Public Companies Flashcards
What type of company can become public?
A company limited by shares only
Is a public company a listed company automatically?
Only a public company which has been successful in gaining a listing of its shares and whose shares have been admitted to trading is referred to in practice as a ‘listed company’.
Definition of a public company
A company whose certificate of incorporation states that it is public.
Is there any difference between private/public company’s Memorandum of Association?
No. Instead, the registration form (IN01) includes a statement that the company should be public. If registration is successful, this is sufficient evidence that the company is registered as public.
What are the share capital requirements for public companies?
- The nominal value of the company’s allotted share capital must be at least £50,000.
- When a public company allots shares, it is under an obligation to ensure that at least 25% of the nominal value of each of the shares issued is paid on allotment.
Can public companies be single-member companies?
Yes, but they must appoint at least two directors and a secretary.
What is the principal advantage of forming a public company?
Ability to raise capital by offering shares or debentures to the public for cash or other consideration.
Requirement to offer shares to the public
A prospectus authorised by the FCA .
When is the trading certificate required?
Before the company can do any business or borrow money. The certificate is issued if the Registrar is satisfied that the company’s share capital is adequate.
What is the procedure to obtain a trading certificate?
A director or the company secretary filing a statement of compliance which states that the nominal value of the company’s allotted share capital is at least equal to the authorised minimum.
The company must also supply details of the amount paid up on the allotted share capital; preliminary expenses and details of who will meet them; any benefit paid to the company’s promoters.
What are the consequences of conducting business without a trading certificate?
The directors will be jointly and severally liable to indemnify the other parties to the transaction for any loss. Both the company and its officers will be liable to a fine and, if the company fails to obtain this certificate within one year of its registration, the court can wind the company up.
Can a public company accept ‘services’ as consideration for the allotment of shares?
No. However, a public company can allot shares for non-cash consideration, but it must take steps to satisfy itself that the value of the assets is appropriate by obtaining an expert’s valuation and report.
Can public companies disapply pre-emption rights on allotments?
A public company cannot make a general exclusion of the statutory pre-emption rights but it can exclude them by special resolution or through provisions in its Articles for SPECIFIED allotments.
Action on serious loss of capital
Directors are under an obligation to convene a general meeting if the company’s net assets are 50% or less of its called-up share capital (no other definitive action required).
Can loans to directors be made?
They require an ordinary resolution (same for all companies). However, only quasi-loans to, and credit transactions with, directors of public companies or of private companies associated with public companies need similar shareholders’ approval.
