Lecture 11 - Company Incorporation/ Constitution Flashcards Preview

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Flashcards in Lecture 11 - Company Incorporation/ Constitution Deck (26):
1

Promoters

Gets a business ready for incorporation and trading to get up and running

2

Promoter's liability

Generally personally liable for all pre-incorporation contracts unless agreed otherwise. (Usually will be person running firm after incorporation anyway)

3

Case for promoter/ incorporation

Royal Mail Estates v Maples Teesdale 2015 > promise to buy property before company incorporated. Court said promoter was liable as they signed.

4

Ways around promoter/ liability issue (2)

- Complete incorporation then enter into contracts
- Don't bother with promoter and buy ready-made company off shelf

5

How is company formed and incorporated?

Once formalities completed, Registrar of Companies at Companies House issues Certificate of Incorporation. Evidence company properly formed. Unique company number allocated.

6

Documents to send to Registrar of Companies (5)

- Memorandum of Association
- Articles of Association
- Details directors and registered office etc
- Formal document confirming legal formalities dealt with
- Payment necessary fees

7

Memorandum of Association before CA 2006 (5)

Include:
- Proposed company name and country of registered office
- Whether liability is limited
- Amount of nominal capital
- Objects of company (type business will be involved in)
- Signature of original subscriber shareholders (names + addresses)

8

Memorandum of Association after CA 2006 (3)

- Memorandum shorter and less important
- No need for objects clause
- No need state maximum amount nominal capital

9

Articles of Association features (4)

- Provide detailed set regulations on how company will operate.
- Form contract between company and members, and members themselves.
- Can be changed by 75% majority vote members - but must be made for good of company.
- Public document.

10

Table A =

Specimen set Articles of Association from Companies Act 1985, can be adapted in whole/ part. Applies by default if nothing else agreed by shareholders. For companies incorporated before CA 2006.

11

Model Articles =

New set Articles of Association for post CA 2006. More modern and reduce regulation.

12

Incorporation =

Creates separate legal entity from date of Certificate of Incorporation, evidence all formalities complied with.

13

Shelf company process (5)

- Complete necessary forms
- Change name company, directors, shareholders, registered office etc
- Give notice to Registrar
- Original directors resign
- Original subscriber shareholders transfer shares to whoever buys company

14

Shareholders Agreement =

Confidential binding contract to regulate variety issues between shareholders. Cannot be changed without unanimous consent all members.

15

Is conversion of company status possible?

Yes, but numerous formalities and complex tax considerations

16

Key difference between Memorandum and Articles of Association

M represents company and structure to outside world. Articles of Association govern internal workings and relationship of members.

17

Day to day control of a company =

> 50%

18

Restrictions on company name (7)

- Doesn't have to be trading name
- Must include Limited/ Ltd unless limited by guarantee
- Cannot be identical/ almost identical to name already registered
- Cannot denote illegality/ criminal activity
- Some specific words need special permission eg Bank
- Court can intervene if name should not been registered (Lindi St Clair case)
- Search for trademarks

19

CA 2006 provides **** to resolve company name disputes

Office of Company Name Adjudicator

20

Objects of the company under CA 2006

Company can undertake any kind of business it likes unless specific restriction in articles

21

Registered office

Must remain constant. Companies registered in England and Wales liable for UK tax

22

Quorum =

Minimum number of people present to make a meeting valid. Default = 2

23

Special articles

Alterations to Table A/ Model articles

24

Case for alteration of articles (2)

- Brown v British Abrasive Wheel Co 1919 > proposal to amend Articles to allow majority shareholders right buy shares of minority. Court held invalid.
- Sidebottom v Kershaw Lees and Co 1920 > alteration provided any member entering into competing business had to transfer shares to nominees for directors at fair price. Court upheld - for benefit of company.

25

Entrenched articles

Articles more difficult to alter/ require shareholders' vote more than usual 75%

26

Effect of Memorandum and Articles together

CA 2006 provides that they bind company and members if each has signed separate contract with each other and company