Limited Companies Part 1

Question 1

When setting up a private company, it is necessary to adopt the model articles of association. True of false?

Answer 1

False

Question 2

The first directors of a company are automatically appointed on incorporation. True or false?

Answer 2

True

Question 3

The directors are responsible for day-to-day decision making in a company by passing board resolutions in general meetings. True or false?

Answer 3

False - they are passed in board meetings, not general meetings

Question 4

What majority is required to pass an ordinary resolution and is it necessary to file it at companies house?

Answer 4

Simple majority (51%). Does not need to be filed a companies house.

Question 5

What notice is required to hold a board meeting?

Answer 5

“Reasonable Notice” for a board meeting and 14 days for a general meeting.

Question 6

What is a shelf company?

Answer 6

A company that has already been set up.

Question 7

What needs to be sent to companies house to register a company?

Answer 7

1. Application form IN01
2. Memorandum of association
3. Articles of association
4. Requisite fee

Question 8

How can a company change its name?

Answer 8

By special resolution and filing this with companies house.

Question 9

Does a trading name (e.g. trading as…) need to be disclosed to companies house?

Answer 9

No

Question 10

How is a trading name authorised by a company?

Answer 10

Board resolution

Question 11

How can a company’s registered office be changed?

Answer 11

By board resolution and form AD01 must be filed with companies house.

Question 12

Are are the articles of association?

Answer 12

A company’s internal rulebook.

Question 13

If a company wishes to fully adopt model articles of association, do these need to be sent to companies house when incorporating?

Answer 13

No, they will be automatically applied.

Question 14

How can a company change its articles? And how long for a company to submit these to companies house?

Answer 14

By way of special resolution. Filing within 15 days.

Question 15

What are the minimum number of directors a private company must have? And a public company?

Answer 15

Private - 1
Public - 2

Question 16

What are considered people with significant control (PSC)?

Answer 16

If they meet one of the following:

• Hold more than 25% shares
• Hold more than 25% voting rights
• Have the right to appoint or remove the majority of the board

Question 17

What is a memorandum of association?

Answer 17

A statement of intention of the subscribers to form a company and become shareholders.

Question 18

What are board meetings?

Answer 18

Meetings of directors, who pass board resolutions

Question 19

What are general meetings?

Answer 19

Meetings of shareholders, who pass ordinary resolutions or special resolutions

Question 20

Who can call and board meeting and what notice must be given?

Answer 20

Any director can call a board meeting. Reasonable notice must be given, but all directors must be given notice.

Question 21

What is a quorum?

Answer 21

The minimum number of people required to be present in order for valid decisions to be made?

Question 22

What is the quorum of board meetings?

Answer 22

Two people

Question 23

Can a director who has a conflict of interest count towards the quorum? And can they vote?

Answer 23

Can count towards the quorum, but cannot vote.

Question 24

What is the percentage of votes required to pass an ordinary resolution?

Answer 24

Simple majority (more than 50%)

Question 25

What is the percentage of votes required to pass a special resolution?

Answer 25

75% or more

Question 26

Notice required for a general meeting?

Answer 26

14 days clear notice.

Question 27

Quorum of general meeting?

Answer 27

Two

Question 28

When can shareholders require directors to call a general meeting?

Answer 28

When shareholders holding at least 5% of the company's share capital with voting rights require them to do so

Question 29

Are small companies exempted from having their accounts audited?

Answer 29

Yes

Question 30

What is classed as a small company?

Answer 30

- Turnover of less than 10.2m pounds - Balance sheet of not more than 5.1m pounds - not more than 50 employees

Question 31

QUESTION 1 Two new clients wish to set up a private company limited by shares. Which of the following best describes the information required in order to complete form IN01? A. Full details of the shareholders, directors and company secretary (if any), the registered office, the name of the company, how many shares the company will have, their type and nominal value, instructions on the articles and confirmation of whether they will elect to keep information usually contained in the statutory books on the public register. B. Full details of the shareholders, directors and company secretary (if any), the registered office, the name of the company, its trading name, how many shares the company will have, their type and nominal value and instructions on the articles. C. Full details of the shareholders, directors and company secretary (if any), the registered office, the name of the company, how many shares the company will have, their type and nominal value, instructions on the articles and details of any service contracts to be issued to the directors. D. Full details of the shareholders, directors and company secretary (if any), the registered office, the name of the company, how many shares the company will have, their type and nominal value, instructions on the articles and confirmation of registration with HMRC. E. Full details of the shareholders, directors and company secretary (if any), the registered office, the name of the company, how many shares the company will have, their type and nominal value, instructions on the articles, confirmation of the auditor and instructions on whether to adopt a company seal.

Answer 31

A. Full details of the shareholders, directors and company secretary (if any), the registered office, the name of the company, how many shares the company will have, their type and nominal value, instructions on the articles and confirmation of whether they will elect to keep information usually contained in the statutory books on the public register.

Question 32

A client was a sole trader who recently incorporated their hairdressing business into a private limited company. They are the sole director and joint and equal shareholder with their spouse. Prior to receiving the certificate of incorporation, the client entered into a contract with a shampoo supplier. The contract was signed by the sole trader on behalf of the company. With whom, if anyone, does the benefit of the contract reside? A. The company. B. The shareholders. C. The sole trader. D. The sole trader and the company jointly. E. The contract is void.

Answer 32

C. The sole trader.

Question 33

A private limited company was incorporated with unamended model articles of association but has since adopted amended articles. What must be filed with Companies House following the adoption of the amended articles of association? A. The board minutes relating to the change and the shareholders' resolution sanctioning the adoption. B. The shareholders' resolution to adopt the amended articles of association only. C. The amended articles of association only. D. The shareholders' resolution to adopt the amended articles of association and the amended articles of association. E. The board resolution relating to the change and the new articles of association.

Answer 33

D. The shareholders' resolution to adopt the amended articles of association and the amended articles of association.

Question 34

A company wishes to call a general meeting to amend the articles of association. There are seven shareholders, all with ordinary voting shares. The client has 52k shares, a man has 20k shares and a woman has 20k shares. The remaining four shareholders have 2k shares each. Which of the following best describes who would be required to agree to hold the meeting on short notice? A. The client, the man and the woman. B. Any four - a simple majority in number is required. C. The client, the man, the woman and any other shareholder. D. The client, as majority shareholder. E. The client, the man, the woman and any other two shareholders.

Answer 34

C. The client, the man, the woman and any other shareholder.

Question 35

A client private limited company with unamended model articles of association has six directors and needs to approve the purchase of property worth £3k that is jointly owned by two of the directors (the 'selling directors'). Two directors do not support the transaction, but the remaining four (including the two selling directors and one of the other directors, who is also the chairperson) wish to vote in favour of it. Which of the following best describes the situation should all directors attend and vote at the board meeting? A. The four directors in favour will be able to pass a board resolution (BR) as they represent the majority. B. The four directors in favour will be able to pass a BR as they represent the majority. However, the two selling directors will need to declare their personal interests in the transaction. C. The four directors in favour will be unable to pass the BR. The two selling directors will need to declare their personal interests in the transaction and will be unable to vote and count towards the quorum. D. The four directors in favour will be able to pass the BR. The two selling directors will need to declare their personal interests in the transaction and will be unable to vote and count towards the quorum. In the event of deadlock (which is anticipated on the facts), the chairperson will be able to exercise her casting vote. E. The decision must be authorised by an ordinary resolution of the shareholders.

Answer 35

D. The four directors in favour will be able to pass the BR. The two selling directors will need to declare their personal interests in the transaction and will be unable to vote and count towards the quorum. In the event of deadlock (which is anticipated on the facts), the chairperson will be able to exercise her casting vote.