Limited Companies (Business and organisational characteristics)-FS

Question 1

What is the key liability advantage of shareholders in a company limited by shares?

Answer 1

Shareholders have limited liability, meaning their personal financial risk is capped at the amount unpaid on their shares; they are not liable for company debts beyond this.

Question 2

What is meant by the principle of separate legal personality in the context of limited companies?

Answer 2

It means that once a company is validly incorporated, it is treated as a distinct legal person separate from its shareholders and directors, having its own rights and liabilities.

Question 3

Who is responsible for making day-to-day decisions in a limited company, and how are those decisions recorded?

Answer 3

Directors manage day-to-day decisions, which are recorded as board resolutions, either passed in board meetings or in writing.

Question 4

What type of company decisions are made by shareholders, and how are they passed?

Answer 4

Shareholders make fundamental decisions via ordinary or special resolutions, passed at general meetings or in writing, as defined under company law.

Question 5

What are the directors’ filing obligations under the Companies Act 2006?

Answer 5

Directors must file several documents with Companies House, including minutes of meetings and updates to the company’s register of shareholders and persons with significant control.

Question 6

Are filing obligations with Companies House optional for limited companies?

Answer 6

No. Filing obligations are compulsory under the Companies Act 2006 and include both regular filings and updates to corporate records such as resolutions and registers.

Question 7

What distinguishes a private limited company by shares from sole trader businesses in terms of legal obligations?

Answer 7

A private limited company must maintain formal records and make regular filings with Companies House, whereas a sole trader has no such statutory filing duties.

Question 8

Can directors pass special or ordinary resolutions in a limited company?

Answer 8

No. Special and ordinary resolutions are passed by shareholders, not directors. Directors only pass board resolutions.