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Business Law Practice > Unit 1 > Flashcards

Unit 1 Flashcards

1
Q

To incorporate a company what are the minimum documents required?

A

Form IN01 and the memorandum of association submitted to Companies House with the fee

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2
Q

When does an incorporated company come into existence?

A

The company comes into existence upon the certificate of incorporation being issued.

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3
Q

What must the certificate of incorporation state under s 15 CA 2006?

A
  • The name and registered number of the company
  • The date of incorporation
  • Whether it is a limited or unlimited company (if it is limited, it must state whether it is limited by shares or by guarantee)
  • Whether it is a private or public company

-Whether the company’s registered office is situated in England and Wales, Scotland or NI

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4
Q

What does the certificate of incorporation provide?

A

Conclusive evidence that the requirements of the CA 2006 as to registration have been complied with and that the company is registered under CA 2006.

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5
Q

What is the effect of a pre-incorporation contract?

A

It remains valid both prior and post incorporation and can be enforced by both parties.

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6
Q

If the application to incorporate was made by post what must a company do in terms of HMRC / corporation tax?

A

Make a separate application to HMRC within 3 months of starting to do business for the company to be registered to for corporation tax.

Note – Not necessary for online applications which are registered automatically.

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7
Q

What are the restrictions on the required ending of company names?

A
  • Private companies = must end in Limited or Ltd.
  • If the company was registered in Wales its name can end in cyfyngedig or cyf instead of the English.
  • Public companies must end in Plc or public limited company.
  • Welsh eequivalend is cwmni cyfngedig cyhoeddus or ccc.
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8
Q

Can a company name be the same as an existing company?

A

No. A company’s name can be considered the same even if they are not identical.

E.g., ‘£’ is the same as ‘pound’ ‘easy electrics for you limited’ is the same as ‘EZ electrix 4 u limited’.

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9
Q

What are the rules on prohibited names?

A
  • Company cannot use offensive names (e.g., terrorist groups / swear words)
  • Approval of secretary of state is needed to register a company which suggests a connection with a government department or authority.
  • Name cannot exceed 160 characters, including spaces.
  • Name cannot suggest connection with the Monarchy.
  • Words which suggest geographical areas like ‘British’ or denote regulated professions (e.g., dentistry) must be approved by the Secretary of State.
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10
Q

What is the difference between a trading name and a company name?

A

A company can have a different trading name which is set up after incorporation. Trading names do not need to be registered and do not appear on form IN01.

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11
Q

What is required to change the registered office address?

A
  • Board resolution
  • File form AD01 at Companies House
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12
Q

When is the registered office changed?

A
  • When the registrar changes it.
  • Documents can still be sent to the previous registered office for 14 days after the change and they will still be deemed as sent.
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13
Q

Where are important company documents kept?

A
  • Registered office.
  • Can elect to keep these records at Companies House.
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14
Q

For first directors (i.e., directors on incorporation) what is required on form IN01?

A
  • Name
  • DOB
  • Directors’ service address
  • Directors’ residential address
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15
Q

What must a director show if they want their addresses to be kept private?

A
  • Risk of violence or intimidation.
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16
Q

Do private companies require a company secretary?

A

No. Just public companies are required to have a company secretary.

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17
Q

To register a company secretary on form IN01 on incorporation, what details are required?

A
  • Name
  • Service address
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18
Q

Form IN01 – What details of shareholders are required on incorporation?

A
  • They names
  • Addresses
  • Details of their shareholdings
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19
Q

How many shareholders are required for incorporation?

A
  • One. Common to have 2 but only 1 is required.
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20
Q

Form IN01 – What does the statement of capital include?

A
  • Number of shares of each type the company has
  • Shares total nominal value (i.e., share capital)
  • Names and addresses of all shareholders.
  • Prescribed particulars – includes what share of dividends they receive, whether they can exchange their shares for money; whether they can vote on certain company matters; how many votes their shares entitles them to.
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21
Q

If a share is sold at nominal value, what is this called?

A

Sold at par value.

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22
Q

What is the company’s constitution formed of?

A
  • The memorandum of association (“the articles”)
  • Certificate of incorporation
  • Current statement of capital
  • Copies of court orders
  • Legislation altering the company’s constitution
  • Shareholder’s resolutions affecting the constitution
  • Agreements involving shareholders.

(M, A, L, C, C, C, S)

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23
Q

What is the memorandum of association formed of?

A
  • Statement that the subscribers wish to form a company and agree to become shareholder & take at least one share each.
  • Signed by subscribers.
  • In the form as set out in the Companies (Registration) Regulations 2008.
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24
Q

If a company was incorporated before Oct 2009 what will they have instead of Model Articles?

A
  • Table A articles.
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25
Q

What are the requirements to amend the articles?

A
  • Special resolution (75% of shareholders)
  • File a copy of amended articles at Companies House within 15 days of the amended articles taking effect.
  • File a copy of the special resolution to amend the articles at Companies House within 15 days after it has been passed.
26
Q

What is a PSC?

A

Person of significant control.

A person / corporate body which holds:

  • More than 25% of the shares in the company; or
  • More than 25% of voting rights;
  • The right to appoint or remove a majority of the board of directors in the company.
27
Q

What is a trading certificate?

A

After receiving a certificate of incorporation, a public company must obtain a trading certificate.

  • Trading certificate = proof that the company can trade & borrow and has met the allotted share capital requirements.
  • Application for trading certificate made to Companies House on form SH50.
28
Q

What is required to convert a private company to a public company?

A
  • Special resolution for:
  1. Approving re-registration of the company
  2. Altering company’s name for a PLC
  3. Altering articles so they are suitable for a public company
  • Company must have satisfied the share capital requirements.
  • Trading certificate not required for the conversion.
29
Q

What documents are required for the application for re-registration at Companies House when converting from private company to public company?

A
  • Special resolution
  • Form RR01
  • Fee for re-registration
    -Revised Articles
  • Balance sheet and written statement from the company’s auditors and valuation report on any shares which have been allotted for non-cash consideration between date of balance sheet and passing of the special resolution.
30
Q

What are the rules of using a company seal?

A
  • Company may adopt a seal by board resolution.
  • Seal can be used to execute a document only where it is signed by at least 1 authorised person in the presence of a witness who attests the signature.
31
Q

What is required to change a company’s name?

A
  • Special resolution
  • File form NM01 with a copy of special resolution & fee.
  • Companies House then provides a new certificate of incorporation and this is when the company’s name is officially changed.
32
Q

What are the rules on accounting reference dates?

A
  • Accounting reference date = The last day of the month in which the company was incorporated.
  • To change this, a board resolution is required along with form AA01.
  • Cannot be extended so that the period lasts more than 18 months.
33
Q

Register of Members – What are the rules?

A
  • Every company must keep a register of members (s 113 CA 2006).
  • Alternatively, it may elect to keep the information on the central register at Companies House instead (s 128B).
  • All shareholders have the right to have their name on the register of members (s 113 CA 2006) and a company must register the transfer (i.e., enter the new shareholder on the register of members or reflect and existing shareholder’s increased number of shares) as soon as practicable and at least within two months of the allotment (s 554 CA 2006).
  • If the company has elected to keep the information at Companies House, it must instead notify the registrar of the share registration as soon as practicable or at least within two months.
  • If the company has only one member, there must be a statement to that effect on the register of members (s 123 CA 2006).
  • It is a criminal offence if the register of members is incomplete or incorrect (s 113) including where there is no reference to the fact that it is a one-member company (s 123).
  • Where the company keeps its register of members at its registered office or SAIL, it must be available for inspection to shareholders free of charge and to anyone else for a fee (s 116 CA 2006).
  • Failure to allow someone to inspect the register under s 113 is a criminal offence (s 118 CA 2006).
34
Q

What rules are there on share certificates?

A
  • All shareholders have the right to receive a share certificate
  • Companies must issue share certificates within 2 months of the allotment of shares or within 2 months of a transfer of shares being lodged with the company. If the directors exercise their discretion not to, under the model articles, they must notify them within 2 moths.
35
Q

PSC Register

A
  • All private companies and non-traded public companies must keep a register of PSC.
  • Any shareholder who owns more than 25% of the shares or controls more than 25% of the voting rights must appear on the PSC register.
  • Even where there are no PSCs, companies must keep a PSC register.
36
Q

Changing the PSC register – What forms are required?

A

PSC01 – must be completed by the individual who is the PSC

PSC02 – must be completed if they are a ‘relevant legal entity’ PSC

PSC04 – if a PSC’s details change they must use this form

PSC05 – if a ‘relevant legal entity’ PSC’s details change, they must use this form

PSC07 – If they are ceasing to be a PSC

37
Q

What is the deadline for filing the PSC forms?

A
  • 14 days from the date the company made the change in its PSC register.
38
Q

What is a preference share?

A
  • Give the holder the right to preferential claims on payment of dividend.
  • ## I.e., preference shareholders will be paid before ordinary shareholders.
  • Preferential shareholders often forego voting rights in order to get fixed dividend rights
39
Q

What is a cumulative preference share?

A

Cumulative preference shareholders have to be paid any missed dividends from previous financial years as well as the current financial year’s dividend, as long as there are profits to pay the dividends.

40
Q

What is a non-cumulative preference share?

A
  • If a dividend is not paid in a particular year, the shareholder loses the right to that years’ dividend and does not have the right to receive it in the future.
41
Q

What is a participating shareholder?

A
  • Participating shareholders have the right to receive profits or assets in addition to their other preference share rights.
42
Q

Are sole traders personally liable for breaches of contract?

A

Yes.

43
Q

What are the three types of partnerships?

A
  1. Ordinary Partnerships
  2. Limited Partnerships
  3. Limited Liability Partnerships.
44
Q

What is the liability in an ordinary partnership?

A

– All partners in a firm are jointlyand severally liable for the debts and obligations of the firm.

– Partners are jointly and severally liable.

– Partner is only liable for things they did as a partner. Will not be liable for anything they did before becoming a partner.

– Under the PA all partners must contribute equally to any losses made.

45
Q

Limited partnerships – what is the difference between a general partner and a limited partner?

A

General partner = manage the firm and are liable for all debts and obligations.

Limited partner = required to contribute capital on becoming a partner and their liability is limited to the amount contributed. Cannot bind the firm or take part in the management of the firm. If they do so, they become liable for any debts or obligations incurred during the period of their management.

46
Q

Are limited partners able to withdraw their capital during the lifetime of the partnership?

A

No. If they do so, they will be liable for the firm’s debts up to the amount withdrawn.

47
Q

How many partners are required in a limited partnership?

A

1 general and 1 limited partner.

48
Q

Do limited partnerships need to be registered at companies house?

A

Yes. If the partnership is not registered, the limited partners lose their limited liability and become liable for all the firm’s debts.

49
Q

What is the key difference between an LLP and a limited and ordinary partnership?

A

LLPs are incorporated entities with separate legal personality.

  • Liability for the LLP’s debts, negligence of its members and other liabilities falls on the LLP itself.
50
Q

What is necessary for incorporation of an LLP?

A
  • 2 designated members
  • Notifying a registered address
51
Q

What is the liability for a shareholder for a private company limited by shares?

A
  • Liability of its members is limited to the amount UNPAID on their shares.
  • If they have fully paid their shares they have no liability.
52
Q

When can the corporate veil be pierced?

A
  • When a person is under an existing legal obligation which he deliberately evades, or whose enforcement he deliberately frustrates, by interposing a company under his control.
  • When the company is a sham.
53
Q

When will the courts look behind the corporate veil as opposed to piercing it?

A

When companies are being used to conceal the identity of those involved in them. The courts will look behind the corporate veil to discover what is being concealed.

54
Q

Can companies enter into employment contracts in their own right?

A

Yes.

55
Q

What is the key difference between private / public company?

A

public = Can sell shares to the public

private = cannot.

56
Q

What is a listed company?

A

A public company which is on the official list (i.e., on the stock market for shares to be bought by public)

57
Q

What is required to incorporate an LLP?

A

Form LL IN01

Appropriate fee

58
Q

Is an LLP a world-recognised business medium?

A

No

59
Q

Under an LLP, what is the liability of the limited partner?

A

Liable only for the amount of money they invest.

60
Q
A

Business Law Practice (10 decks)

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