W2

Question 1

What are the two important documents that make up a company’s constitution?

Answer 1

The two important documents that make up a company’s constitution are the Memorandum and Articles of Association.

Question 2

What is the role of the Memorandum of Association in companies incorporated since the Companies Act 2006 came into force?

Answer 2

In companies incorporated since the Companies Act 2006 came into force, the Memorandum of Association is now merely a formality and no longer of constitutional significance.

Question 3

What is the main constitutional document for a company?

Answer 3

The main constitutional document for a company is its Articles of Association.

Question 4

How are the provisions in a company’s Articles of Association binding?

Answer 4

The provisions in a company’s Articles of Association bind the company and its members to the same extent as if they were covenants on the part of the company and each member to observe those provisions.

Question 5

How can a company’s Articles of Association be amended?

Answer 5

A company’s Articles of Association can be amended by special resolution. Any amendment must be made bona fide in the interests of the company as a whole.

Question 6

What is the relationship between a company’s Articles of Association and the Companies Act 2006?

Answer 6

The Articles of Association must always be interpreted alongside the Companies Act 2006. The Articles take effect as a contract between the company and its members in respect of their rights and obligations as members.

Question 7

What were the constitutional documents required for companies under the Companies Act 1985?

Answer 7

Under the Companies Act 1985, companies were required to have two constitutional documents: the Articles of Association and the Memorandum.

Question 8

What is the purpose of the Articles of Association?

Answer 8

The purpose of the Articles of Association is to regulate the relationship between the shareholders, the directors, and the company. It includes provisions such as the number of directors required, powers of directors, shareholder rights, and procedures for meetings.

Question 9

What is the legal effect of a company’s Articles of Association?

Answer 9

The provisions in a company’s Articles of Association bind the company and its members to the same extent as if there were covenants on the part of the company and each member to observe those provisions. The Articles evidence a contract between the company and its members in their capacity as members.

Question 10

What is the difference between a company’s Articles of Association and a shareholders’ agreement?

Answer 10

The Articles of Association regulate the relationship between the company and its members, while a shareholders’ agreement is a private agreement between the shareholders themselves. Members can enforce provisions contained in the Articles through the company, but a shareholders’ agreement allows members to enforce rights against other members.

Question 11

How can a company’s Articles of Association be altered?

Answer 11

A company can alter its Articles of Association at any future date by special resolution. The alteration must be made bona fide in the interests of the company as a whole. Entrenched provisions may require specific conditions to be met or more restrictive procedures to be followed.

Question 12

When does a company become a legal entity?

Answer 12

A company becomes a legal entity from the date on which the certificate of incorporation is issued by Companies House.

Question 13

What is the significance of the date of incorporation?

Answer 13

The date of incorporation is set out in the certificate of incorporation and serves as the official date when the company becomes a legal entity.

Question 14

What changes are typically made when converting a shelf company?

Answer 14

When converting a shelf company, meetings of the directors and shareholders need to be held to make necessary changes to the company name, registered office, Articles, directors, company secretary, and shareholders. Additionally, the first shares will be transferred from the initial shareholders to the new shareholders.

Question 15

How can a company change its name?

Answer 15

A company’s name can be changed by a special resolution of the shareholders or by any other means provided by the company’s Articles. Form NM01 needs to be filed at Companies House with the special resolution passed to change the name.

Question 16

What steps are involved in changing the registered office of a company?

Answer 16

To change the registered office of a company, Form AD01 needs to be filed at Companies House. The client’s chosen address will need to be substituted for the first registered office in accordance with section 87(1) of the Companies Act 2006.

Question 17

How can a company alter its Articles?

Answer 17

A company may alter its Articles by special resolution. The amended Articles and the special resolution need to be filed at Companies House.

Question 18

What are the steps involved in appointing directors and a company secretary?

Answer 18

Representatives of the company registration agent or law firm will become the first members, directors, and company secretary of the company. The shares held by the first members need to be transferred using a stock transfer form. Forms AP01 (directors) and AP03 (secretary) are required to be filed at Companies House. The first directors and company secretary (if there was one) need to resign, and Forms TM01 (directors) and TM02 (secretary) are required to be filed at Companies House.

Question 19

What is the order of appointments and resignations when appointing directors and a company secretary?

Answer 19

The order of appointments and resignations is important. At least one director needs to be appointed to ensure compliance with the Companies Act 2006. The first members’ shares need to be transferred, and the client’s representatives can be appointed as directors and the company secretary. The resignations of the first director(s) and company secretary (if there was one) need to be filed at Companies House.

Question 20

What are the considerations for choosing a company name?

Answer 20

When choosing a company name, it must not be offensive, must end in ‘limited’ or ‘ltd’ for a private limited company, must not be the same as another company name on the index, and must obtain approval if it suggests a connection with the government or public authority or contains sensitive words. Companies House publishes guidance on company names, and once a name is chosen and registered, it must be displayed in certain prescribed locations.

Question 21

What are the post-incorporation steps for a new company?

Answer 21

After a new company has been formed, the board needs to decide whether to elect a chairperson and determine the accounting reference date. The company may need to appoint an auditor, register for tax, consider a shareholder agreement, and address pre-incorporation contracts. These steps are important for the smooth functioning of the company

Question 22

What are the different types of company resolutions and how are they passed?

Answer 22

There are three types of company resolutions: board resolutions, ordinary resolutions, and special resolutions. Board resolutions are passed by the directors at board meetings or in writing. Ordinary resolutions are passed by the shareholders at general meetings or in writing, and they require a simple majority. Special resolutions also require shareholder approval and must be passed by a majority of 75% or more of the votes.

Question 23

Who can demand a poll in a company meeting?

Answer 23

The chairperson of the meeting, the directors, two or more persons having the right to vote on the resolution, or a person or persons representing at least 10% of the total voting rights of all the shareholders entitled to vote on the resolution can demand a poll in a company meeting.

Question 24

In a company meeting, can an ordinary resolution be passed without the support of all shareholders?

Answer 24

Yes, an ordinary resolution can be passed without the support of all shareholders. It requires a simple majority, which means more than half of the shareholders voting and present at the meeting need to be in favor of the resolution.

Question 25

What is the difference between a show of hands and a poll in a company meeting?

Answer 25

In a show of hands, a simple majority is required for a resolution to pass. However, if any shareholder is unhappy with the result, they can demand a poll. In a poll, a simple majority is determined based on the total number of shares, and shareholders with a larger percentage of votes can hold more power by forcing through or blocking resolutions.

Question 26

What is the requirement for passing a special resolution in a company meeting?

Answer 26

A special resolution requires a majority of at least 75% of the shareholders voting and present at the meeting. This means that the resolution needs the support of a significant majority of shareholders to pass.

Question 27

Can a special resolution be passed without the support of all shareholders in a company meeting?

Answer 27

Yes, a special resolution can be passed without the support of all shareholders. It requires a majority of at least 75% of the shareholders voting and present at the meeting. If the required majority is obtained, the resolution can pass even if some shareholders are against it.

Question 28

What is the voting requirement for passing a written ordinary resolution in a company?

Answer 28

A written ordinary resolution is passed by a simple majority of the total voting rights of eligible members. Each member has one vote in respect of each share held by them when voting on a written resolution.

Question 29

What is the voting requirement for passing a written special resolution in a company?

Answer 29

A written special resolution must state that it is a special resolution and is passed by a majority of members representing not less than 75% of the total voting rights of eligible members. This means that a significant majority of members need to support the resolution for it to pass.

Question 30

Are there any decisions that cannot be passed as written resolutions in a company?

Answer 30

Yes, there are two decisions that may not be passed as written resolutions: the removal of a director under section 168 and the removal of an auditor under section 510.

Question 31

In a company meeting, can an ordinary resolution be passed if some shareholders abstain from voting?

Answer 31

Yes, an ordinary resolution can be passed even if some shareholders abstain from voting. The resolution requires a simple majority, but on a written resolution vote, abstaining counts as voting against. Therefore, if the majority of the remaining shareholders are in favor of the resolution, it can pass.

Question 32

What is the purpose of company meetings?

Answer 32

Company meetings serve as a platform for making decisions on behalf of the company. Directors make decisions by passing board resolutions in board meetings, while shareholders make decisions by passing shareholder resolutions (ordinary and special resolutions) in general meetings or by written resolution. Shareholders with a larger share of the voting rights can hold more power in the company.

Question 33

What are the post-meeting matters that need to be dealt with after company meetings?

Answer 33

After company meetings, post-meeting matters (PMMs) need to be dealt with. This includes filing relevant documents at Companies House and updating the company's internal records, such as minute books and registers.

Question 34

What is the purpose of a BM (Board Meeting) in relation to a GM (General Meeting)?

Answer 34

A BM is held to resolve to convene the GM, to approve the form of notice for the GM and the form of consent to short notice, and to authorize their circulation to the shareholders. The BM is then adjourned to enable the GM to take place.

Question 35

What happens during a GM (General Meeting)?

Answer 35

The GM takes place immediately following the adjournment of the BM, and the shareholders vote on the resolutions set out in the notice. The BM is then reconvened.

Question 36

What happens if a company does not receive enough responses to pass a Written Resolution (WR)?

Answer 36

If the company does not receive a sufficient number of responses to pass the WR, it will lapse. For a company with Model Articles, the lapse date is 28 days beginning with the circulation date. A company can choose another period of time in its Articles if it wishes.

Question 37

What are the post-meeting matters that need to be dealt with?

Answer 37

The post-meeting matters (PMMs) can be categorized into three categories: internal matters, filing at Companies House, and record-keeping. Internal matters include keeping minutes of all meetings for 10 years and updating statutory books. Filing at Companies House involves filing special resolutions and amended Articles, along with any required forms. Record-keeping includes keeping documents such as directors' service contracts at the registered office.

Question 38

What is the sequence of events for a GM held on short notice?

Answer 38

The sequence of events for a GM held on short notice is as follows: a BM is held to resolve to convene the GM, approve the form of notice and consent to short notice, and authorize their circulation. The notice and consent are given to shareholders who sign the form of consent. The BM is then adjourned to enable the GM to take place.

Question 39

What are the options for proceeding with a Written Resolution (WR) if shareholders are present?

Answer 39

If shareholders are present, the BM is adjourned and the approval of the WR takes place immediately following the adjournment. Shareholders vote on the resolutions set out in the WR by signing to signify their agreement, or not signing or abstaining, which both constitute votes against the resolution.

Question 40

What are the options for proceeding with a Written Resolution (WR) if shareholders are not present?

Answer 40

If shareholders are not present, the WR is circulated to shareholders. The company awaits approval from the required percentage of shareholders. If the WR does not receive enough approvals, it will lapse after 28 days (for a company with Model Articles).

Question 41

What happens after the approval of a Written Resolution (WR)?

Answer 41

After the approval of a WR, the BM is reconvened if the first option was used, or a second BM is called if the second option was used. The board is informed of how the shareholders voted, and one of their members or the company secretary is authorized to take relevant action and deal with post-meeting matters.

Question 42

What are the key points to note about Written Resolutions (WRs)?

Answer 42

Key points to note about WRs include that they must be recorded in the minute books of the company, resolutions to remove a director or auditor may not be passed by way of WRs, and they can be proposed by directors or members of a private company. The required majority for passing a WR depends on whether it is an ordinary or special resolution.

Question 43

What should happen when incorporating from scratch?

Answer 43

o When incorporating from scratch, the following must be sent to Companies House:  the company’s memorandum; * First shares of the company (subscribers) declare they want to form a company in this and that they want to be members  Articles (if the company does not intend to use the Model Articles (MA) – so not always);  the fee, and * This is very little money  an application for registration (Form IN01) containing: * The company’s proposed name and registered office; * Whether the company is to be private or public; * Whether the company is to be limited by shares (or guarantee); * A statement of capital and initial shareholdings (s 10) (or if it is to be limited by guarantee, details must be given of the guarantee (s 11)); * A statement of the company’s proposed officers (s 12) and persons with significant control (s 790); and * A statement of compliance (s 13). o Saying all this information is true so the company’s house do not need to verify it  Once the Registrar of Companies has approved the application for incorporation of the company, the company is sent a certificate of incorporation authenticated by the Registrar’s official seal.  The certificate of incorporation sets out: * the name of the company. This may be changed at a later date; * the company’s registered number. The company’s registered number will never change and must therefore be used when drafting any legal agreements to which the company is a party to ensure that the company can be correctly identified following future changes to its name; and * the date of incorporation. o The company becomes a legal entity (s 16(3)) from the date on which the certificate of incorporation is issued by Companies House. The date of incorporation is set out in the certificate of incorporation (s 15 CA 2006).

Question 44

What happens when converting a shelf company?

Answer 44

o For a shelf company is likely that the client will have to make some, or all, of the following changes (amongst others) to the shelf company to meet their requirements:  *Name – most shelf companies will have a name that has no connection with the client or its business (eg ABC 123 Ltd). It will therefore need to be changed to a name selected by the client. Under s 77(1) CA 2006 a company's name can be changed by a special resolution of the shareholders or by any other means provided by the company’s Articles (eg a decision of the directors by way of board resolution). Form NM01 is required to be filed at Companies House with the special resolution passed to change the name and the fee; * The new name will be effective once the Registrar of Companies issues a new certificate of incorporation.  Registered office - the client’s chosen address will need to be substituted for the first registered office in accordance with s 87(1) CA 2006. Form AD01 is required to be filed at Companies House.  Articles – it is common for a shelf company to have been incorporated with MA (though some firms and registration agents incorporate their shelf companies with a different form of Articles drafted in-house). You will need to consider whether the company’s existing Articles need to be amended, in accordance with s 21(1) CA 2006, to meet the specific requirements of your client. A company may alter its Articles by special resolution (SR). The amended Articles and SR need to be filed at Companies House.  Members, directors and the company secretary – representatives of the company registration agent or law firm will have become the first member(s) (subscriber(s)), director(s) and company secretary (if the company has one) of the company. New directors and company secretary are appointed by Board resolution then the old directors resign. It is therefore essential that: * the share(s) held by the subscriber(s) (the first members) is/are transferred using a stock transfer form. The client becomes the shareholder once it is entered on the register of members; * the client’s representatives are appointed as director(s) and the company secretary (if there is to be one). Forms AP01 (directors) and AP03 (secretary) are required to be filed at Companies House, and * the first director(s) and company secretary (if there was one) resign. Forms TM01 (directors) and TM02 (secretary) are required to be filed at Companies House. The order that appointments and resignations are made is very important; the company will always need at least one director to be CA 2006 compliant. o Liability for pre-incorporation contracts rests with the promoter under s 51 CA 2006, subject to any agreement to the contrary.