Choice of a business medium
Three choices
Company Partnership
Sole trader
Company:
• Separate legal entity
• Separate legal personality (so conceptually, a person in its own right, quite separate from its s
employees)
• Perpetual succession= Members may leave or die, or new members join, without any effect on
• can own its own property
• contracts in its own name
• liable for its own debts
Can the courts “lift/pierce the corporate veil” – disregard the company’s separate personality a
consequences of the company’s acts? Prest v Petrodel Resources Ltd & Ords [2013] UKSC 34
beyond the corporate veil- divorcing husband was avoiding tax. Wife knew about it. Court wi
existing legal obligation/ restriction and b)deliberately evades / frustrates by imposing a comp
• Liability of directors: can happen in limited circumstances, where statue says so eg s2 of Insol
• Providing security: Charge over property of director etc. So there is some protection but still o
that have nothing etc
Compliance with the formal requirements of the Companies Act 2006 (the "ACT"):
• Probably the biggest single disincentive to incorporation. The Act forces upon all companies c
making structures and processes. In many instances these will be found to be cumbersome and
company. Nevertheless they must be adhered to. The Act also imposes significant filing and d
companies.
• Separate taxation: Since a company is a separate legal person it has its own tax life. It pays co
company is taxed separately from its shareholders. This means that the monies received in the
twice. First, the trading and capital profits are charged to corporation tax in the hands of the co
money is extracted from the company to the shareholders by way of dividend, it is taxed to eit
depending upon whether the shareholder is a company or an individual.
Types of Companies:
,In a company where liability is limited by guarantee the members agree (‘guarantee’) that if the com
each contribute up to a fixed amount (commonly a derisory sum, such as £10). There are no shares t
above. Guarantee companies are not generally used as trading vehicles. They are most commonly us
organisations such as clubs, professional bodies, etc.
Private Limited Company (Ltd) or Public Limited Company (Plc)?
• Name must end in Ltd/Limited or Plc
• Minimum capital requirements
• Ability to offer shares to the public.-only plc
Listed or unlisted?
• In order to offer its shares to the public in an effective way a Plc may seek to be listed on a rec
the London stock market, etc.).
• Note carefully that, though all listed companies are Plcs, by no means all Plcs are listed. If list
comply with the additional rules and requirements of the investment exchange in question, as
Companies Act
Setting up a company
Requirements:
• largely a matter of filling in the proper forms and sending them to the Registrar of Companies
• £ 13 to set up a company on companies House
• The procedure is outlined in the Companies Act 2006 sections 7 - 13.
7 Method of forming a company
(1) Company formed by one or more persons-
(a) Subscribing their names to a memorandum of association (s8)
(b) Complying with the requirements of the act regarding registration (s9-13)
8 A Memorandum of association is a memo stating that the subscribers
(a) Wish to form a company under this Act
(b) Agree to become members of the company and, in the case of a company that is to hav
share each.
(2) Memo must be in the prescribed form and authenticated by each subscriber
9 Registration documents
(1) Memo must be delivered to registrar together with an application for registration, docu
statement of compliance
(2) Application to state:
(a) Company’s proposed name
, (6)The application must be delivered—
(a)to the registrar of companies for England and Wales, if the registered office of the compan
Wales (or in Wales);
(b)to the registrar of companies for Scotland, if the registered office of the company is to be s
(c)to the registrar of companies for Northern Ireland, if the registered office of the company i
10 Statement of capital and initial shareholdings
These have to be delivered. Statement of capital must state: number of shares & their nomina
subscriber: the value and class of their shares
11 If company to be limited by guarantee, must deliver a statement of guarantee according to co
12 Must have a statement of proposed officers with the particulars of first director and the first
Particulars of the director to be stated in the company’s register of directors and register of di
For secretaries, to be registered in the company’s register of secretaries
12A Statement of initial significant control
(1) Must state whether 790 M will apply to anyone and include their particulars if it does,
will be required on incorporation to be entered in the company’s PSC as per 790 M
13 Must deliver a statement of compliance confirming that they complied with these requiremen
Registration and its effects
14 If the registrar is satisfied that the requirements of this Act as to registration are complied
delivered to him.
15 On registration the company should be given a certificate of incorporation. S 15 states what n
16 The registration of the company has the following effects:
2)The subscribers to the memorandum, together with such other persons as may from time to
company, are a body corporate by the name stated in the certificate of incorporation.
(3)That body corporate is capable of exercising all the functions of an incorporated company
(4)The status and registered office of the company are as stated in, or in connection with, the
(5)In the case of a company having a share capital, the subscribers to the memorandum becom
the statement of capital and initial shareholdings.
(6)The persons named in the statement of proposed officers—
(a)as director, or
(b)as secretary or joint secretary of the company,
are deemed to have been appointed to that office.
21 (1)A company may amend its articles by special resolution.
(1)
Company Names
53 Prohibited names
A company must not be registered under this Act by a name if, in the opinion of the Secretary
(a)its use by the company would constitute an offence, or
(b)it is offensive.
54 Names suggesting connection with government or public authority
Need approval for these
55 Other sensitive words specified in regulation also need approval
56 Under regulation secretary of state may require that, in connection with an application for the
under that section, the applicant must seek the view of a specified Government department or
57 Secretary of State may also make provisions about allowed characters, punctuation etc
Indications of company type
, 78 Where a change of name has been agreed to by a company by special resolution, the compan
registrar.This is in addition to the obligation to forward a copy of the resolution to the registr
Registered office
86 A company must at all times have a registered office to which all communications and notice
87 (1)A company may change the address of its registered office by giving notice to the registra
Register of members
112 The members of a company
(1)The subscribers of a company's memorandum are deemed to have agreed to become mem
registration become members and must be entered as such in its register of members.
(2)Every other person who agrees to become a member of a company, and whose name is en
member of the company.
113 Every company must keep a register of members- this indicated what particulars need to be i
Register of Directors
162 Every company to keep register of director. Must include particulars. Must keep the register a
office. Must give notice to registrar where it keeps it.
165 Every company must keep register of director’s residential addresses,
Board minutes
248 (1) Minutes of directors meetings to be record
(1)- (2) To be kept for at least 10 years from the date of the meeting
(2)
249 If minutes authenticated by chairman can serve as evidence in proceedings
Shareholder resolutions
281 (1)A resolution of the members (or of a class of members) of a private company must be pass
(a)as a written resolution in accordance with Chapter 2, or
(b)at a meeting of the members (to which the provisions of Chapter 3 apply).
(3)Where a provision of the Companies Acts—
(a)requires a resolution of a company, or of the members (or a class of members) of a compa
(b)does not specify what kind of resolution is required,
what is required is an ordinary resolution unless the company's articles require a higher majo
282 Ordinary resolution- simple majority
283 Special resolution- no less than 75%
Written resolutions
288 Written resolutions of private companies
(1)In the Companies Acts a “written resolution” means a resolution of a private company pr
this Chapter.
(2)The following may not be passed as a written resolution—
(a)a resolution under section 168 removing a director before the expiration of his period of of
(b)a resolution under section 510 removing an auditor before the expiration of his term of off
(3)A resolution may be proposed as a written resolution—
(a)by the directors of a private company (see section 291), or
(b)by the members of a private company (see sections 292 to 295).
(4)References in enactments passed or made before this Chapter comes into force to—
(a)a resolution of a company in general meeting, or
(b)a resolution of a meeting of a class of members of the company,
have effect as if they included references to a written resolution of the members, or of a class
