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LAWS10083 Constitution of the Company Question and Answers
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LAWS10083 Constitution of the Company Question and Answers
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Constitution of the CompanyDISCUSSION QUESTIONS AND ACTIVITIES
Discussion Questions
1) What is the role and relevance of the model articles of association?
2) What i s the main consequence of regarding the certificate of incorporation as conclusive
evidence that the requirements of the CA 2006 as to registration have been met?
3) Compare and contrast the role of the memorandum of association before and after CA 2006.
4) What are the consequences of labelling the constitution a “statutory contract”?
5) To what extent, if at all, does s 33 of CA 2006 give a shareholder enforceable contractual
rights against a company?
6) What are the limits to shareholders’ powers to amend the arti cles of association?
7)What is the purpose of shareholders’ agreements?
What will be discussed:
- Nature of the foundational documents of the company.
- The way they are interpreted.
- The relationship between a company’s constituencies.
Avenues for creation
- Incorporation by registration most important.
Types of company
Public company limited by shares; they have to be limited by shares. There is no requirement for
a number of shareholders - you need to have the capital requirement - a nominal value for each
share. It is doesn’t prevent unlimited liability - but it would defeat the purpose of having a public
company. It incorporates in order to raise capital - it is impossible to raise capital by unlimited
liability. Private companies can be unlimited.
What is a public company? What makes it public as opposed to private?
They are limited by shares that are available to public.
In order to be a public, does it have to be traded by the stock market?
, No. It can offered to an unspecified recipients. They don’t have to be carried by a stock
exchange. Could be a public offer outside a stock exchange. As long as there is no defined
recipient. It has to be registered and stated as such that it is a public company. Issues shares to
the public.
One goes public so you can raise money by selling to the public. The private capital, with a
private investor is usually for investors in venture capital. They sell the company and exit.
At what point does it become public?
When it is sold to an unspecific general group of people.
Private companies can be limited by shares, guarantee or unlimited. If they undertake the
guarantee, in case of insolvency they will provide a specific amount. They do not contribute
equity - they just say we will give this given amount. Some organisations do not rely on share
equity because of things like being not for profit. Community interest companies are a special
type of company limited by guarantee - you need to have a certain purpose - which is of utility to
the community and in order to obtain finance, they need to be of this type.
Unlimited companies, - Here if the business losses its money, the debts extend to the members. It
is more acceptable in certain professions, as you are not trying to use limited liability to avoid
any debts. It refers to the idea of reputation and credit worthiness. If you are an accountant, you
may want to show that you have good reputation and you incorporate. The idea refers to
reputation and in certain circles that could give you an advantage.
Unlimited liability still have share capital, but it is a question of that there will be unlimited
liability - so the share capital has a significantly different role than in a limited liability company.
They are liable to how much they own in The Company. Joint and severally liable. The transfer
of shares will really depend on the articles of the company. Follows the articles of association.
Community Interest Companies - limited by shares or guarantee - they have to be certified.
European Company - European Public Company - It was meant to be a supranational company.
Something that transcends national boundaries. Linked with the idea of being able to move
around without having to liquidate your business, however the members of the EU were unable
to agree on the legal regime especially in regards to mandatory employee representation in the
, board. The EU Company ended up being a compromise, it is a national PLC that has certain
supranational roles that apply to it. The project has been stalling for many years.
Incorporation procedure
3 main ways to register a company;
- Using the web incorporation service - takes 24 hour - cheap and quick.
-A formation agent - not sure which type of company is good for your business not sure of your
obligations as a director, you may get advice from someone who can give them such advice.
-Paper filing; Takes up to 10 days and if you want it on the same day, it take £100
What kind of documents do you need to have?
-Application to register a company
- Memorandum of Association,
-Articles of Association unless the founders adopt the model articles in their entirety. You can
apply the entire model articles with some exceptions and you say the clauses you want to
change.
Another way is buying a company that is already created. Shelf companies. It would be a much
quicker way. Now since it is very easy, it is perhaps not a useful way of incorporating your
business.
The application for registration.
The application for registration must state the following information;
- Proposed Name - some are not allowed to be used.
- Need a registered office in the UK.
- Liability of the company's members.
- Form: private or public company.
- Statement of capital and initial shareholders or statement of guarantee. When the companies are
incorporated we state who are the shareholders and how much do they hold. The snapshot of
structure in the beginning.
- You think of who your directors are - you need one for private, two for public + a secretary.
Memorandum of Association: the standard content
The purpose of the memorandum, and how is it different.
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