notes by serenalky @ stuvia // https://www.stuvia.com/user/serenalky
BLP NOTES
SGS 1 - Setting up in business
Business Accounts
• To ensure the shareholders’
• Asset - OWN / Liability = OWE eg agreement is binding on a new
loan shareholder, a deed of adherence
• Assets - equipment, debtors, cash should be entered into.
• S435 - associate of director is
at bank, petty cash, stock
connected persons / siblings
• Liability - provision for
• Voting on poll - depends on stake of
depreciation, creditors, loan,
provision for doubtful debts shareholding in company
• Under s.281 CA 2006 only private
• Capital - drawings
companies may pass a
shareholders’ resolution by way of
a written resolution.
Procedure Plan - always consider • Section 282(2) CA 2006 states that
a written ordinary resolution can be
passed by a simple majority of the
1. Who transacts the business – the total voting rights of eligible
board or shareholders? members (i.e. the same voting
threshold required for an ordinary
2. Call - how, and by whom, must the resolution if passed at a GM on a
meeting be called? poll vote with no shareholders
3. Notice - how much notice is required to abstaining).
be given and to whom? • Sections 283(2) and (3) CA 2006
4. Quorum - what quorum is required? state that a written special
resolution must state it is a special
5. Agenda - what is on the agenda for the resolution and can be passed by a
meeting and is it set out in the correct majority of members representing
order? The notice of a GM which is not less than 75% of the total voting
given or sent to members must rights of eligible members (i.e. the
describe in sufficient detail the same voting threshold required for
business to be transacted in order for a special resolution if passed at a
members to decide whether they wish GM on a poll vote with no
to attend or not (s.311(2) CA 2006). shareholders abstaining).
Further, if a special resolution is • Section 284(1) CA 2006 states that,
proposed, the notice must specify that where a company has a share
the resolution is to be passed as a capital, every member has one vote
special resolution and must set out the in respect of each share held by him
text of the resolution (s.283(6)(a) CA when voting on a written resolution.
2006). Whilst there is no requirement to • Sections 288 - 300 CA 2006 contain
do so, in practice the wording is set out the general provisions applying to
in full for ordinary resolutions too. written resolutions, for example
6. Voting - who is entitled to vote and how directors or members can
how? propose a written resolution.
7. Post-meeting - what documentation Section 288(2) CA 2006 provides
must be dealt with? that resolutions to remove a director
or auditor from office may not be
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passed by way of written have been entitled to vote at a GM
resolutions (because, as we shall (as defined in s.289 CA)).
see in the BLP module, these • Auditors are entitled to copies of
decisions require ‘special notice’, some communications supplied to
the aim of which is to allow the members, including written
director or auditor time and resolutions, to receive notice of
opportunity to mount a defence). GMs that members are entitled to
• Section 307(1) Companies Act receive, to attend any GM, and to
2006 (‘CA’) provides that a GM of a be heard at any such meeting on
private company must be called by any part of the business that
giving notice of at least 14 concerns him as an auditor. See
days. Section 360 (1) and (2) CA s.502 CA 2006.
adds that this notice period • The allotment of shares is a
excludes the day of the meeting contract between the company and
and the day on which the notice is a new/existing shareholder under
given (thus requiring at least 14 which the company agrees to issue
“clear” days notice to be given). new shares in return for the
• Written resolutions can be used for new/existing shareholder paying
all types of resolutions except those the subscription price.
passed to remove a director and to • Special notice: The procedure
remove an auditor (see s. begins with the shareholder
288(2)CA). proposing the removal of the
• Section 1147 CA provides that any director by giving the company
document sent by post is deemed ‘special notice’. Special notice
to have been received by the means that the shareholder must
intended recipient 48 hours after it give formal notice to the company’s
was posted. Note that this period of registered office of their intention to
48 hours only includes working propose a resolution to remove the
days (i.e. not weekends or bank director at least 28 clear days
holidays (see s.1173 CA for before a general meeting.
definition of ‘working day’)). o The board of directors must
• Section 307(4) CA allows a GM to then convene a meeting and
be held by shorter notice if agreed on receipt of special notice
by the members. “forthwith send a copy of the
• Section 307(5) CA provides that a notice to the director
GM may be held by shorter notice if concerned.” (S169(1)
agreed by: Companies Act 2006). To
o - a majority in number convene the meeting, the
of the members who have a board must circulate a
right to attend and vote at ‘notice of general meeting’
the GM, being a majority to the company’s
who; shareholders at least 14
o - together hold not clear days before the
less than the requisite general meeting.
percentage in nominal value o s312
of the shares. • A transfer of shares is a contract to
• Section 307(6) CA provides that the sell the existing shares in the
requisite percentage in the case of company between an existing
a private company is 90% or such shareholder and the purchaser.
higher percentage specified in the • If a share with a nominal value of £1
company’s articles. is issued for the price of £10, then it
• Under s.291 CA ML must send a is issued at a premium. The amount
copy of the written resolution to of the premium is £9.
every eligible member (i.e. any • The default articles of association
member who would, at that date, for private companies under the
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Companies Act 2006 are called the • Changes in directors (be they
Model Articles. They replace the resignations or appointments) are
default articles under the not dependent on registration at
Companies Act 1985, which were Companies House to become
called Table A. effective. For example, so long as
• Written resolutions can be used for there is an appropriate directors’
all types of resolutions except those resolution, appointments can be
passed to remove a director and to with immediate effect.
remove an auditor (see s.
288(2)CA).
• A repudiatory breach by one party
would allow the injured party to treat
SGS 2 - Intro to Ritchisons
himself as discharged from any
further liability under the contract
and to claim for damages.
• The minimum number of • Model Article 11(2) provides that
shareholders needed to vote in the quorum for Board Meetings is 2
favour to pass a resolution to • S. 318(1) provides that where the
remove a director under s.168(1) company is a single-member
Companies Act 2006 (which company, the quorum for General
requires an ordinary resolution). Meetings is one.
• Directors are NOT required to have • Only some decisions require
regard to the likely consequences shareholder input, eg change of
of any decision in the short term or name. Other decisions can be
the need to act fairly as between the made by the Board who run the
directors of the company when company on a day-to-day basis.
complying with the section 172 of • An LLP is transparent for tax yet is
the Companies Act 2006 (ie the also a separate legal
duty to promote the success of the entity. However, an LLP is obliged
company). to file certain information at
• Executive directors can be Companies House.
appointed by board resolution or an • The general rule is that resolutions
ordinary resolution. passed by directors at board
• A party in breach of contract could meetings will be passed by a simple
use the defence of frustration if he majority of those present at the
can show that the contract became meeting and voting., Under s.19
substantially more difficult to Financial Services and Markets Act
perform due to the total or partial 2000 it is a criminal offence for
destruction of some object someone who is not authorised or
necessary to the performance of exempt to carry out any regulated
the contract. activity.
• A shelf company will be a validly • A company may amend its articles
incorporated company with a by way of a special resolution.
certificate of incorporation. It will, • Major decisions regarding the
therefore, be able to enter into company, such as the power to
contracts. change the name of the company or
• Allotting shares is not a necessary to remove a director, will usually be
part of the shelf company taken by the shareholders.
conversion process. The change of • Authorised share capital (''ASC") is
ownership is achieved through the a concept applicable only to a
transfer of existing shares. company which already existed
• A person becomes a shareholder before CA 2006 came into
once they are entered in the force. Such a company's ASC is
company’s register of members the maximum number of shares
(s.112(2) CA 2006). which that company may issue in
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total. It is set out in the • The 10% Business Asset Disposal
memorandum of a CA 1985 Relief (BADR) rate of CGT is
incorporated company and is applied after the Annual Exemption.
deemed to have been transferred
into the articles of such a company
under s.28 CA 2006. There is no SGS 4 - Incorporating a Company
concept of authorised share capital
for CA 2006 incorporated
companies.
• A company's Issued share • Assuming that a company has
capital refers to the number of unamended Model Articles, the
shares it has actually issued to its board of directors of that company
shareholders. This is applicable to can appoint an additional director at
all companies. a board meeting.
• Auditors can be appointed by board • A company has a separate legal
resolution personality from its shareholders.
• A trading certificate is only needed • Decisions at board meetings are
by a public company – see s.761. usually made by majority decision.
• Only PLCs require a minimum of (MA 7(1))
two directors – see s. 154(2). • The notice that is required for board
• A share premium account is not meetings is whatever is reasonable
needed if the shares are issued at for the company (Browne v La
nominal value. Trinidad).
• Section 112(2) CA 2006 states that • Consent to a general meeting being
a person becomes a member of a held on short notice? → a majority
company only when his/her name is of shareholders who together hold
entered into the company's register 90% in nominal value of shares in
of members. the company
• signify their agreement to an
ordinary resolution being passed by
SGS 3 - Tax means of a written resolution? →
shareholders holding over 50% of
the voting rights in the company
• Section 77(b) allows for a company
• If a receipt is the product of how the to provide for a change of name
taxpayer generates money on a procedure in its articles.
regular basis this will be classified • Authorised share capital (''ASC") is
as an income receipt. a concept applicable only to a
• If a receipt is the product of a company which already existed
transaction that is not integral to before CA 2006 came into
such regular activity this is likely to force. Such a company's ASC is
be classified as a capital receipt. the maximum number of shares
Such transactions can be thought of which that company may issue in
as one-off transactions. total. It is set out in the
• An individual can qualify for memorandum of a CA 1985
Entrepreneurs' Relief on the incorporated company and is
disposal of shares if the shares deemed to have been transferred
have been held in a trading into the articles of such a company
company for at least two years prior under s.28 CA 2006. There is no
to the disposal, by an individual who concept of authorised share capital
is an officer or an employee who for CA 2006 incorporated
holds at least 5% of the ordinary companies.
voting shares in the company with • A company's Issued share
equivalent rights to dividends and capital refers to the number of
distributions on a winding-up. shares it has actually issued to its
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