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Flashcards in Legal Considerations on Inc. Deck (48):
1

Does a co. need two subscribers to form a company?

Only needs 1 - s7 CA 2006

2

When does a company become a legal entity?

On the date of incorporation as shown on certificate of incorporation issued by registrar of companies upon registration - s15(1) CA 2006

3

What does the certificate of incorporation state?

Date of incorporation - s15(2)(b) CA 2006

On this date the subscribers to the memorandum become a body corporate - s16(1) CA 2006

4

What does s51(1)-(2) CA 2006 mean?

If a person tries to enter into a contract or deed on behalf of a company that is not yet incorporated, that person will be personally liable on the contract or deed.

5

Who calls the relevant meeting?

For a board meeting: any director (or company secretary if authorised by a director) - Art 9 MA

For a General meeting: directors may call (s302 CA 2006) or shareholders may require the directors to call a general meeting (s303 CA 2006)

6

What kind of notice is required before the relevant meeting can be held?

Board meeting: reasonable notice (Brown v la Trinidad)

7

What period of notice is required for a general meeting?

At least 14 clear days - s307(1) and s360(1)
and (2) CA 2006

A general meeting can also be called at short notice.

8

What is required to call a shareholders meeting at short notice?

Requires consent from a majority of shareholders who hold majority of at least 90% in nominal value of shares (95% in public companies) from members who have the right to attend and vote at the meeting - s307(4)-(6) CA 2006

9

What is the quorum required for a board meeting?

Number can be fixed in articles, otherwise it cannot be less than 2 directors - Art 11(2) MA

10

What is the notice period for calling an annual GM for public companies?

At least 21 days ss 307(2), 360 CA)

11

What is the quorum for a shareholders meeting?

The number can be fixed in the articles but must be at least two members s.318(2) CA) , unless it is a single member company and then the quorum is one s.318(1) CA)

12

How voting is undertaken for a board meeting?

Voting is on show of hands - Art 7 MA

13

How voting is undertaken for a SH meeting?

voting is on show of hands, unless poll is
demanded under Art 42

14

What is the threshold required for board resolutions to be passed?

decided by a majority decision - Art 7 MA or a unanimous decision - Art 8 MA

15

What is the threshold required for SH resolutions to be passed?

4 possibilities:

1) Voting on a special resolution by show of hands: must be
passed by not less than 75% of those who attend the GM, and are entitled to vote, and do vote (i.e. 75% exactly would be enough) - s283(1) and s283(4) CA 2006

2) Voting on an ordinary resolution by show of hands: passed by simple majority, of those who attend the GM, and are entitled to vote, and do vote (i.e. +50%) - s282(1) and s282(3)

3) Voting on a special resolution on a poll: must be passed by members representing not less than 75% of the total voting rights (i.e. 75% exactly would be enough) - s283(5) CA 2006

4) Voting on an ordinary resolution on a poll: members representing simple majority of total voting rights (i.e. +50%) - s282(4) CA 2006

16

Describe common law concept of agency.

A company is not animate.

It needs someone to act for it (i.e. its directors).

In general, a person acting on behalf of another person is its agent.

Under this concept any act of the agent is deemed to be the act of the principal (for whom he acts) and so the actions of the directors are deemed to be actions of the company.

17

Which article of the MA gives directors power to run company?

Basic power contained in Art 3

Effect of Art 4 should also be considered - ultimate power to run the company rests with the shareholders

18

What are the two key limitations on a company director’s ability to do whatever they like in relation to the company

Directors are limited by:

1) Statutory duties outlined in ss170-179 CA 2006

2) The rules set out in the
company’s articles, ie. Model Articles, or amended articles.

19

What happens if a director breaches a duty?

Under s178 CA 2006, common law and equitable remedies will then apply - e.g. damages, restitution, etc

20

What happens if shareholders want to forgive the director for the breach?

Under s239 CA 2006 the shareholders can ratify a director’s breach by passing ordinary resolution.

However a director who is also a shareholder (or any ‘connected person’) cannot ratify their own breach - s239(4) CA 2006

21

To whom does a director owe his or her duties?

To the company - s170(1) CA 2006

22

Give an example of when it may be necessary for a matter to be approved by a resolution of the shareholders, and another example of a matter which can only be effected by the shareholders

Loans to directors require prior approval from the shareholders.

Only the shareholders can amend the articles of association.

23

What are the key restrictions/requirements when changing a private company's name?

Private company must have ‘ltd’ or ‘limited’ at the end of its name - s59 CA 2006

If name suggests connection with government, public or local authority, or if it contains sensitive word/expression, secretary of state’s approval required - ss54 and 55 CA 2006

Also, name cannot be same as another name appearing on registrar’s index of company names - s66 CA 2006

24

What are the key restrictions/requirements when changing a public company's name?

Public company must have ‘plc’ or ‘public limited company’ at the end of its name - s58 CA 2006. Furthermore the public company will have to put the new name on all its correspondence and in front of the premises where it conducts business - s82 CA 2006

If name suggests connection with government, public or local authority, or if it contains sensitive word/expression, secretary of state’s approval required - ss54 and 55 CA 2006

Also, name cannot be same as another name appearing on registrar’s index of company names - s66 CA 2006

25

Why could it be a good idea to set up a new subsidiary when undertaking a new potentially risky business venture?

If you form a subsidiary company then any losses and/or liabilities of the new business will be born by the subsidiary, not the group company

26

What is required to change a company's name?

Shareholders must effect change, by special resolution, or other means provided for in company’s articles - s77(1) CA 2006

27

How are new directors appointed? and who can appoint them?

Outgoing directors or shareholders can effect the change - Art 17(1) MA

The change can be effected by either a board resolution - Art 17(1)(b) MA, or by an ordinary resolution of the shareholders - Art 17(1)(a)

28

How are secretaries appointed? and who can appoint them?

Directors can appoint them - Art 3 MA

Precisely which directors can effect this change depends on when the new directors are appointed.

Secretary will be appointed by board resolution, although note there is no specific
requirement under CA 2006 or MA.

Note that private company not required to have a company secretary - s270(1) CA 2006

29

How can directors resign? and when does the resignation become effective? Are board and GM meetings required?

Outgoing directors will send a letter of resignation to effect this change - Art 18(f) MA.

It will be effective from date set out in letter, which will normally be handed over at board
meeting

No board/shareholder resolutions or meetings necessary

30

How are new chairpersons appointed?

Outgoing director who was chairman will cease to be chairman automatically upon resignation.

New directors vote on a new chairman - Art 12(1) MA by board resolution

31

How are subscriber shares transferred between companies?

1. New members will use a stock transfer form transfer to register shares into the registry. Change is only effective once registered.-s112(2) CA 2006

2. The transfer and register of the shares must be in accordance with the Stock Transfer Act 1963 - ss. 544 and 770 CA 2006

3. Usual to have a board meeting to approve the transfers.

4. New shareholders must be entered into the Register of Members.

5. Secretary will issue new share certificate and notify companies house using forms PSC02 &PSC07

NB directors have discretion to refuse transfer altogether under Art 26 MA

32

How is the registered office address changed?

Board gives notice to the registrar - s87(1) CA 2006

Board resolution to instruct secretary to fill in the required Companies House form (AD01)

33

How is the accounting reference date of a company changed?

Board gives notice to the registrar - s392(1) CA 2006

Board resolution to instruct secretary to fill in the required Companies House form (AA01)

34

How are auditors appointed?

Auditors are appointed by the directors any time before the first period for appointing auditors - s485(3) CA 2006

NB shareholders also have the ability to appoint auditors at times specified in s485(4) CA 2006 (e.g. where directors have failed to make an appointment under s485(3) CA 2006)

This is all effected by way of board resolution and board meeting.

35

What is procedure plan in terms of stages for the conversion of a shelf company?

BM1
GM
BM2
Post Meeting Matters

36

What happens in board meeting 1 when in terms of the procedure plan for conversion of a shelf company?

NQAV

Notice:

Any director of the company can call meeting- Art 9(1) MA. And notice should be reasonable according to what is usual for the company - Brown v La Trinidad.

Quorum:

2 directors under Art 11(2) MA.

Agenda:

To report on formation of co.

Appoint two new directors and new secretary to take effect immediately Art 17(1)(b) MA

Replace old chairman with new chairman Art 12.

To accept letters of resignations from old directors to take effect immediately art 18(f) MA

To recieve and approve transfer of subscriber shares and enter new shareholders into register of members immediately. s112(2) CA 2006 - NB if there is now only one shareholder, include statement that [name of the company] has only one member - s123(2)(a) CA 2006

To call GM on short notice to move a special resolution to change the company name - s77 (1) CA 2006

To approve form of notice of GM and the consent to short notice. Contents of the notice that will be sent to shareholders will include:

• i) Date, time and place of meeting - s311 CA 2006
• ii) Precise wording of special resolution - s283(6) CA 2006 and Re Moorgate Mercantile
• iii) A statement that a member may appoint a proxy - s325(1) CA 2006

Direct company secretary to give notice of the GM in accordance with s308 CA 2006. Copies also to be sent to the company’s auditors (if already appointed) - s502(2) CA 2006

Voting - board to vote on issues above. Must be by either majority decision (Art 7 MA) or a unanimous decision (Art 8 MA)

Direct company secretary to amend Register of Members: s112(2), s113(1) and s123(2) CA 2006 (register to be amended in meeting)

Notice of the GM and consent to short notice must now be given to the new shareholder [insert shareholder’s name]

Board meeting now adjourns for the notice and consent to be distributed and the GM to be held (NB if not using short notice procedure, the board meeting would close)

37

What happens in board meeting 2 when in terms of the procedure plan for conversion of a shelf company?

1) Meeting still needs to be quorate - with 2 directors present

2) Agenda:

• A) Report that special resolution was passed at the GM

• B) Change the registered office - s87(1) CA 2006

• C) Change the ARD - s392(1) CA 2006

• D) Appoint [new auditor’s name] as company auditors - s485(3) CA 2006

3) Report that the special resolution was passed to change the company name at the GM

4) Voting - board must vote by majority under Art 7 MA or unanimously under Art 8 on the following:

• A) Change the registered office
• B) Change the ARD to [insert new ARD date]
• C) Appoint [new auditor’s name] as company auditors

5) Direct company secretary to deal with all relevant documentation, minutes and to prepare the share certificate

6) Close board meeting

38

What forms need to be filled out in post meeting matters when in terms of the procedure plan for conversion of a shelf company?

• A) Form notifying change of name: Form NMO1

• Copy of special resolution to be sent to Registrar of Companies within 15 days - s30(1)
CA 2006 plus any applicable fee

• Certificate of incorporation on change of name to be received in due course and change of
name takes effect from date on which the certificate is issued - s81(1) CA 2006

• B) Forms notifying appointment of directors: Forms APO1

• Send to Registrar of Companies within 14 days - s167(1) CA 2006

• C) Forms notifying resignation of directors: Forms TMO1

• Send to Registrar of Companies within 14 days - s167(1) CA 2006

• D) Form notifying appointment of secretary: Form APO3

• Send to Registrar of Companies within 14 days - s276(1) CA 2006

• E) Form notifying change of registered office: Form ADO1 • Send to Registrar of Companies ASAP

• F) Form notifying change of accounting reference date: Form AAO1

• Send to Registrar of Companies ASAP
NB - if not using short notice procedure, send filings A, B, C and D AFTER BM1, so as not to miss the 14 day deadline

39

What needs to be done to company books in relations to the conversion of a shelf company?

A) Amend the Register of Directors to reflect the changes - s162(2) CA 2006

B) Complete the Register of Secretary to reflect the appointment - s275(2) CA 2006

40

What needs to be updated in the minutes during post meeting matters when converting a shelf company?

Direct company secretary to draw up minutes of BMs and GM and enter them into the company’s minute book - s248(1) and s355(1) CA 2006 respectively.

41

What other issues need to be updated in post meeting matters when converting a shelf company?

New share certificate to be issued and old share certificates cancelled

Company must also comply with s82 CA 2006 - requirement to disclose company name in
specified locations

42

Documents required when notifying name change:

Copy of special resolution must be sent to Registrar of Companies within 15 days - s30(1)

CA 2006 plus any applicable fee

Need to wait for certificate of incorporation for name to take effect from date on which the certificate is issued - s81(1) CA 2006

43

Forms notifying appointment of directors?

Forms APO1

Send to Registrar of Companies within 14 days - s167(1) CA 2006

44

Forms notifying resignation of directors?

Forms TMO1
Send to Registrar of Companies within 14 days - s167(1) CA 2006

45

Form notifying appointment of secretary

Form APO3

Send to Registrar of Companies within 14 days - s276(1) CA 2006

46

Form notifying change of registered office

Form ADO1

Send to Registrar of Companies ASAP

47

Form notifying change of accounting reference date:

Form AAO1

Send to Registrar of Companies ASAP

48

Steps required on exam when converting a shelf company.

1. read clients instructions page

2. identify the transfer note on procedure

3. examine the certificate of incorporation

4. read the proposed instructions from client

5. Then make a summary procedure chart by identifying:

-all the changes
-who can affect the change
-authority
-what type of resolution is required
-what type of meeting required to effect change

6. Then create a summary procedure plan using NQAV