June 2023 Exam Flashcards
What is an “off the shelf” company? Explain the advantages and disadvantages of such a company?
(1) An off the shelf company is one which has been incorporated but left dormant or “on the shelf” until it is purchased
(1) Such companies are usually created by incorporation agents or company formation agents
(1) The advantage of purchasing such a company is that the promoter does not need to incorporate the company
(1) This can be useful if the promoter lacks relevant knowledge or wishes to avoid the time, effort or costs of incorporation
(1) The main disadvantage is that the company will not be tailored to the needs of the promoter
(1) The promoter may need to change the company name, articles, share structure, etc.
(1) The confirmation statement in a shelf company will need to be filed sooner than if the company were newly incorporated.
Explain the difference between a “quoted” company and a “listed” company.
(1) The FCA Handbook (1) defines a listed company as a company with a class of its securities listed on the UK official list.
(1) Section 385 of the CA 2006 states that a quoted company is a company whose share capital:
- (1) has been included on the (UK) official list
- (1) is officially listed in an EEA state; or
- (1) is admitted to dealing on the NYSE or NASDAQ.
List five types of companies that can be incorporated under the Companies Act 2006.
- (1) A public company limited by shares
- (1) A private company limited by shares
- (1) A private company limited by guarantee
- (1) A private unlimited company without a share capital
- (1) A private unlimited company with a share capital
Section 542(1) of the CA 2006 provides that shares in a limited company must each have a nominal value. Explain what the “nominal value” is and why shares are generally required to have a nominal value.
(1) The nominal value is a fixed value which is attached to the share.
(1) The nominal value is not always the same as the price of the share (i.e. the nominal value may not reflect the share’s value).
(1) Shares are often allotted for more than their nominal value, with the excess being known as the share premium.
(1) The nominal value represents the minimum value the share can be allotted for.
(1) Nominal value helps determine how much a shareholder will be required to contribute in the event of the company’s liquidation.
(1) If the shareholder has paid the nominal value, they will not be required to contribute any more in the event of the company’s liquidation.
(1) According to s.542(2) CA 2006, failure to fix a nominal value renders the allotment void.
Who has the right to inspect a company’s register of members? Explain the procedure which must be followed.
(1) Any member has the right to inspect the register of members free of charge.
(1) Any other person may inspect the register on payment of a fee.
(1) The person wishing to inspect the register must send a request to the company (1) stating certain information including their name and address and their reason for inspecting the register.
(1) The company must generally comply with the request within five working days.
(1) Alternatively, the company may apply to the court for an order refusing the request on the ground that it was not made for a proper purpose.
(1) If the court makes such an order, then the company must not comply with the request.
