Module 3 revision cards - part 1 Flashcards
(102 cards)
1
Q
When did the concept of separate legal entity come in
A
1844 - Joint Stock Companies Act
2
Q
When did the concept of limited liability come in
A
1855 - Limited Liability Act
3
Q
What is the concept of separate legal entity
A
The company is seen as a separate legal personality with perpetual succession of ownership of assets standalone from its investors
4
Q
What is the concept of limited liability
A
Shareholders are only limited to pay the cost of the shares they have bought and not for any additional monies or debts that the company incurs
5
Q
What is the definition of a company
A
An artificial construct having its own legal identity separate from its owners and managers
6
Q
What 4 types of company can be incorporated under the Companies Act 2006
A
Public company limited by shares
Private company limited by shares
Private company limited by guarantee
Private unlimited company, with or without shares
7
Q
What activities can companies incorporated under the Companies Act 2006 participate in
A
Any activity provided that it is legal
8
Q
What is the default and most popular form of company
A
Private company limited by shares
9
Q
Private companies limited by guarantee are usually what type of business
A
Non profit organisations, clubs or membership orgs
10
Q
Can a public company exist if it doesn’t offer shares to the public
A
Yes, sometimes used as a marketing ploy to seem bigger and more established than what they are
11
Q
Where must a companies registered office be
A
In the county in which the company is registered. Either company head office or the address of one of their professional advisors
12
Q
What detail must be displayed at a company’s registered office
A
The company name on the outside of the building
OR
Electronically in reception where a number of companies use the same address
13
Q
Where must a business keep its statutory registers and other docs
A
Either at the company’s registered address or at a Single Alternative Inspection Location (SAIL address)
14
Q
Who owns a company
A
Its members/shareholders
15
Q
What do shareholders contribute
A
Funds/working capital in exchange for ownership rights
16
Q
What does a share represent
A
A proportion of ownership pf the company
17
Q
How many members must a company limited by shares have
A
1 shareholder and there is no max
18
Q
How many members must a company limited by guarantee or an unlimited company have
A
2 shareholders
19
Q
What are the 2 elements to becoming an member
A
- Person must consent to being a member
- Agree to have their details entered into the company’s register of members
20
Q
What is the process by which a company sells its shares called
A
Share allotment/share issue
21
Q
What 2 ways do Directors have authority to issue new shares
A
Authority contained in the articles of association
OR
By resolution of the members
22
Q
What is the right of pre-emption for existing shareholders
A
Protection to existing members by giving them first refusal on new shares being offered by the company in proportion to the number of shares they already hold before those shares are then offered to new members. Details contained in the Articles
23
Q
What is the general rule regarding issuing new shares under pre-emption rights of a PUBLIC company
A
Only authorised to issue shares up to a max stated number (usually no more than 1/3 of existing issued share capital of which only 5% may be issued without observing the rights of pre-emption
24
Q
What happens to any shares not taken up on pre-emption rights
A
Shareholders percentage will be diluted once the new shares are issued
25
What is a share transfer
The process by which a shareholder can transfer ownership of the shares they hold to another person
26
Name an exemption where stamp duty is not paid on a share transfer
Where the shares are being traded on the Alternatives Investments Market (AIM) or if under £1000
27
What is the stamp duty rate on transfer of shares (if it needs to be paid)
0.5% on any amount over £1000
28
Are share pre emption rights available for a PUBICALLY listed company
No, public shares must be freely transferable
29
What is a share transmission
Where shares transfer by operation of law e.g. when a member dies or in a divorce settlement
30
What is the main role of a director
To exercise the powers and authority of the company (subject to any restrictions in the articles)
31
What must all companies have as a director for :
a. Private Co
b. Public Co
A natural person who is at least 16, there is no upper age limit
a. 1 min, max set out in articles
b. 2 min, max set out in articles
32
Upon appointment what must all DIRECTORS do
Consent to act
33
Which 2 ways can a director consent to act
1. with the statement pre programmed in the AP01 & AP02 forms
2. Explicit written consent from the director (advisable to avoid contesting)
34
When does the appointment of a PRIVATE company director come to an end
Until they resign
Are removed from office
Death
Incapacitated through ill health
Majority of shareholders voting (this rule cannot be removed from the Articles)
35
When does the appointment of a PUBLIC company director come to an end (if not listed/not under the UK Corp Gov Code)
Every 3 years (reoffer for re-election)
Are removed from office
Death
Incapacitated through ill health
Majority of shareholders voting (this rule cannot be removed from the Articles)
36
When does the appointment of a PUBLIC company director come to an end (if listed/under the UK Corp Gov Code)
Every year (reoffer for re-election)
Are removed from office
Death
Incapacitated through ill health
Majority of shareholders voting (this rule cannot be removed from the Articles)
37
Name some of the restrictions that might be imposed on directors as set out in the articles
Borrowing limits
New shares that can be issued
Transfer of shares
38
Name some ways in which the directors powers might be restricted
Articles of association
Service agreement
Board policies
Matters reserved for the board
Authorised signatory lists
39
What are the 7 key duties of a director
Act within their powers
Promote the success of the company
Exercise independent judgement
Exercise reasonable care, skill and diligence
Avoid conflict of interest
Not accept benefits from third parties
Declare interests in any proposed transaction or arrangement
40
Do Directors carry personal liability when carrying out their duties
Yes
41
What are the 3 main categories of the role of the company secretary
The Board - procedures in place, papers delivered timely, practical support and guidance especially to the NEDs and guide corporate governance
The company - compliance with legislation and codes. Be a central source of info to the board and senior execs
The shareholders/members - primary point of contact
42
Which companies MUST employ a company secretary
Public companies (optional for private Cos)
43
Are there specific duties set out in the Companies Act for Co Secs
No
44
What does PSC stand for
Persons with Significant Control
45
What is the main aim of the PSC register
To combat terrorism, organised crime and money laundering
46
What is the criteria for being listed on the PSC register
Holds (directly or indirectly) more than 25% of the shares in the Co
Holds (directly or indirectly) more than 25% of the voting rights in the Co
Holds the right (directly or indirectly) to appoint or remove a majority of directors
Has the right or does exercise significant influence or control over the company
47
What should be considered when deciding what type of company to incorporate as
Is separate entity concept required
Where is profit to be taxed - company or owners
Are the roles of management and ownership separate
Is charitable status to be sought
Ownership structure
Privacy of financial info
48
What are the rules around company name
Can only be made up of specified letters, numbers, punctuation marks or limited symbols
Some words are restricted such as royal or bank
Is the name already protected by trademark or internet domain name
49
What are restricted words around company name called
Sensitive words
50
What are documents that need to be filed with Companies House to register/incorporate a company
Complete form IN01
Memorandum of Association
Articles of Association
51
What is the name of the document that confirms a Company has been registered/incorporated
Certificate of incorporation
52
What information is in a certificate of incorporation
Company registered name
Company registered number
Date of incorporation
Type of company
53
Aside from a certificate of incorporation what other document does a PUBLIC listed company need before it can begin trading
Trading certificate (demonstrating that it meets the minimum authorised share capital). Application made using the SH50 form
54
Who can file incorporation docs for a company
Company itself through Companies House Portal
Registration agent
Lawyer
Accountant
55
What are the 4 main rights categories for shares
Right to vote
Right to profit/dividends
Right to capital - surplus cash if the biz wound up
Right to manage
56
What are the 3 main share classes
Ordinary
Preference
Redeemable
57
What are the features of ordinary shares (most common share class)
Right to vote
Right to profit or capital
Make amends to the articles (through voting)
Amend the composition of the board (through voting)
Any other powers of the members stated in the articles
58
What are the features of preference shares
Carry a preferential right to one or more of the variable rights of (voting, profit, capital or management)
59
What is the main purpose of preference shares
Raise additional working capital either generally or for a specific purpose without diluting control (usually no voting right but preferential right to profit or capital
60
What are the features of redeemable shares
Right to be purchased by the company subject to distributable reserves
Redeemed at a fixed date or at any time either the shareholder or the company (or both) call them
61
Define tag along rights
When a buyer wants to obtain a large number of shares the minority shareholders can get the purchaser to acquire their shares on the same terms
62
Define drag along rights
Allows the purchaser of a major holding the right to acquire the minority shareholders shares on the same terms
63
Who tends to look after large share registers
A share registrar (outsourced company)
64
What is the timeframe for updating the register of members
2 months from the date of registration
65
What details must the register of members contain
Full name
Address
Date membership commenced
Date and number of shares acquired or disposed of
Whether the shares are fully or partly paid
Amount still due if partly paid
Date of end of membership (if applicable)
66
What are the stages of transfer of ownership of shares
Seller to complete and sign stock transfer form
Pass to the purchaser with the share cert for at least the number of shares being sold
Purchaser to pay the agreed price to the seller
Purchaser to pay stamp duty (if applicable) and get doc stamped
Stock transfer form & share certs sent to the company for registration
Company to issue new share cert in name of the purchaser and any balance certificate in the name of the seller
67
What are the stages of transmission of ownership of shares (e.g. through divorce or death)
Seller to complete a letter of request and send to company
Company to issue new share cert in name of the will executor or beneficiaries
68
How do you cancel a damaged share certificate
Send damaged certificate to the company so that it can be cancelled and a replacement can be issued and sent back to the shareholder
69
How do you cancel a lost share certificate
Cert is Prima Facie evidence so is more complex process
Indemnity form and sometimes indemnity insurance will need to be taken out (especially for publicly traded shares) in case the original comes to light
70
Can a shareholder request that their shares be split over numerous certificates
Yes
71
What is the 3 part process for death of a member
Death notified to the company - original or certified copy of death certificate will need to be provided
Date of death noted in the register, any dividend mandates cancelled and the death certificate returned
Shares in joint names pass to other named holders. Executor of a will can determine if shares are held with them or given directly to another beneficiary but only once the grant of probate has been issued to the Executor
72
How should electronic comms with shareholders be processed
Company must request that members give their consent to be contacted electronically
Deemed consent states that no response is an opt in response
Usually comms put on company website - shareholders are notified by email or letter
73
Give 2 examples of when a company can not communicate with a shareholder electronically
When they have specifically expressed that they don't want to be
When the company's articles specify that electronic comms is not permitted
74
What are the 2 constitutional documents of a company
Memorandum of Association
Articles of Association
75
What info is contained in the Memo of Association subscriber clause
That the subscribers wish to form a company under CA2006
Agree to become the first members
Agree to take at least one share
76
What are Articles of Association
Internal rules governing the relationship between the company and its members and directors
77
What job do the Articles do
Form a contract between the company and each shareholder
78
What is an entrenched clause in the articles
A clause that has a higher threshold to amend, remove or alter a provision in the articles. Makes certain amendments either more difficult or impossible to pass
79
How can clauses in the Articles be amended
By special resolution
80
Can you amend the rights of a non voting share class without getting consent of the class
No
81
What are the main topics covered by Articles of Ass
Share capital - allotment of shares, calls, rights attached to diff share classes and rights of pre emption
Directors - quorum for meetings, max number to appoint, appointment and removal process, voting rights
Meetings - detail around the convening and holding of general meetings, notice periods, clear days, proxies, poll votes
Communication - how to give notice and notice periods
82
What is a shareholder agreement
A more detailed document outlining the same topics as those contained in the articles
A non public document unless it is referenced in the Articles in which case it must be filed at companies house
83
What is the document called that sets out the responsibilities and areas of decision for a COMMITTEE
Terms of Reference
84
What is the name of the document that sets out items that only the BOARD can decide
Matters Reserved for the Board
85
Are there tight regulations around organising DIRECTOR/Board meetings
No - CA2006 is largely silent and it is for the directors themselves to regulate according to their and the businesses needs
86
Who can convene a DIRECTORS meeting
Any director or the company secretary under the direction of a director
87
What is the notice period for convening a DIRECTORS meeting
There isnt one - reasonable notice just needs to be given (allowing time for papers to be read and considered)
88
What is a quorum
The minimum number of directors who must be present throughout a meeting to make it valid
89
Who must ensure that Director and member meeting minutes are made and kept
The Directors
90
Are there tight regulations around organising MEMBER/General meetings
Yes
Can only be convened by resolution of the board or in exceptional circumstances by the shareholders
91
Minimum notice period for an AGM
21 days
Shorter only if ALL members agree
92
Minimum notice period for a general meeting of a private or public company
14 days
Shorter only if a majority of members agree
93
What is the default quorum for a members meeting
2 people in person
94
What resolutions must be filed at companies house
Ordinary resolutions that change the constitution or share capital
All special resolutions
95
What filings must be made to companies house on an annual basis
Confirmation statement
Annual report and accounts
96
Name some filings that need to be made to companies house on an ad hoc basis
Change of company name
Appointment or termination of a director
Changes to the articles
Commencement of liquidation
97
What are the 2 main types of board structure
Unitary and 2 tier
98
What are the 3 main types of meeting held by a company
Members meetings (AGM & General)
Class meetings
Director/Board meetings
99
What is the paragraph of information on the memo of association called
Subscriber clause
100
What types of business decision do the board, members and executive managers take
Board - strategic
Members - constitutional changes
Exec managers - day to day
101
What is the purpose of the main statutory registers
To help provide business transparency
102
What is the definition of a meeting
An assembly of people for a lawful purpose
