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Social Science
Law
Legal Management
Topic 4: Company FORMATION
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Terms in this set (19)
What are the CONSEQUENCES of separate '
legal personality
'?
-
limited liability
for members,
-
perpetual succession
,
- company can
own property
and
sue/be sued
in its own name
What are some examples of when the courts will '
lift the veil
'?
- to
produce
a tax liability
- give
compensation
- prevent
tax evasion
-
reveal true national identity
- recognise
breakdown in a quasi-partnership
TYPES of Companies
- Companies can offer
limited or unlimited liability
to their members
- There are numerous differences between Ltd and plc companies covering directors, shares, names, AGMs amongst others
Private vs. Public:
- Limited liability can be conferred by guarantee or shares
- Companies limited by shares can have either Ltd or plc status
-
Public only has LIMITED liability
-
Private may have LIMITED or UNLIMITED liability
FORMATION of a company in the UK:
- To obtain registration of a company limited by shares an application must be sent accompanied by various documents and a fee
- A
plc
even when incorporated, may not trade without a
Trading Certificate
- A
Certificate of Incorporation
is issued by the Registrar and is conclusive evidence that the provisions of the
Companies Act
have been followed
- The
'off the shelf'
method of setting up a company avoids the administrative burdens of registration
Who is a
promoter
?
= person who takes the necessary steps to form a company/make business preparations for the company
HOWEVER, a person who acts merely in a professional capacity in company formation e.g. solicitor/account, is not a promoter
What are the duties of a promoter?
General duties:
1. exercise reasonable
skill and care
Fiduciary duties:
1. to
account
2.
avoid conflicts of interest
3. to
disclose
4. to
not make secret profits
How can promoters avoid liability under
pre-incorporation contracts
?
- by forming contracts in
draft
- by purchasing a company
off the shelf
- by attempting to
novate
the contract
Restrictions for choice of a
company name
(
Companies Act 2006
):
Name CANNOT:
- be
offensive
- constitute a
criminal offence
- be
sensitive
(words 'british' or 'international' require approval from the secretary of state!)
- be the
same as an existing company
What is the 'Articles of Association'?
(from google)
- form a document that specifies the
regulations for a company's operations
and defines the company's purpose.
- the document lays out how tasks are to be accomplished within the organization, including the process for appointing directors and the handling of financial records
- they are related to the
internal working or management
of the company.
Which parties does the '
Articles of Association
constitute a binding contract between?
= binding contract between the company & its members, but
not third parties
- They may be
changed via a special resolution
after which the Registrar must be informed
- The articles may not be definitely declared unalterable, but can be effectively entrenched via weighted voting rights
What do
'company records'
refer to?
= any register, agreement, minutes, accounting records, or other documents required to be kept by the
Companies Act
An incorporated company must keep what company records?
- registers of members, directors, resolutions and minutes and charges
- accounting records e.g. accounts, director's reports, renumeration reports, auditor's reports and confirmation statement
Plc vs. Ltd - what is their deadlines for filing their accounts?
-
Plc
:
within 6 months
of year end
-
Ltd
:
within 9 months
of year end
Which companies are EXEMPT from having to have a statutory audit?
a)
'micro-entities'
and
small
companies
b)
dormant
companies
c)
non-profit
companies
MICRO-ENTITIES meet at least
2
of the following requirements...
— turnover
≤ £632k
— balance sheet
≤ £316k
— employees
≤ 10
A SMALL company meets at least
2
of the following requirements...
— turnover
≤ £10.2m
— balance sheet
≤ £5.1m
— employees
≤ 50
What is a
company secretary
?
= an officer of the company and faces the
same liability as a director
functions include: organising meetings, maintaining registers and filling documents
Plc vs. Ltd - which must have a company secretary?
-
Plc
:
MUST
appoint a company company secretary
-
Ltd
: with
> 1 director
need
not
appoint a company secretary, can choose whether to have one
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