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LPC - BLP NOTES - COMPANY FORMATION (DISTINCTION)
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Notes on company formation. used to achieve a distinction in the LPC BLP exam.
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BLP – COMPANY FORMATIONHow to set up a company.
An entrepreneur can start their business as a company in one of two ways: Either she sets
up a new company from scratch, or she can buy an existing shelf company.
Forming a new company from scratch:
A company does not exist until it has been formed.
o The birth of a new company – its incorporation – takes place in accordance
with section 7 of the CA 2006 by a process known as registration.
What does registration involve?
o Registration generally involved preparing a number of documents and
delivering them to the registrar of companies at companies house, together
with a fee.
o The documents which must be prepared and delivered to the registrar for a
private company limited by shares are:
An application for registration as a company
A memorandum of association for the company
Articles of association for the company.
o The documents may be delivered in either paper form in person, by post or by
electronic form.
o Once the correct documentation has been submitted and the correct fee paid,
the registrar will check the documents to see that everything has been
prepared properly and is in order. If all requirements have been satisfied, he
will register the documents delivered to him and will then issue a certificate of
incorporation for the company.
o The company comes into existence on the date stated on its certificate
of incorporation.
o Electronic registration:
Vast majority of new companies are registered electronically. There
are two ways in which this can be done:
The companies house software filing service; or
The companies house web incorporation service.
The most common way of using the software service is via a company
formation agent. A company formation agent specialises in registering
new companies.
A person who wishes to register a new company may, in return for
paying for the service, simply enter the required information for the
new company on one of the agent’s websites.
The registration documents are then generated and sent electronically
to companies house by the agent on the individual’s behalf.
Alternatively, companies house maintains a list of software suppliers
on its website from who it is possible to purchase the software.
o Paper registration:
An alternative to electronic registration, it is possible to register a new
company using paper documents.
Hard copies of the documents and the fee must be sent to the
registrar of companies at companies house in the jurisdiction in which
the company is to be registered. This may be done by post or by
person.
Documentation.
Although anyone, including the entrepreneur is allowed to prepare and submit the
documentation to register a new company, because of the need for legal documents
, and the volume of rules, the potentially complex concepts involved, and the specialist
technical language used, it will often be prepared by either a solicitor or an
accountant, or a company formation agent.
In order to submit the information electronically or to draft the documentation in paper
form, you will first need instructions from your client on the key elements of the
proposed new company.
Will the new company be owned partly or wholly by the entrepreneur?
What is the preferred name?
How many directors will there be?
Who will the directors be?
How many shareholders will there be?
Who will the shareholders be?
o Application for registration: the application for registration of the company is
required by section 9(1) of the CA 2006.
The application must contain:
The type of company being registered – section 9(2)(c) and (d).
The new company’s proposed name – section 9(2)(a)
The address of the new company’s registered office, including the
country – section 9(2)(b) and 9(5)(a)
A statement of capital and initial shareholdings – section 9(4)(a)
A statement of the new company’s proposed officers – section 9(4)
(c)
A statement of initial significant control – section 9(4)(d)
Possibly a copy of the new company’s articles of association –
section 9(5)(b)
A statement of compliance – section 9(1)
Electronic registration
The electronic version of the application for registration consists of
a number of requests for information on the website of the
company formation agent or Companies House Web Incorporation
Service.
Paper registration.
The hard copy application for registration is known as From IN01
A copy may be found on the companies house website.
Type of company
Various different types of company.
The application must state what the type of company is, whether private or public,
limited or unlimited, and limited by shares or by guarantee – section 9(2)(c) and (d).
Company name.
Choosing the name of a company is not purely down to the client deciding what they
would like to call it.
There are a number of detailed statutory rules which govern which name can or
cannot be used for a company and these must be complied with.
First step is to search the index of company names at companies house – necessary
under 66(1) as a company must not be registered with the same name as one
already appearing in the index. This is to avoid people getting companies confused.
o Under the regulations the ‘same’ name includes not just an identical name but
also names which would be essentially the same if simple elements were
disregarded. Essential elements include:
Status of company, certain words, punctuation marks, symbols and
plurals.
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