November 2022 Exam Flashcards
Explain the circumstances under which a person will be considered to have significant control over a company for the purpose of the Register of People with Significant Control.
(1) Schedule 1A, Pt 1 of CA 2006 provides that a person will have significant control over a company if:
(1) They hold more than 25% of the company’s shares
(1) They have more than 25% of the company’s voting rights
(1) They have the right to appoint or remove a majority of the company’s directors
(1) They have the right to exercise, or they actually exercise, significant control or influence over the company
(1) The trustees of a trust or members of a firm which is not a legal person meet any of the conditions above, or would do if they were individuals, and have the right to exercise or actually exercise significant influence or control over the activities of the trust or firm.
Explain who has the power to call a general meeting.
(1) A general meeting can be called by the Board of Directors
(1) Members representing 5% of the company’s paid-up share capital or (1) 5% of the voting rights if the company does not have a share capital can require the directors to call a general meeting.
(1) The court can call a general meeting (1) if it is impractical to call a meeting or conduct a meeting in the manner prescribed by CA 2006 or the articles
(1) A resigning auditor can call on the directors to call a general meeting (1) for the purposes of receiving and considering the auditor’s statement of the circumstances surrounding their resignation.
Explain the ways in which a person may cease to be a member of a company.
(1) Death of the member
(1) Transfer or gift of shares
(1) Transmission of shares
(1) Forfeiture or surrender of shares
(1) Where a contract to sell shares to the member is rescinded or declared void
(1) Where the articles specify that membership should terminate.
(1) The member is declared bankrupt and their shares are re-registered in the name of their trustee in bankruptcy
Section 658(1) of the Companies Act 2006 establishes the general rule that a company may not acquire its own shares. Explain the justifications for this prohibition.
(1) Purchase of own shares amounts to a return of capital to shareholders (1) which is generally prohibited under the capital maintenance regime.
(1) A return of capital to shareholders in this way is generally prohibited in order to protect creditors by ensuring that share capital is not unduly reduced.
(1) Acquisition of shares to reduce the company’s share capital would allow a company to avoid the legal procedures set out in the CA 2006. (1) A minimum level of capital is generally needed to allow the company to operate successfully and continue trading.
(1) A company could purchase its own shares in order to manipulate its share price.
Explain which persons are not eligible to act as, or be appointed as, a director of a company.
(1) A person under the age of 16
(1) The company’s statutory auditor
(1) An undischarged bankrupt person cannot act as a director without the leave of court
(1) A person subject to a disqualification order, without the leave of the court
(1) When s. 156A CA 2006 comes into force, and subject to any exceptions, a director who is not a natural person
(1) The company’s articles can specify additional persons who are not eligible to be appointed as a director.
