P5. Compliance Flashcards
Minimum filing requirements
Confirmation statement & financial statements
Comparing company types acronym
FLAPS
Comparing company types considerations (5)
Financial info public?
Limited liability?
Assessed for tax as co?
Profit making?
Shares public?
Which type of company is not for profit?
Limited by Guarantee
Which type of company has unlimited liability?
Private unlimited company
Which type of company does not make financial info public?
Private unlimited company
4 main types of company
Public company limited by shares
Private company limited by shares
Private company limited by guarantee
Private unlimited company
3 specialised company variants
Charitable companies
Community Interest Companies (CICs)
Right to Manage Companies (RTMs)
3 methods of incorporating company
Electronic software
Paper filing
Web incorporation service (only for Ltd cos adopting model arts)
4 areas of word or phrase in company name which require consent of secretary of state
Imply pre-eminence or a particular status or function
Imply connection with government
Represent regulated activities
Use could be offensive
4.5 necessities for incorporating
Memorandum of association
Articles of association
Form IN01
Name approval (if required)
Registration fee
Additional requirement for registering public company
2 directors and a cosec
What must public co obtain in addition to cert of incorp before trading
A trading certificate
How does a public co obtain a trading certificate
Deliver an application for borrowing certificate using form SH50, confirming that minimum share capital has been subscribed (£50k), and paid up at a minimum of 25% nominal value
What is required to re-register a private company as a public company
Special resolution, and copy of resolution and form RR01 to be delivered to the registrar within 15 days. Articles reviewed and amended as necessary
What is required to re-register a public company as a private company
Special resolution, and copy of resolution and form RR02 to be delivered to the registrar within 15 days. Articles reviewed and amended as necessary
What % of members (or number of members) are required to apply to court to cancel re-registration as private company
5% or 50
5 advantages to online filing of forms
Quicker
Cheaper
Lower rejection rates due to inbuilt checks and pre-population
Automatic confirmation of filing
Environmentally friendly
Criminal offences as stipulated by act (5)
Failure to file accounts on time
Failure to enter or update directors details in RoM on time
failure to file copy of arts following amendment
Failure to respond to request for confirmation that details on central register are correct
Failure to show RO and CRN on emails
Range of penalties for breach of CA
Fines to imprisonment
4 examples of corp gov reports to improve best practice - acronym
HESATIGD
4 examples of corp gov reports to improve best practice
Higgs Report
Effectiveness and rols of NEDs
Smith Report
Audit committees
Turnbull Report
Internal control
Greenbury Report
Directors remuneration
Current code on corp gov name and year
UK Corporate Governance Code (2018)
Which companies does UK CG Code apply to
Companies with a premium listing
5 main sections of of UK CG Code
Board Leadership and Company Purpose
Audit, Risk and Internal Control
Remuneration
Composition, Succession and Evaluation
Division of Responsibilities
How many sections and principles of UK CG Code
5 sections, 18 principles
On what basis does compliance with UK CG Code work
Comply or explain
On what basis does compliance with UK Stewardship Code work
Comply or explain
What was the aim of the FRC in establishing UK Stewardship Code
‘To enhance the quality of engagement between institutional investors and investee companies to help improve long-term returns to shareholders and efficient exercise of governance responsibilities by setting out good practice on engagement with investee companies’
What is the FRC?
Financial Reporting Council
What is meant by ‘comply or expain’
Companies departing from the Governance Code provisions must explain the reasons for non-compliance
What is a merger ‘by absorption’?
A situation where the undertaking, property and liabilities of one or more public companies are to be transferred to another existing public company
What is a merger ‘by formation’?
A situation where the undertakings, property and liabilities of two or more public companies are transferred to a newly incorporated company
What level of member approval is required for a merger/division
75% approval of each share class of each merging company
What is a division?
The undertaking, property and liabilities of the company are to be divided among and transferred to two or more companies each of which is either an existing public company or a newly incorporated company
Mergers and divisions - what must directors report to the members at convened meetings and the directors of other companies involved?
Any material changes to the property and liabilities of their company between the date the draft terms were approved and
the date of the members’ meeting(s)
4 main types of takeover transaction
Share sale agreement
Public purchase
Takeover offer
Scheme of arrangement or compromise
What is a share sale agreement?
Standard takeover transaction for private co’s - Formal agreement made with shareholders (typically won’t be so many shareholders). Pre-emption, drag along, tag along considerations
What is a public purchase?
Arrangement to purchase blocks of shares in target company, forming a basis on which to launch a bid for remaining shares
What is a scheme of arrangement or compromise?
Useful in instances where 100% takeover is desired, but difficult to reach 90%
Meeting convened under authority of court must receive 75% approval by members (or creditors if liquidation)
Which code impacts takeovers and mergers for public co’s
City Code on Takeovers and Mergers
What is a takeover offer?
Public offer to shareholders, making an offer to acquire shares on stated terms (cash or shares in offeror company)
When does a public takeover offer become unconditional (come into force)
When the minimum number of acceptances is reached (typically 75%, rarely less than 50%)
At what level of % voting rights does the City Code dictate that a takeover offer is compulsory?
30% - significance being that shareholders often stop at 29.9%
2 criteria for a takeover/merger being referred to CMA
Value of turnover in UK of enterprise being taken over exceeds £70 mil
Merger would result in creation or enhancement of at least 25% share of market
What are the ‘squeeze-out’ provisions?
Provisions in Act for offeror company to acquire remaining shares when holding exceeds 90%
What are the ‘sell-out’ provisions?
Provisions in Act for minority shareholders of company where offeror company has obtained 90% to exercise their right to be bought out on share terms
When are ‘sell-out’ provisions applicable?
Only if ‘squeeze-out’ provisions not activated
2 examples of compulsory acquisition
‘Squeeze-out’ provisions, ‘sell-out’ provisions
When might takeovers be exempt from stamp duty?
If UBO does not change
What is covered by Environmental in ESG? (4)
Climate change
Use of natural resources
Pollution
Sustainability
What is covered by Social in ESG? (4)
Corporate culture
Diversity
Stakeholder engagement
Community
What is covered by Governance in ESG? (5)
Leadership
Board composition
Audits
Shareholder rights
Implementation and review of existing policies
What is whistleblowing?
When employees make a compliant, in the public interest, about the company they work for. If they lose their job as a result, they can go to the employment tribunal
What does the Governance Code say on remuneration?
Quoted companies should adopt a remuneration policy, and remuneration committees should set the remuneration of executive directors
When does a company become insolvent?
When it is unable to pay its debts as they fall due
When is a company considered unable to pay its debts? (4)
It fails to comply with a statutory demand for a debt in excess of £750;
It fails to satisfy enforcement of a judgment debt;
The court is satisfied that the company is unable to pay its debts as they fall due; or
The court is satisfied that the liabilities of the company exceed its assets
When might an administrator be appointed?
When the directors realise that the company will become insolvent
When is a members’ voluntary winding up appropriate?
When the company is solvent, and the directors have prepared a statutory declaration stating as much
When is a creditors’ voluntary winding up appropriate?
When a declaration of solvency cannot be made
3 types of ‘winding up’ (liquidation)
Members’ voluntary winding up
Creditors’ voluntary winding up
Winding up by the court
When can a company be wound up by the court (4)
The company so resolves by special resolution;
A judgment creditor or a creditor petitions the court where an amount in excess of £750 has not been paid following written demand for payment (IA1986 s. 123);
It is just and equitable for the company to be wound up; or
The company fails to comply with certain statutory requirements, e.g. the minimum number of members
When should a report on director conduct be made to the Secretary of State
When it appears the conduct of a director is such to render them unfit to be concerned in the management of a limited company
What is the punishment if secretary of state agrees with report on director conduct
Disqualified from being director for 15 years
What is a phoenix company?
A company with a name so similar to that of an insolvent company, that an association is made
When might the registrar strike off a company?
When they believe it is defunct - due to non-filing
What can a company not have done in last 3 months in order to voluntarily strike off?
Changed name
Traded
Disposed of property or rights for value
Engaged in any activity other than to effect the dissolution
The assets of a company struck off pass to?
The Crown, Duchy of Lancaster or Duke of Cornwall
When can applications for administrative restoration be made?
Within 6 years
At any time if the purpose is to bring proceedings against the company for personal injury
Define dormant company
One that has had no significant accounting transactions as defined in CA2006 s. 1169 since the end of its previous financial year or, in the case of a newly incorporated company, since its incorporation
3 transactions disregarded re. dormant companies
Payment for shares by subscribers
Fees paid to Registrar
Civil penalties imposed by Registrar
5 main sections of UK CG code - acronym
BARCD
