 73 IA?

A

Voluntary

Winding up by the court

142
Q

What are the two types of voluntary winding up?

A

Members’

Creditors’

143
Q

When may a company be voluntarily wound up?

A
  • the article provide for winding up after a certain event

- the company passes a special resolution

144
Q

What is the significance of a statement of solvency in a winding up?

A

If statement of solvency has been made = members’ winding up

If no statement = creditors’ winding up.

145
Q

When may a company be wound up by the courts under s 122 IA?

A
  • the company passes a special resolution to that effect
  • a public company has no trading certificate within a year of registration
  • the company ceases trading for a year
  • the number of members in a public company is less than 2
  • the court believes it is just and equitable
146
Q

When is a company unable to pay its debts according to s 123 IA?

A
  • creditor of more than £750 has served notice
  • creditor has obtained judgement against company
  • it is proved to the court that the value of assets is less than liabilities
147
Q

What is a dormant company?

A

One that has no significant accounting transactions (s1169 ca)

148
Q

When may the Registrar restore a company to the register?

A

With a court order

149
Q

When may restoration of a company be ordered by the court?

A

When:

  • a person was not given a copy of the the company’s application to be struck off
  • breach of conditions of striking off application
  • for some reason it is just to do so.

Corporate Secretarial Practice (20 decks)

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