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Flashcards in Companies: The consequences of incorporation Deck (21):

Can an LLP create floating charges, sue and be sued?



What is the veil of incorporation?

How the company is a separate legal 'person' to its shareholders


What dies the veil of incorporation mean for companies?

- can enter into contracts, sue and be sued in its own name
- owns property in its own name
- has perpetual succession
- separation of management and control
- members have limited liability


If a company fails, the liability of its shareholders are limited to...

- amount unpaid on their share capital, or
- any amount they have agreed to contribute


Why might the veil of incorporation be lifted?

- groups of companies where subsidiary acts as agent to parent
- to reveal national identity (war)
- sham companies
- quasi-partnerships (registered as business but run as partnership)


What are statutory examples to lift the veil?

- disqualified directors still working
- fraudulent trading
- wrongful trading


What are the 2 types of company?

- public
- private


What is the main characteristic of a public company?

- limited by shares


What are the 2 types of private company?

- unlimited
- limited - by shares or guarantee


What are the main characteristics of a plc?

- at least 2 members
- minimum share capital of £50k
- shares must be at least 25% paid up
- must have trading certificate pre trade
- company secretary required
- file accounts within 6 months and must be audited


What are the main characteristics of a ltd?

- can have 1 member
- company secretary optional
- file accounts within 9 months


What documents must be submitted in order to form a company?

- memo of association
- application
- articles
- statement of capital and initial shareholdings
- statement of guarantee
- statement of proposed officers
- statement of compliance

Registrar checks docs and issues certificate of incorporation - company exists from here.


What must be included in the application part of company formation?

- proposed name of company
- liability of members
- private or public
- details and address of office


What must be included in the statement of capital and initial shareholdings part of company formation?

- number of shares
- their aggregate nominal value
- details of each class of share
- how much has been paid up on each share


Pre-incorporated contracts...

- company not liable, promoter is
- company cannot ratify
- avoidance: postponing finalisation, buying off-shelf company, entering agreement of novation
- promoter owes fiduciary duty to company


Who enforces the names of companies?

Secretary of state


Describe the articles of association

- company can use model articles or make their own
- binds company to members
- outsiders cannot enforce article rights
- can be altered by special resolution (75% majority)
- can be entrenched so all members have to agree


What does the annual return contain?

- address of registered office
- type of company
- principal of business activities
- details of officers
- details of issued shares and their holders
- details of private company elections to dispense with holding AGMs/laying accounts


What distinguishes different sized companies in terms of turnover, balance sheet assets and number of employees?

At least two of:
Micro: <=632k, <=316k, <=10
Small: <=6.5m, <=3.26m, <=50
Medium: <=25.9m, <=12.9m, <=250


What are exempt from audit requirements?

- small companies
- dormant companies
- non-profit companies


Company secretary...

- required for plcs
- chief admin officer
- bind companies in admin contracts