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LPC - BLP MODULE - COMPANY INCORPORATION (DISTINCTION)
- Module
- LPC
- Institution
- Swansea Metropolitan (UWTSD)
Notes on the formation of a limited company
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BLP – Company Incorporation.Why choose a company?
Incorporation means creating a company - Turning a business that you already have from un
incorporated to incorporated.
Incorporation gives the business its own body – its own legal identity.
The business owner if they are a shareholder and director enjoy limited liability. The limit of
their liability is the amount they have paid for their shares in the company.
o If shares already paid for in full the there is no liability.
o If money is owed for shares/only partially paid for – then you are liable for the
money you owe but that is it.
Might in some cases have to give personal guarantee on loans/ liabilities etc which may
erode this liability but this is individual, and limited to what the individual is willing to be
liable for and agree too.
Separate legal identity.
Solomon v Solomon.
The fact that the company has its own separate legal identity shapes how we act for
companies, the advice we give, the way become insolvent, the way they do business etc.
Directors etc are agents of the company. When they become liable for the company the
‘corporate veil’ is said to have been lifted.
The corporate veil is the protection/the limited liability that protects the agents of the
company.
The human side.
The company needs humans to carry out its acts.
Directors and shareholders are separate. Someone can however be both.
Company secretary – small companies are not required to have a secretary. Public
companies do.
Ultra Vires.
Ultra vires is Latin for beyond the powers.
Way in which companies can avoid liabilities.
Companies no longer have object clauses.
There may be internal ultra vires – company director has acted in excess of their remit
Memorandum.
Used to be very important. Since the companies act 2006 – importance has been
diminished.
Used to deal with the outward relationship between the company and the world. It not just
contains the basic details of the company.
Has to be signed by the original subscriber who is one of the, or the first, share holder.
Articles of Association.
THE MOST IMPORTANT DOCUMENT IS THE ARTICLE OF ASSOCIATION.
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