Nature of a Company Flashcards
Define the legal personality and the nature of a limited liability company as compared to other forms of business organizations such as partnerships, the office of Registrar of Companies and types of companies. Explain the legal personality and the nature of a limited liability company as compared to other forms of business organizations such as partnerships, the office of Registrar of Companies and types of companies.
Who issues shares in a company?
The company itself.
Shares are initially issued to shareholders who subscribe to the company’s constitution.
What is share capital?
The consideration used to pay for the shares.
It represents the money and assets acquired by the company through issuing shares.
What is loan capital?
Money provided to the company through loans.
This may be more significant than the money raised by issuing shares.
Who runs the day-to-day operations of a company?
Directors appointed by the shareholders.
Directors are usually from among the shareholders but not necessarily.
What legal status does a registered company have?
It is an incorporated association with its own legal personality.
This means it has its own legal rights and obligations separate from its owners.
Do shareholders have a direct interest in the company’s assets?
No, shareholders have no direct interest in the company’s assets.
All assets are owned legally and beneficially by the company.
What can happen if a person owns all the shares in a company?
They can still be convicted of stealing from the company.
This illustrates the separate legal personality of the company.
What governs companies in Malawi?
The Companies Act 2013 and case law.
Various Regulations made under the Act also apply.
What must examination answers be supported by?
Provisions of the Companies Act or decided cases.
These are collectively referred to as authorities.
Fill in the blank: A company is formed or _______ by a promoter.
incorporated
True or False: Shareholders control the company by voting in meetings.
True
What is a company?
A company is a form of business organization incorporated by a promoter, where shares are issued to shareholders who control the company through voting.
How does a company acquire money for its business?
Through share capital and loan capital.
Who owns the assets of a company?
The company itself, as it is a separate legal entity from its shareholders.
What is the role of the Registrar of Companies?
To administer the Companies Act, register companies, maintain records, enforce compliance, and conduct investigations.
What are the four types of companies recognized under the Companies Act 2013?
- Private Limited Liability Company 2. Public Limited Liability Company 3. Company Limited by Guarantee 4. State-Owned Company (SOC)
What is a private limited liability company?
A company with at least one and at most 50 members, and its securities cannot be offered to the public.
What is a one-person company?
A private company where the sole shareholder is also the sole director.
What is a public limited liability company?
A company with at least three members, whose securities can be publicly traded.
What is a company limited by guarantee?
A company where members agree to contribute a specified amount in case of winding up, usually for charities or non-profits.
What is a state-owned company (SOC)?
A company controlled by the government, also known as a parastatal.
What is a holding (parent) company?
A company that controls another company by holding more than 50% of shares or controlling its board.
What is a subsidiary company?
A company that is controlled by another company (the parent company).
What is a dormant company?
A company that has no significant accounting transactions.
What is a foreign company?
A company incorporated outside Malawi but operating or doing business in Malawi.
What is the main difference between a company and a partnership?
A company has a separate legal personality from its owners, while a partnership does not.
How are partnerships governed in Malawi?
By the Partnership Act 1969.
What is the liability of partners in a partnership?
Partners have unlimited liability and are jointly and severally liable for the partnership’s debts.
What is incorporation?
The process by which a company is legally registered, giving it a separate legal identity.
What is perpetual succession?
The continued existence of a company despite changes in shareholders.
What is the importance of the case Salomon v Salomon (1897)?
It established the principle that a company has a separate legal personality from its owners.
