BPP University College Of Professional Studies Limited (BPP)
I completed the LPC (Legal Practice Course) at BPP University in 2017 with a 90% distinction. These very detailed and condensed notes cover the entire Business Law and Practice module, including tax, business accounts and procedure plans. I have covered every SGS and highlighted all the key statuto...
BPP University College Of Professional Studies Limited (BPP)
Legal Practice Course
Business Law and Practice
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SETTING UP A BUSINESS CONSTITUTIONAL DOCS
OBJECTS
• S9 IN01 must incl. –
o Company name + registered office
• CA 1985 If incorporated before CA 2006, objects clause = restricted types of activities o List of initial directors + addresses
• Code
• CA 2006 o S8 Memorandum of association – each agree to take at least 1 share
o O(1.9) Inform client of complaints procedure
o S31 Unrestricted objects, unless AoA restricts objects o S10(2) Statement of capital
o O(1.13) At outset, advise client on possible fees in client care letter
o S28 Companies incorporated before CA 2006 = retain objects clause ∴ amend AoA! • S86: Company must nominate a registered office to serve docs
o O(3.1) Conflict check between solicitor’s personal interest / 2 diff clients (e.g. advises company + director in
o S39 If breaches restriction, ultra vires act = valid CONVERTING A SHELF COMPANY
capacity as a director > individual)
§ Protects 3rd party if entered transaction w/ company that lacked authority/capacity to act • Incorporation from scratch:
o Due diligence: Verify identity to ensure client ≠ money laundering
§ But shareholders’ action / directors personally liable o + Tailor-made company to meet client’s requirements
o If fears client can’t pay, ask for ££ on account
SPENDING LIMITS § + If want complex shareholdings, shareholdings can be set up specifically from scratch > going
• AoA may restrict ££ spent w/o shareholder approval through ↑ complex transfers
o If low limit = adversely affects company’s ability to trade effectively + exploit opportunities o +/- Fee
o ↑ Spending limits by SR / written resolution o - Formalities: *If shelf company requires tailor-made AoA, formalities ≠ significant factor
• Instead, directors could agree to certain spending limits § Copy of memorandum
o Amend via board resolutions § IN01 incl. statement of capital, statement of compliance, statement of significant control
§ AoA (/MA)
QUORUMS § Fee
Board meeting o + Now, faster: online incorporation can be incorporated on same day (if pays premium)
• MA 7(2) If 1 director, quorum = 1 § - But online incorporation must occur during CH opening hours
• MA 11(2) BM quorum = 2, unless AoA states otherwise
• Purchasing a shelf company:
• MA 14 Interested directors ≠ count towards quorum
o + Exists now + ready to trade = ↑ convenient, esp. if client wants to enter contract now
General meeting § VS. Incorporation from scratch = needs to wait for certificate of incorporation
• S318(1) If 1 shareholder, quorum = 1 o + Available out of hours
• S318(2) GM quorum = 2, unless AoA states otherwise o +/- May be cheaper, b/c fewer costs
o But invalid if quorum > than no. of shareholders § Depends on lawyer’s fees, esp. if making changes
o - Needs to be tailored to client’s needs = ↑ time/££/effort
Written resolutions
CHANGES
• Sent to all eligible parties to vote
• If fails to vote = deemed to abstain
• If required majority votes in favour = decision approved
VOTING
• MA 13 If deadlock, chairman’s casting vote
• If director abstains from voting ≠ count towards no. of people voting
o E.g. 5 directors, 1 abstains = requires 3/4 directors to vote in favour of resolution
AMENDING ARTICLES OF ASSOCIATION
• S21 Amend AoA by special resolution
• S26 File amended AoA at CH within 15 days
1) Legality test
• If conflicts w/ CA, AoA ≠ enforceable: E.g. Directors can’t unilaterally alter AoA
o Check min/max thresholds, qualifications
• If CA silent on issue, AoA applies: E.g. Chairman’s casting vote
INCORPORATING A COMPANY 2) Commerciality test
• S16 Company has no legal personality + cannot trade until incorporated (when CH issues Certificate of • AoA should suit the company’s size/nature/objectives
Incorporation)
o Private companies can start trading
o Public companies ≠ start trading, until Registrar issues trading certificate
• Company (principal) acts via directors (agents): If unincorporated, no agency
• Company can’t ratify pre-incorporation contracts ∴ if individual signs contract on behalf of unincorporated
company = individually personally liable for breach under s51
o But parent may indemnify X
o To be bound, use novation to get benefit of contract
PRIVATE VS. PUBLIC LIMITED COMPANIES DIRECTORS
• Executive directors: Day-to-day running of company + full-time employees under employment contract
• NEDs: Board members ≠ involved in day-to-day running + may have contract for services, but not
employment contract
• Shadow directors: Informal directors = gives instructions in which directors are accustomed to follow
DIRECTORS’ POWERS
• MA 3 Directors’ general power to exercise all powers of company
• MA 5 Delegate powers to any person/committee
• MA 19(2) Directors’ power to determine their own remuneration
DIRECTORS’ DUTIES *AoA may make duties ↑ onerous, but never ↓ onerous
• S170 Directors owe duties to company ∴ only company can enforce them
• S171 Act within powers, e.g. CA 2006: transactions of a certain value/type requires shareholder approval
• S172 Promote success of company e.g. buys expensive car ∴ advise for cheaper options
o Duty to act in a way they believe will benefit company
o Enlightened shareholder value: Consider stakeholders –
CHOOSING COMPANY NAME § Likely long term consequences
• S77 Change name by special resolution / by other means in AoA= effective once certificate of incorp issued § Employees, customers, suppliers, community, environment, company’s reputation
• Company’s name can’t – • S173 Independent judgment
o S53 Offensive • S174 Reasonable care, skill + diligence *Only remedy = damages
o S54 Suggest association w/ govt o (2)(a) Objective standard: General knowledge, skill + experience that may be reasonably expected of
o S55 Use certain sensitive words, e.g. University, NHS, Banking, Royal = requires SoS approval a person carrying out the same functions as the director
o S66 Already registered REGISTERING AT COMPANIES HOUSE o (2)(b) Higher subjective standard: general knowledge, skill + experience of that particular director
o S67 Too similar to existing name • Send to registrar at Companies House:
o S75 + 76: Misleading o 1) Application form (IN01)
• CA 2006 Trading disclosure = display name at registered office + docs o 2) AoA
o 3) Fee
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