Problem Questions and Answers on Company Law

October 9, 2017 Law

Coursework 1

Adam, Belle, Claire and Dennis have decided to put up a new company which is private, limited by portions.

Section 1 – Incorporation Documentation

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Memorandum of Association ( MoA )

  1. Under the Companies Act 1985 [ 1 ] the Memorandum of Association [ 2 ] sets out a company’s fundamental law and aims. ?t besides forms the footing of a company’s being, by modulating external personal businesss (ss 2-6, CA85 )[ 3 ] .

The MoA was significantly simplified subsequently by the Companies Act 2006 [ 4 ] . Now, it requires the names of the first endorsers. Besides unders 8 ( 1 ) ( B )[ 5 ] it states that the first endorsers must be allotted with at least one portion and automatically become members of the company. The new act simply evidences the subscribers` purpose to organize a new company and therefore upon enrollment, the members need to authenticate it [ 6 ] .

IN01 Form

  1. Along with the MoA, an application for enrollment and a statement of conformity must be delivered to the Companies House ; referred to as the IN01 Form.

TheCA85replaced assorted demands of the MoA with the Application for Registration [ 7 ] (s. 9, CA06) [ 8 ] , every bit good as rushing the manual procedure of the MoA`s content (US Secret Service 2 and 10, CA85) [ 9 ] . The information required is included ins 9 ( 2 ) , s 9 ( 4 ) , s 9 ( 5 ) and 9 ( 6 ) of CA06[ 10 ],and briefly this includes the company`s inside informations such as the name, topographic point of registered office, portions, capital, proposed officers and a transcript of the company`s AoA. All these need to be delivered to the relevant registrar with the needed fee [ 11 ] .

Part 1

  1. The company is identified by its name and consecutive figure, hence they both need to be alone. As this is a private company, limited by portions, the right postfix must be placed at the terminal ; “Limited” or “Ltd” (s 59 ( 1 ) , CA06) [ 12 ] . The name on the index can be checked by the WebCheck [ 13 ] .
  1. “ABCD Limited” is non available as it is already on the registrar.s 66 ( 1 ) , CA06[ 14 ] clearly provinces that a company can non be registered by the same name as another company in the index of company names (s 1099 )[ 15 ] .
  2. “4 Friends Ltd” is free in the registrar. However, it is non advised to utilize this name as a company “FOURFRIENDS LTD” is in the registrar’s index. Technically, you can utilize “4 Friends Ltd” but unders 67 ( 1 ) , CA06[ 16 ] , the Secretary of State [ 17 ] may judge that this will be passed off as a similar name. In that instance, the company will hold to alter its name within 12 months of enrollment (s 68 ( 2 ) , CA06) [ 18 ] , unless “FOURFRIENDS LTD” has given consent for the proposed name to be used.
  3. “Adam & A ; Company Limited” is available on the registrar, but in the index a company under the name “ADAM & A ; COMPANY PUBLIC LIMITED COMPANY” is registered. Therefore, as stated inPart 1 C. II, this is a affair of the SoS to make up one’s mind upon.
  4. “A Thru D Ltd” is available on the registrar.
  5. “Belle & A ; Co Ltd” is already on the index and therefore it can non be used. SeePart 1 C. I.
  6. “The Red Cross Federation Limited” can non be used. To get down with, this will be interpreted as a misleading name (s 76 ( 1 ) , CA06) [ 19 ] , as the company has nil to make with the non-profit Red Cross administration.

In add-on, even if the name is non interpreted as misleading, so under the Geneva Conventions Act 1957 [ 20 ] it can non be used under any fortunes.s 6 ( 3 )[ 21 ] Clearly prohibits anyone to utilize diction that is associated with the Red Cross Organisation [ 22 ] .

  1. Registered office (s 9 ( 2 ) ( B ) , CA06[ 23 ] )
  1. A company requires a registered office at all times because this is where all communications and notices will be addressed [ 24 ] . In add-on, unders 86, CA06[ 25 ] the registered office is the reference stated available for review for any registry, index or other papers ; and, that all paperss by said company have the reference mentioned [ 26 ] .
  2. A company that is registered in “England and Wales” can non hold a registered office in Scotland or Northern Ireland. It’s a different legal power and upon enrollment they will hold to province in what legal power the company will be ; A5 of the IN01 signifier (s 15 ( 2 ) ( vitamin E ) , CA06) [ 27 ] . If a registered office is required in Scotland or in Northern Ireland, so a new company will hold to be formed under the specific legal power [ 28 ] .
  1. Articles of Association
  1. The Articles of Association [ 29 ] are the regulations of a company and regulate its internal personal businesss. In other words this is the fundamental law of the company (s 18, CA06[ 30 ] ) . In add-on, it forms a statutory contract between its members and the company (s 33[ 31 ] ) .

The first Option available on A7 of the IN01 signifier is to obtain theoretical account articles, besides known as “off the shelf” (The Companies ( Model Articles ) Regulations 2008[ 32 ] ) .

Option 2 once more has to make with “off the shelf” articles but, you can add and/or amend commissariats. The extra and/or amended commissariats must be attached to the IN01 signifier.

As opposed to Options 1 and 2, Option 3 is wholly new articles. For case, all the commissariats are drafted from abrasion, known as bespoke articles ; a transcript of the bespoke must be submitted with the IN01 signifier [ 33 ] .

  1. As they want to amend certain articles, it is advised to utilize Option 2 and click the first box ( Private limited by portions )
  2. Section A8 of the IN01 signifier refers to intrench articles. Entrenched articles are specified commissariats which may be amended if conditions are met. However, they are more restrictive than those which merely require a particular declaration. Entrenchment may be made by the articles on formation or an amendment which is agreed by all the members of the company. However, the tribunal can still order a company to change its articles, even though they are entrenched (US Secret Service 22, 23, 24, CA06[ 34 ] ) .

Part 2

  1. Proposed Military officers
  1. A Private company unders 270 ( 1 ) , CA06[ 35 ] does non necessitate a company secretary. This nevertheless, was non the instance before 1stof October 2009, when the CA06 came into force. Unders 283, CA85[ 36 ] , every company was required to hold a secretary.

The maps of a company’s secretary are non defined in the Acts of the Apostless. However, a better apprehension is made in the instance ofRe Maidstone Buildings Provisions Ltd[ 37 ] . The judgement held that “A secretary is non concerned in the direction of the company. Equally, I think he is non concerned in transporting on the concern of the company … a individual who holds the office of secretary may in some other capacity be concerned in the direction of the company`s concern [ 38 ] .”

  1. A corporate secretary ensures the unity of the administration model, and for the efficient disposal, for illustration, guaranting conformity with statutory and regulative demands and implementing determinations made by the board. The corporate secretary is non needfully a human being.

As a company secretary is non defined in the act, so for now they might non necessitate a corporate secretary.

  1. Yes, everyone can be a manager ass 154, CA06[ 39 ] provinces that a private company must hold at least one manager. Hence, it is possible to hold 4 managers.
  2. A corporate manager is a natural individual moving as a manager of the company.

From the 1stof October 2010 all companies are required to hold at least one natural manager (s 155, CA06[ 40 ] ) and his inside informations must be stated in E1 of the IN01 signifier

  1. The “Usual Residential Address [ 41 ] ” it the usual place reference of the natural individual moving as the manager and will non be available to the populace record. Whereas, the “Service Address” can be used to have communications by 3rd parties.

The “Service Address” can technically be the same as the “URA” . However, as the “Service Address” is publically recorded, it is advised to utilize a different “URA” so that the information is disclosed from the populace. This has replaced the old system where merely officers at serious hazard could hold their residential references kept off the populace record ; and with the old system the registered office could be the same as the “URA” [ 42 ] .

The necessary information is given in subdivisions D1-D5 of the IN01 Form and it is in conformity withs 165, CA06[ 43 ] .

Part 3

  1. Statement of Capital
  1. Equally shortly as the Companies Act 1985 was in force, a company was required to hold a nominal value of portions. This is a fixed sum prescribed by members (s 542, CA06 )[ 44 ] ; in our instance, the nominal value is ?1. The Shares can ne’er be issued at a price reduction (US Secret Service 552 and 580, CA06 )[ 45 ] , in other words, lower than their nominal value. The instance ofOoregum Gold Mining Co v Roper [ 1892 ][ 46 ] illustrates this point when it refers to a “Fixed amount” for nominal value.

On the other manus, the portion premium is the sum received over and above the face value of the portions ( anything over ?1 ) (s 610, CA06 )[ 47 ] .

By and large talking there are no limitations on who holds portions, but the company which can non be a member of itself (Trevor V Whitworth ( 1887 )[ 48 ] . However, there are some exclusions stated in s659, CA06[ 49 ] :

  • Treasury portions (s 724, CA06) [ 50 ] .
  • Shares may be acquired for the intent of capital care.
  1. Ordinary portions are used to depict the portions of a company with merely one category of portions. In the CA06 they are known as “equity shares” . They are the simplest signifier of portions and by and large carry one ballot per portion, but have no dividend rights attached to them (s 560) [ 51 ] .

In contrast, Preference portions give the holder discriminatory rights, normally in dividends and/or return of capital when weaving up the company. Preference portions are non defined in the Act, nevertheless, they are eligible to have automatic “Fixed discriminatory cumulative dividend” . In other words, stockholders with Preference portions are entitled of any dividends that have been omitted in the yesteryear, and if more dividends are left so common stockholders receive those rights [ 52 ] .

The statement of capital must be completed in F1-F5 of the IN01 signifier.

H.Initial Shareholdings.

  1. When make fulling in subdivision F5 all they need to be cognizant of is who has ownership of the company. The ownership is determined by the per centum of issued portion capital that each stockholder owns.

Partss 4 and 5

I.They do non necessitate to finish both parts as portion 4 is merely for companies limited by warrant ( Charities ) . However, Part 5 demands to be completed by all companies ( Statement of conformity ) .

Concluding Page

J.The fee owed to the companies house for registering depends if it is submitted electronically or by paper and if you need the same-day incorporation service. Below is a dislocation of the fees [ 53 ] :

Electronic ( Software )

  • Same-day: ?30
  • Normal: ?13

Electronic ( Web incorporation Service

  • Normal: ?15

Paper

  • Same-day: ?100
  • Normal: ?40

*Fees are capable to periodic alteration. You should ever look into the Companies House for current fees[ 54 ].

Articles of Association

K.Tweaking the Articles

  1. Yes, mentioning back to E. II. , our clients have chosen to utilize theoretical account articles with certain amendments of commissariats. It is allowable to cancel the mention toArticle 8[ 55 ] in7 ( 1 )[ 56 ] andArticle 8every bit long as they attach a transcript of the alterations before entry.

However, DeletingArticle 8might interfere withArticle 15[ 57 ] in the hereafter. Therefore, it is non advised to cancelArticle 8.

  1. Yes, they can alter it but it’s irrelevant becauseArticle 11 ( 2 )[ 58 ] provinces that “it must ne’er be less than two” . Therefore, this already meets their demands.
  2. Yes, they will hold to amend/removeArticle 17 ( 1 ) ( a )[ 59 ] .
  3. Article 26 ( 5 ) of the theoretical account articles ensures that the managers have the authorization to decline anyone to register the transportation of a portion. And, underArticle 27 ( 2 ) ( a )[ 60 ] , they may take to go holder of these portions or have them transferred to another individual.
  4. The default is two measure uping individuals at a meeting (s 318 ( 2 ) , CA06) [ 61 ] . In the scenario that they want to put the quorum at 3, so they will hold to add that proviso to article 38 of the theoretical account articles and once more guarantee that they attach the transcript before enrollment.
  5. The managers have the authorization if they decide to utilize a company seal or non (Article 49 ( 1 )) [ 62 ] . In that instance, there is no demand to take this proviso.

L.After enrollment the company still has the power to amend any of its AoA (s 21, CA06[ 63 ] ) , which can be done under a particular declaration ( must be a declaration by the members passed by 75 % ) (s 283[ 64 ] ) .

However, there are some restrictions. For illustration, a clause restricting the company from amending is invalid as seen in the instance ofPunt v Symonds & A ; Co Ltd[ 65 ].The changes must be “for the benefit of the company and the members as a whole” [ 66 ] .Allen v Gold Reefs Of West Of Africa Ltd[ 67 ], in which it washeld that changes could non be inferred with the tribunal unless the amendments were bona fide for the good will of the company, illustrates this point.

Any amendments of the articles must once more be sent to the registrar (s 26 ( 1 ) , CA06) and published (US Secret Service 1077/1078, CA06[ 68 ] ) .

M.They should include a clause in the AoA about Erin.However, will she be bound by it? Case jurisprudence suggests that she won’t be bound it. The trial is provided inHickman v Kent or Romney Marsh Sheep-Breeders Association[ 69 ] , and it stated that “an foreigner to whom rights intent to be given by the articles in his capacity as such foreigner, whether he is or later becomes a member, can non action on those articles handling them as contracts between himself and the company to implement those rights” [ 70 ] .

As Erin is Adam`s girl, she might reason that she is non an foreigner. However, in the eyes of the jurisprudence she is non a member and therefore an foreigner. She might derive some 3rd party rights unders 6 ( 2 ) of Contracts ( Rights of Third Parties ) Act 1999[ 71 ] but, this act does non use to statutory contracts.

The lone scenario where Erin has rights, is if she creates a separate contract with the company outside the articles.

Section 2 – Pre-incorporation Business

N.Yes,s 51, CA06[ 72 ] allows for pre-incorporation contracts to be entered into.

  1. Prior to incorporation, the company does non yet exist, and an effort to move on behalf of the company before the birth certification [ 73 ] has no legal consequence as the company may ne’er be formed. A booster needs to be assigned in order for the company to come in pre-incorporation contracts. The term “promoter” is defined by Lord Cockburn CJ as “one who undertakes to organize a company with mention to a given undertaking and to put it traveling, and who takes the necessary stairss to carry through that purpose” [ 74 ] .

When subscribing contracts “for and behalf of” the company, the individual authorising it ( booster ) will be normally held apt as seen in the instance ofKelner V Baxter ( 1866-87 )[ 75 ].

  1. Promoters may except liability and still guarantee that the contract is valid through two processs. The first requires an express term in the pre-incorporated contract to except personal liability which may be done under the relevant subdivision [ 76 ] . This option terminates the promoter’s personal liability once the company is incorporated. As confirmed inPhonogram Ltd v Lane [ 1982 ], where the words “subject to any understanding to the contrary” [ 77 ] were analyzed, and interpreted as “unless otherwise agreed” [ 78 ] . Hence an exclusion of personal liability must be given [ 79 ] .However the booster must ne’er subscribe a contract in the name of the company prior to incorporation. As Goddard CJ stated in the instance ofNewborne V Sensolid Ltd ( 1954 ): “as the company was non in being when the contract was signed at that place was ne’er a contract” [ 80 ] .

The Second Procedure is called “Novation” . The freshly formed company must make a new contract with the same old footings. Ratification is non plenty as it is now a different contract with the incorporated company alternatively of the booster [ 81 ] .

Section 3 – The Corporate Entity

O.It is of import to remind ourselves, that this is a company private limited by portions. With that noted, the thought that their personal assets will be protected stems from the landmark instance ofSalomon v Salomon & A ; Co [ 1897 ][ 82 ] . The chief rule ofSalomonderives from the diction “separate Legal Entity” . To organize a better apprehension, “separate legal entity” means that the company acts as a jural individual in the eyes of the jurisprudence therefore, the persons involved in the company are non personally apt if something should travel incorrect [ 83 ] . The company as its ain legal individual is apt for all its debts, non the proprietors. Therefore, merely the company can be sued and non the members ; risk merely arises to the members if assets were purchased illicitly.

However, there are exclusions to this rule and this facet is one of the most equivocal countries in company jurisprudence. This is where a tribunal decides to disregard the “separate legal personality” ; and it was created by the landmark instance through the diction “the head covering of incorporation” . There is no general rule on how a justice might make up one’s mind to raise the corporate head covering [ 84 ] . However, the corporate head covering might be lifted where there is clear maltreatment of the corporate signifier. This was illustrated in the instance ofJones v Lipman [ 1962 ][ 85 ] where an improper refusal to sell a house was made due to the fake transportation of the house to a company controlled by Lipman [ 86 ] . Thus abysmal fortunes might take to personal liability if decided so by the Judgess.

Bibliography

  • Primary beginnings
  • Cases
  • Allen v Gold Reefs Of West Of Africa Ltd [ 1900 ] 1 Ch 656
  • Hickman v Kent or Romney Marsh Sheep-Breeders Association [ 1915 ] 1 Ch 88a
  • Jones v Lipman [ 1962 ] 1 ALL 442 ( ER )
  • Kelner V Baxter [ 1866-87 ] 2 LR 174 ( CP )
  • Newborne V Sensolid ( Great Britain ) Ltd [ 1954 ] 1 QB 45
  • Ooregum Gold Mining Co v Roper [ 1892 ] AC 125
  • Phonogram Ltd v Lane [ 1982 ] QB 938
  • Punt v Symonds & A ; Co Ltd [ 1903 ] 2 Ch 506
  • Re Maidstone Buildings Provisions Ltd [ 1971 ] 1 WLR 1085
  • Re Northumberland Avenue Hotel Co Ltd [ 1886 ] 38 ChD 156
  • Salomon v Salomon & A ; Co [ 1897 ] 22 AC
  • Supplies Ltd V Jerry Creighton Ltd [ 1951 ] 1 KB 42
  • Trevor V Whitworth ( 1887 ) 12 App Cas 409
  • Legislation
  • Companies ( Model Articles ) Regulations 2008/3229
  • Companies Act 1985
  • Companies Act 2006
  • Contracts ( Rights of Third Parties ) Act 1999
  • Geneva Conventions Act 1957
  • The Companies ( Model Articles ) Regulations 2008
  • Secondary Beginnings
  • Books
  • Alexis Mavrikakis, Helen Watson, Christopher Morris and Nick Hancock, CLP Legal Practice Guides: Business and Company Legislation ( College of Law Publishing, UK 2014/15 )
  • Alexis Mavrikakis, Helen Watson, Christopher Morris and Nick Hancock, CLP Legal Practice Guides: Business and Company Legislation ( College of Law Publishing, UK 2012/13 )
  • Boyle and Birds, Company Law ( 8th, Jprdan Publishing Limited, Bristol 2011 )
  • Charles Wild and Stuart Weinstein, Company Law ( 16th, Pearson Education Limited, Edinburgh gate 2013 ) 74-77
  • L.S. Sealy, Cases And Materials In Company Law ( Cambridge University Press, Cambridge 1971 )
  • Sealy and Worthingtons, Cases And Materials In Company Law ( 10th, Oxford, UK 2013
  • Susan McLaughlin, Unlocking Company Law ( 2nd, Routledge, Oxon 2013 )
  • Diaries
  • A Daehnert, ‘The minimal capital demand – an mistiming under preservation: Part 1 ‘ [ 2009 ] Comp. Law
  • G Scanlan, ‘The Company Names Adjudicator – A New Regime – New Principles ‘ [ 2007 ] Comp. Law, 172
  • S Ottolengthi, ”From Peeping behind the Corporate Veil, to Ignoring It Completely ‘ [ 1990 ] Modern Law Review
  • Tan Cheng-Han, ‘Veil piercing – a fresh start ‘ [ 2015 ] Journal of Business Law
  • Dictionaries
  • Woodley, M. G, Osborn ‘s concise jurisprudence lexicon. ( 11th, Mick Woodley, London: Sweet & A ; Maxwell/Thomson Reuters 2009 )
  • Web sites
  • www.companieshouse.gov.uk
  • Ben Pettet, ‘Promoters and pre-incorporation contracts ‘ ( Oxy.com 2013 ) & lt ; hypertext transfer protocol: //law.oxy.co/promoters-and-pre-incorporation-contracts-91620/ & gt ; accessed
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