P2 - 5. Regulatory requirements for companies

Question 1

What are the different types of company that can be incorporated under the Companies Act 2006?

Answer 1

• Public company limited by shares
• Private company limited by shares
• Private company limited by guarantee
• Private unlimited company, with or without a share capital

Question 2

What are the specialised variants?

Answer 2

CIO - Charitable Incorporated Organisation

CIC - Community Interest Companies

RTMs - Right to Manage Companies

Question 3

What are the three ways company registration can be undertaken?

Answer 3

1. Electronic software filing using an approved software product
2. Paper filing
3. Web Incorporation Service

Question 4

What are the five things that must be lodged with the Registrar to incorporate a company?

Answer 4

1. Memorandum of association - There must be at least one subscriber to the memorandum, who must agree to take at least one share or agree to be a member if the company is not to have a share capital
2. Articles of Association – 3 types
   ((a) to adopt the relevant set of Model Articles in their entirety;
   (b) to adopt the relevant set of Model Articles with modification; or
   (c) to adopt an entirely bespoke set of Articles.
3. Form IN01
4. Name approval
5. Registration fee

Question 5

Additional requirements of a CIC?

Answer 5

Demonstrate how it will meet the community interest test
confirm using Form CIC36 that the company will benefit the community

Excluded Company Declaration (ECD),

Question 6

What are the additional requirements for the registration of a Right to Manage Company?

Answer 6

No registration requirements, however, in order to be an RTM company the company must:
* be a private company limited by guarantee;

• ensure its Articles comply with the provisions for RTM Companies;
• hold a freehold or leasehold interest in a qualifying premises;
• not be a commonhold association; and
• have as its members the tenants of flats in the premises or landlords under leases of those premises.

An RTM company ceases to be an RTM company if it no longer continues to fulfil any of these conditions.

Question 7

Which changes of company status are permitted?

Answer 7

• Private to public (unless previously re-registered as unlimited) (CA2006 s. 90).
• Public to private limited (CA2006 s. 97).
• Private limited to unlimited (unless previously re-registered as limited) (CA2006 s. 102).
• Unlimited to limited (unless previously re-registered as unlimited) (CA2006 s. 105).
• Public to unlimited (unless previously re-registered as limited or unlimited) (CA2006 s. 109).

Question 8

When is it not possible to change a company’s type?

Answer 8

• to or from that of a company limited by guarantee; or
• from being a CIC company.

Question 9

What is required to re-register a private company to a public company?

Answer 9

A special resolution

Copy of the resolution and RR01 delivered to registrar

Must meet additional requirements (issued share capital)

Question 10

Public company to a private company?

Answer 10

Special resolution

File an RR02

Question 11

What is the process from public or private limited company to unlimited company?

Answer 11

Re-registration of either a public or a private limited company to an unlimited company requires unanimous
shareholder consent.

Resolutions and forms should be filed at Companies Houses

Question 12

Which changes are companies required to give notice to the Registrar?

Answer 12

Change to their constitution
Changes to officers
Changes to members
Changes to PSC

Question 13

What are the different types of filing?

Answer 13

Hard copy pqper filingOnline, webFiling, software filing,

Question 14

What are some of the criminal offences under the Companies Act?

Answer 14

• failing to file accounts on time (CA2006 s. 451)
• failing to enter a director’s details in the register of directors or failing to update those details within the prescribed timescale (CA2006 s. 162);
• failing to file an amended copy of the Articles following an amendment (CA2006 s. 26);
• failing to respond to a request for confirmation that the details on the central register are up to date (CA2006 s.128F);

Question 15

How is The Governance Code divided?

Answer 15

5 sections containing 18 main principles

Question 16

What are the five sections?
The Governance Code is divided into

Answer 16

1. Board Leadership and Company Purpose
2. Division of Responsibilities
3. Composition, Succession and Evaluation
4. Audit, Risk and Internal Control
5. Remuneration

Question 17

Apply and explain?

Answer 17

Apply principles in full and explain how

Question 18

Features of a merger?

Answer 18

Members of each class of shares of the merging companies must approve the terms of the scheme by special resolution requiring approval of 75% of the members present, in person or by proxy, at the general or class meeting convened to consider the resolutions.

The directors of each company that is merging must report (i) to their members at the meeting(s) convened to consider the merger arrangements and (ii) to the directors of the other merging companies of any material changes to the property and liabilities of their company between the date the draft terms were approved and the date of the members’ meeting(s) (CA2006 s. 911B).

Question 19

Features of a division

Answer 19

The members of each class of shares of the companies involved in the division must approve the terms of the scheme by special resolution requiring approval of 75% of the members present, in person or by proxy, at the general or class meeting convened to consider the resolutions CA2006 (s. 922).

The directors of each company that is involved in the division must report (i) to their members at the meeting(s) convened to consider the division arrangements and (ii) to the directors of the other companies involved in the division of any material changes to the property and liabilities of their company between the date the draft terms were approved and the date of the members’ meeting(s) (CA2006 s. 927).

Question 19

Objective of a takeover?

Answer 19

The acquisition, usually by a company (the offeror or acquirer), of the whole or most of the issued share capital of another company (the target or offeree).

Question 20

Arrangements and Reconstructions

Answer 20

• The approval of the court is required and consequently the legal advisers of both companies will be involved in settling the necessary documentation.
• Meetings to approve schemes of compromise or arrangement are convened under the authority of the court (CA2006 s.896).
• The meeting itself will be managed by the directors and company secretary in the same way as any general meeting
• Any notice convening a meeting of the members or creditors must be accompanied by a statement complying with the provisions of CA2006 s. 897 explaining the effects of the compromise or arrangement, and, in particular, any material interests of any director and the impact of the scheme on those interests (CA2006 s. 897).
• Provided 75% of the members or 75% of the creditors, by value of claim, approve the terms of the scheme the court may sanction the scheme of compromise or arrangement (CA2006 s. 899).

Question 21

What are the main types of takeover?

Answer 21

• Share sale agreement
• Public purchase
• Takeover offer
• Scheme of arrangement or compromise

Question 22

What is The Takeover Panel?

Answer 22

An independent body, established in 1968.

Main function is to issue and administer the City Code and to supervise and regulate takeovers and other matters to which the City Code applies in accordance with the Rules set out in the City Code.

Question 23

What is an important aspect of the City Code?

Answer 23

The requirement for a shareholder or group of shareholders (referred to as a concert party) acting together to make a takeover offer if the total voting rights they control reaches 30% or more of the total votes available. This is known as a mandatory offer.

Question 24

What does The City Code reflect?

Answer 24

The collective opinion of those professionally involved in the field of takeovers as to appropriate business standards and as to how fairness to shareholders and an orderly framework for takeovers can be achieved.

Question 25

When does a company become insolvent?

Answer 25

When it is unable to pay its debts as they fall due

Question 26

When will a company be deemed unable to pay its debts?

Answer 26

* it fails to comply with a statutory demand for a debt in excess of £750; * it fails to satisfy enforcement of a judgment debt; * the court is satisfied that the company is unable to pay its debts as they fall due; or * the court is satisfied that the liabilities of the company exceed its assets.

Question 27

What is a members voluntary winding up?

Answer 27

Solvent winding up Directors have prepared a statutory declaration within the five weeks immediately preceding the resolution to wind up of the opinion that the company will be able to pay its debts in full, with interest at the official rate, within a period not exceeding 12 months from commencement of the winding up (IA 1986 ss. 89 and 90).

Question 28

What is a Creditors’ voluntary winding up?

Answer 28

Appropriate where a declaration of solvency cannot be made

Question 29

When would a company be wound up by the court?

Answer 29

* the company so resolves by special resolution; * a judgment creditor or a creditor petitions the court where an amount in excess of £750 has not been paid following written demand for payment (IA1986 s. 123); * it is just and equitable for the company to be wound up; or * the company fails to comply with certain statutory requirements, e.g. the minimum number of members (IA1986 ss. 122 and 124).

Question 30

What is the role of the liqudator?

Answer 30

The liquidator should: 1. take over responsibility for the assets of the company, together with its books and records; 2. take other necessary steps to protect and realise the assets, as indicated above in the case of a creditors’ voluntary winding up; 3. disclaim any onerous property or unprofitable contracts (IA1986 s. 178 and IR1986 reg. 4.187–4.194); 4. ensure the winding up order halts any proceedings against the company, except by leave of the court (IA1986 s. 130(2)); and 5. provide the Official Receiver with information, access to books or such other assistance as they may reasonably require.

Question 31

When would a company be struck off?

Answer 31

The Registrar of Companies is authorised by CA2006 s. 1000 to remove from the register companies that they believe are defunct (failure to file accounts and confirmation statements)

Question 32

Can a company be restored?

Answer 32

Yes - under CA2006 ss. 1024–8, application may be made to the Registrar by a former director or member of the company to restore the company to the register under an administrative restoration procedure

Question 33

When is a company dormant?

Answer 33

No significant accounting transactions as defined in CA2006 s. 1169 since the end of its previous financial year or, in the case of a newly incorporated company since its incorporation.

Question 34

Transactions that are disregarded for the purposes of assessing the company’s dormant status?

Answer 34

* payment for shares taken by the subscriber(s) to the Memorandum and Articles; * fees paid to the Registrar of Companies; and * civil penalties imposed by the Registrar of Companies (i.e. late filing penalties). Any other transactions required to be entered in the company’s accounting records will disqualify

Question 35

Certain words and expressions require consent before they may be used as part of a company name. Which of the following require consent?

Answer 35

* French No * Accountant No * Britain Yes * Insurance Yes * Royal Yes

Question 36

Why must a public company apply for a certificate under CA2006 s. 761 before it starts trading?

Answer 36

To ensure that the amount paid up on the aggregate nominal value of its issued share capital is not less that the authorised minimum

Question 37

Does it matter to which Companies House office documents are delivered?

Answer 37

No, as any documents filed at one registry that relate to a company registered at another will be forwarded

Question 38

Is it sufficient to post documents to Companies House prior to the expiry of the appropriate filing period?

Answer 38

No – the requirement is that they must be received, and be acceptable for filing, prior to the deadline

Question 39

What is the comply or explain principle?

Answer 39

Listed companies should apply the principles of the UK Corporate Governance Code and explain any non-compliances with the provisions of the Code

Question 40

What are the five categories covered by the Governance Code?

Answer 40

Board Leadership and Company Purpose Division of Responsibilities Composition, Succession and Evaluation Audit, Risk and Internal Control Remuneration

Question 41

What is the benefit of acquiring at least 90% acceptances on a takeover?

Answer 41

Achieving the 90% threshold permits an acquiring company under the Companies Act 2006 to compulsorily acquire all remaining shares on the same terms if it wishes

Question 42

The City Code applies to what type of company?

Answer 42

All public companies or companies that have been public in the previous 10 years

Question 43

What is the significance of a share offer being conditional on reaching acceptance of 50%, 75% or 90% of the issued shares?

Answer 43

These thresholds provide different degrees of control: 50% allows the holder to pass all ordinary resolutions and is treated as the holding company for accounting provisions 75% permits the passing of special resolutions as well as ordinary resolutions and gives control to the holder 90% is the level at which dissenters in a takeover can be compulsory acquired under procedures in the Companies Act 2006

Question 44

How long after ceasing to trade can an application for dissolution be made?

Answer 44

Three months

Question 45

What action might occur if the Registrar believes a company is defunct?

Answer 45

The Registrar will contact the company with a warning giving the company an opportunity to respond and to remedy any deficiency (e.g. overdue filings). If there is no response from the company or if the deficiencies are not remedied, the Registrar may take action to strike the company off the register and dissolve it

Question 46

Which of these activities disqualifies a company from being able to file dormant company accounts?

Answer 46

A late filing penalty being imposed on ABC Ltd, an authorised insurance company. No Payment for the amounts due on the subscriber share relating to XYZ Ltd. No A dividend being paid by a non-trading entity? Yes