Formation of a Company Flashcards
(8 cards)
What happens when a company is incorporated under the Companies Act 2006?
A. The company becomes a legal entity only when it begins trading.
B. The company becomes a legal entity once the directors sign a formal agreement.
C. The company becomes a legal entity when the Certificate of Incorporation is issued.
D. The company becomes a legal entity when all shareholders pay for their shares.
C. The company becomes a legal entity when the Certificate of Incorporation is issued.
Explanation:
Under section 16(3) CA 2006, a company is legally formed on the date stated in the Certificate of Incorporation issued by Companies House. This means the company can enter contracts, own property, and sue or be sued.
What is required to incorporate a company from scratch under the Companies Act 2006?
A. A Memorandum of Association, Articles of Association (if not using Model Articles), Form IN01, and the incorporation fee.
B. A Memorandum of Association, a shareholders’ agreement, and the incorporation fee.
C. A Memorandum of Association, a full business plan, and Form IN01.
D. A shareholders’ agreement, Form IN01, and the incorporation fee.
A. A Memorandum of Association, Articles of Association (if not using Model Articles), Form IN01, and the incorporation fee.
Explanation:
Section 9 CA 2006 outlines that a company must submit:
A Memorandum of Association
Articles of Association (or use Model Articles)
Form IN01, which contains key details (company name, registered office, share structure, officers, lawful purpose)
Registration fee
Which of the following is true about a company’s name under the Companies Act 2006?
A. The company’s name must include the surname of at least one director.
B. The company’s name must end with “Ltd” or “Limited” for private companies.
C. A company may use any name, even if it is identical to another registered company’s name.
D. A company name must include “UK” if the business is operating in the United Kingdom.
B. The company’s name must end with “Ltd” or “Limited” for private companies.
Explanation:
Under section 59 CA 2006, a private limited company must include “Limited” (or “Ltd”) in its name unless it qualifies for an exemption (e.g., charities). Additionally, section 66 CA 2006 prohibits companies from using names that are the same as an existing registered company.
Your client wants to register a company but has not yet drafted Articles of Association. What will happen if they proceed with registration?
A. The application will be rejected until the Articles of Association are submitted.
B. Companies House will issue a temporary set of Articles that expire after 6 months.
C. The company will automatically adopt the Model Articles as its Articles of Association.
D. The company will be allowed to operate without any Articles of Association.
C. The company will automatically adopt the Model Articles as its Articles of Association.
Explanation:
Under section 20(1) CA 2006, if a company does not submit Articles of Association, the default Model Articles prescribed by the Secretary of State will apply. These regulate company management, director powers, and shareholder rights.
A businessperson signs a contract on behalf of a company before it is incorporated. What is the legal effect of this contract under section 51 CA 2006?
A. The contract is binding on the company once it is incorporated.
B. The contract is automatically invalid.
C. The person who signed the contract is personally liable unless the contract is novated.
D. The company can ratify the contract once it is incorporated.
C. The person who signed the contract is personally liable unless the contract is novated.
Explanation:
Under section 51 CA 2006, a contract made before incorporation does not bind the company. Instead, the person who acted on behalf of the company is personally liable, unless the contract is novated (i.e., replaced by a new contract with the company post-incorporation).
Which of the following is NOT a valid requirement for incorporating a company under the Companies Act 2006?
A. The company must have at least one shareholder.
B. The company must have a minimum of two directors.
C. The company must have a registered office in the UK.
D. The company must submit a statement of compliance to Companies House.
B. The company must have a minimum of two directors.
Explanation:
Under section 154 CA 2006, a private company only requires one director. However, public companies require at least two directors. Every company must also have at least one shareholder, a registered office, and file a statement of compliance.
What happens if a company wants to change its name after incorporation?
A. The company must submit a court application to change its name.
B. The company can change its name by special resolution or any other method provided in its Articles.
C. The company cannot change its name once incorporated.
D. The company can only change its name if it has been in operation for at least 12 months.
B. The company can change its name by special resolution or any other method provided in its Articles.
Explanation:
Under section 77(1) CA 2006, a company’s name can be changed:
By a special resolution of the shareholders
Or by a method set out in its Articles of Association
Once approved, Companies House must issue a new Certificate of Incorporation on Change of Name for the change to take effect.
A business purchases a shelf company and wants to make changes. Which of the following steps is NOT necessary?
A. Transferring the shares to the new owners.
B. Changing the registered office address.
C. Filing a fresh Certificate of Incorporation.
D. Replacing the existing directors with the new owners.
C. Filing a fresh Certificate of Incorporation.
Explanation:
A Certificate of Incorporation is issued only when the company is first incorporated. If a shelf company is acquired, the buyer must change directors, update shareholder details, and amend the registered office, but no new Certificate of Incorporation is required.
