Nature and Formation of Companies

Question 1

What is a private limited company?

Answer 1

A company whose shares are not publicly traded and whose shareholder’s personal liability is limited to what they agreed to pay for their shares

Question 2

What is the minimum nominal share capital of a public limited company?

Answer 2

£50,000

Question 3

What is the name of those who go about arranging to bring a company into existence?

Answer 3

Promoters

Question 4

Promoters are ________ ______ for pre-incorporation contracts

Answer 4

personally liable

Question 5

How long do promoters remain personally liable for pre-incorporation contracts?

Answer 5

Until a novation is put in place for the promoter to be substituted for the company under the agreement between the promoter and third party

Question 6

What is a shelf company and what are they commonly used for?

Answer 6

A company that has already been registered but never traded. They allow a promoter to set up a corporation quickly

Question 7

What two things must a promoter file to Registrar at Companies House for a company to become incorporated?

Answer 7

1. Memorandum of association
2. Application for Registration

Question 8

A document that must be submitted to the Registrar of Companies by the person(s) wishing to set up a new company is known as a….

Answer 8

memorandum of association

Question 9

Can you name any of the 9 things that an application for registration to Companies House should include?

(Initials: P.R.D.L.C.P.P.C.R)

Answer 9

1. Proposed company name
2. Registered office
3. Details of company’s business
4. Limited by shares or guarantees
5. Capital and initial shareholders
6. Proposed officers/directors
7. Persons with significant control
8. Compliance with CA 2006
9. Relevant Fee

Question 10

What are 3 key features of a proposed company name?

Answer 10

1. Can’t be the same as another company or be offensive
2. Needs to end in Limited/Ltd or PLC/etc.
3. Can’t suggest an unapproved connection to government

Question 11

What two key things will a statement of capital and initial shareholdings include?

Answer 11

1. Total number of shares
2. Aggregate nominal value of shares

Question 12

At which point does a company come into existence?

Answer 12

On the date specified on the Certificate of Incorporation

Question 13

Every company is required to have ________ __ _______ which prescribe the internal workings of the company. If a company don’t submit bespoke ones, the ____ ______ will apply unamended

Answer 13

Articles of Association, Model Articles

Question 14

The Model Articles allow companies to pursue any _______ and to carry on business __ ___ ____

Answer 14

objective, of any kind

Question 15

Shareholder agreements are generally binding and enforceable by all who ____ ____

Answer 15

sign them

Question 16

What type of vote is required to amend a Company’s articles?

Answer 16

Special resolution

Question 17

What does it mean when shareholders entrench specific articles?

Answer 17

To amend the articles, the company must comply with additional conditions beyond the 75% approval

Question 18

Is an amendment that adversely affects minority shareholders a sufficient ground to object to alteration of articles?

Answer 18

No - Not if the alteration was made in good faith in the interests of the company

Question 19

The veil of incorporation will only be lifted/pierced in very limited circumstances, if the company form is being used to do which two things?

Answer 19

1. Carry out a fraud; or
2. Avoid existing legal obligations