Limited Companies

Question 1

What is a company?

Answer 1

An artificial legal person that a business may run.

Question 2

What is the process of incorporating a company?

Answer 2

Involves producing documents and registering with Companies House.

Question 3

What is a Shelf Company?

Answer 3

A company that has already been set up, often by a solicitor or a company formation agent.

Question 4

What forms and documents are required for incorporating a new company?

Answer 4

• Form IN01
• Memorandum of association
• Articles of association
• Requisite fee

Question 5

What is the minimum number of directors required for a private company?

Answer 5

At least 1 director.

Question 6

What is the minimum number of directors required for a public company?

Answer 6

At least 2 directors, both aged 16 or older.

Question 7

What is the fiduciary duty of directors?

Answer 7

To act in the best interest of the company.

Question 8

What sections of law outline directors’ statutory general duties?

Answer 8

Sections 170-180.

Question 9

What is Section 171 about?

Answer 9

Duty to act in accordance with the company’s constitution and exercise powers properly.

Question 10

What does Section 172 require from directors?

Answer 10

To promote the success of the company and the benefit of the members.

Question 11

What is the duty of directors under Section 173?

Answer 11

To exercise independent judgment.

Question 12

What is the standard of care required from directors according to Section 174?

Answer 12

That of a reasonably diligent person.

Question 13

What does Section 175 require directors to avoid?

Answer 13

Conflicts of interest.

Question 14

What is prohibited under Section 176?

Answer 14

Accepting benefits from third parties in relation to their role as directors.

Question 15

What must directors declare according to Section 177?

Answer 15

Interest in a proposed transaction with the company.

Question 16

Define Shadow Director.

Answer 16

A person not formally appointed as a director but who exercises significant influence over the company.

Question 17

Define De Facto Director.

Answer 17

A person who performs the role of a director without official appointment.

Question 18

What is required for a director’s service contract exceeding 2 years?

Answer 18

Approval by shareholders.

Question 19

What is a substantial property transaction?

Answer 19

Acquisition or disposal of non-cash assets valued above £100,000 or more than 10% of the company’s net asset value.

Question 20

What is the process for removing a director by shareholders?

Answer 20

By Ordinary Resolution with at least 28 days’ notice.

Question 21

What must be done following the removal of a director?

Answer 21

Update the Register of Directors and file Forms TM01 or TM02 within 14 days.

Question 22

What is required for a proposed resolution to remove a director?

Answer 22

28 days’ notice.

Question 23

What does a Bushell v Faith clause do?

Answer 23

Grants certain shareholder-directors weighted voting rights on a resolution to remove them.

Question 24

What grounds can lead to disqualification of directors under the Disqualification Act 1986?

Answer 24

• Conviction of an indictable offence
• Persistent breaches of company legislation
• Fraudulent trading or misfeasance
• Being an unfit director in an insolvent company

Question 25

What information must Form IN01 include?

Answer 25

* Company name * Company type * Principal business activity * Registered office * Articles of Association * Company secretary * Statement of capital and initial shareholding * People with Significant Control (PSC) * Consent to act * Statement of compliance

Question 26

What is one of the post-incorporation steps for a new company?

Answer 26

Ordering a company seal for official use.

Question 27

What is a Board Meeting (BM)?

Answer 27

A meeting of the company's directors to discuss business matters and pass board resolutions.

Question 28

What is a General Meeting (GM)?

Answer 28

A meeting of the company's members or shareholders to pass resolutions affecting the company.

Question 29

How are board decisions made?

Answer 29

By a majority vote at a Board Meeting.

Question 30

What is required for important decisions in a company?

Answer 30

Approval from the shareholders through a General Meeting (GM) ## Footnote Important decisions often require a formal process to ensure compliance and transparency.

Question 31

What is the role of the Board Meeting (BM) in decision-making?

Answer 31

To discuss and authorize calling a GM for shareholder approval ## Footnote The BM handles internal decision-making before seeking external approval.

Question 32

What is a quorum?

Answer 32

The minimum number of members required to be present at a meeting for decisions to be valid ## Footnote In this context, the quorum is two members.

Question 33

What voting method is commonly used in Board Meetings?

Answer 33

Show of hands or oral consent ## Footnote This method allows for quick and clear decision-making among directors.

Question 34

How is a conflict of interest defined for directors?

Answer 34

A director must declare any personal interest in a transaction with the company and cannot vote or count towards the quorum for that matter ## Footnote This ensures transparency and fairness in decision-making.

Question 35

What is the required notice period for calling a General Meeting (GM)?

Answer 35

14 clear days notice ## Footnote An additional 2 days is required if notice is sent by email or post.

Question 36

What is an Ordinary Resolution (OR)?

Answer 36

A decision requiring a simple majority (more than 50%) of votes at a general meeting ## Footnote ORs are commonly used for routine decisions.

Question 37

What is a Special Resolution (SR)?

Answer 37

A decision requiring a 75% majority of votes at a general meeting ## Footnote SRs are needed for more significant decisions such as changing the company's articles.

Question 38

What must be filed with Companies House (CH) after passing a resolution?

Answer 38

A signed copy of the Special Resolution (SR) or Ordinary Resolution (OR) within 15 days ## Footnote This is part of the formalities to ensure compliance with regulations.

Question 39

What is the role of shareholders in requisitioning a General Meeting (GM)?

Answer 39

Shareholders holding at least 5% of the company's shares can request the company to call a GM ## Footnote This empowers shareholders to address concerns directly.

Question 40

What is the time frame for a company to call a GM after a requisition?

Answer 40

21 days to call the meeting, which must occur within 28 days after the requisition ## Footnote Timely response is crucial for maintaining shareholder rights.

Question 41

What is the minimum number of members required for a quorum at a General Meeting?

Answer 41

Two members ## Footnote The quorum must be maintained throughout the meeting.

Question 42

What is a Derivative Action?

Answer 42

A shareholder can bring a derivative action to claim for a wrong done to the company, typically by a director ## Footnote This allows shareholders to protect the company's interests.

Question 43

What is the purpose of the Confirmation Statement?

Answer 43

Form CS01 must be filed every year within 14 days of the anniversary of the company’s incorporation ## Footnote Failure to file is a criminal offence.

Question 44

What is the liability of shareholders in a company?

Answer 44

Shareholders' liability is usually limited to their investment in the company ## Footnote This limited liability protects personal assets in case of company debts.

Question 45

What powers do majority shareholders have?

Answer 45

Can remove a director by Ordinary Resolution (s168) and pass resolutions ## Footnote Majority shareholders have significant control over company decisions.

Question 46

What is the purpose of keeping minutes of Board Meetings (BMs)?

Answer 46

A record of decisions made at Board Meetings must be kept for at least 10 years and signed by the chairperson ## Footnote This ensures accountability and provides a historical record of decisions.

Question 47

What is the process for changing a company name?

Answer 47

Requires approval, Form NM01 to CH, and updating company stationery and minutes ## Footnote This formal process ensures legal compliance and proper documentation.

Question 48

What is a petition for unfairly prejudicial conduct?

Answer 48

A member can petition the court if the company's affairs have been conducted in a way that is unfairly prejudicial to their interests ## Footnote This protects minority shareholders from oppressive actions.

Question 49

What is the requirement for financial reporting for small companies?

Answer 49

May be exempt from financial reporting requirements if turnover is under £10.2m, balance sheet under £5.1m, and no more than 50 employees ## Footnote This exemption reduces the administrative burden on smaller businesses.

Question 50

What is the significance of different classes of shares in a company?

Answer 50

Companies may issue different classes of shares with various rights (e.g., voting rights, dividends) ## Footnote This allows for flexibility in capital structure and governance.

Question 51

What is a written resolution?

Answer 51

Private companies may pass resolutions in writing instead of at a meeting ## Footnote This facilitates decision-making without the need for a formal gathering.