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BPP University College Of Professional Studies Limited (BPP)
Legal Practice Course
Business Law and Practice
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Pre-Module reading-
SECTION 2: Introduction to Company Law-
Ownership-
Owners of a company are its shareholders – members
Shareholders invest money in the company, in return for a share > evidenced by a share
certificate
The first shareholders of the company are its subscribers, as they subscribe to the articles of
assoc
Membership begins w/ the members name entered into the Company’s register of members –
s112(2) CA ‘06
A share is often described as a ‘bundle of rights’
The investor becomes a part owner of the company and will often have voting rights at
shareholders meetings
Several diff types of share.
These will carry diff rights & entitlements
These will be set out in the Art of Assoc
Most common = Ordinary share
Which allow the holder to vote at shareholder meetings and receive a share of the profits
-
Nominal or par value-
Shares in a limited company having a share capital must have a fixed nominal value
Common nominal value for an ordinary share = 1p, 5p or £1.
The nominal (or par) value of share is the min subscription price for that share & it
represents a unit of ownership, rather than the actual value of the share
A share may not be allotted/ issued by a company at a discount to its nominal value.
But it may be done so for more than its nominal value – the excess is known as the
‘premium’
The market value of a share will often be much higher than its nominal value.
-
Issued, allotted, paid up and called up shares-
Issued: shared are only issued and only form part of a company’s issued share capital, once the
shareholder has actually been registered as such in the company’s register of members, and his title
has become complete.
The total amount in value (nominal & premium) of all the shares in issue at any one time is known as
the ‘issued share capital’
, This is the amount of share capital that will be shown in the company’s accounts.
A company’s issued share capital is made up of:
Shares purchased by the first members of the company - ‘subscribers shares’
Further shares issues after the company has been incorporated
o New shares can be issued at any time, provided that the correct procedures are
followed
Allotment:
CA’06 s 558 -For the purposes of the Companies Acts shares in a company are taken to be
allotted when a person acquires the unconditional right to be included in the company's
register of members[F1(or, as the case may be, to have the person's name and other
particulars delivered to the registrar under Chapter 2A of Part 8 and registered by the
registrar)] in respect of the shares.
Paid-up:
Not always that the shareholder will have to pay the full amount due on their shares immediately
The amount paid is known as ‘paid up on the share capital’
The amount outstanding can be demanded by the company at any time
Called-up:
Once the money is demanded by the company, it has been called.
But it is extremely rare for shareholders not to pay the full nominal value on issue
-
Different classes of share-
A company may create different classes of share
e.g: two classes of ordinary share, where perhaps only one will carry voting rights.
Preference shares – will allow the holder a preferential right, such as the first claim to a dividend or a
return on capital on winding up.
The rights will depend on the terms on issue and will usually be set out in the Art of Assoc
-
Shareholders -
A shareholder need not be a human being. - a company with a sep legal entity can own property in
its own name. Hence a company may hold shares in another company
If Comp A owns all the shares in Comp B – then B will be a wholly owned subsidiary of A. A is
a parent/ holding company. A & B form a ‘group’ of companies
Where A owns only some, then B may still be a subsidiary, yet not wholly owned.
Shares held by companies are considered assets
From 1st April 06 – every UK company is required to identify its ‘people with significant control’ - PSC
, So any individual (human) that owns more than 25% of the shares/ voting rights of the
company and has the power to appoint/ remove a majority of its board of directors.
Every company must maintain a register of its PSC, which must be open for public inspection
s790A – ZG CA 06
o The intention of this is to create transparency so as to help combat tax evasion,
money laundering and terrorist financing.
o Must be filed at Companies House, along w/ the company’s confirmation statement
(prev known as annual return)
-
Limited liability-
Total nominal value of the shares held by a shareholder is equal to the total amount of that
shareholder’s liability to contribute to the assets of the company should it become insolvent.
This means that if all the shareholders shares are paid fully, he will not have to contribute
any further amount to the company on insolvency. Hence the limited liability of the
shareholder. Limited to the amount, if any, unpaid.
--
Management of companies-
Day to day management -
As an artificial person, the company needs human agents to make decisions on its behalf
Directors are responsible for the day to day management of the company
Their conduct is governed by the common law and principles of agency
They owe fiduciary duties to the company
The directors of a company together form a ‘board of directors’
-
Key decisions-
Some fundamental decision cannot be made by directors and are reserved for the shareholders
Making changes to the company constitution
Approval of certain transactions between directors and the company
Declaration of dividends
Removal of directors
-
Companies House-
All companies incorporated in England and Wales are registered at a public registry – Companies
House
Head of Companies house – registrar
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