Lecture notes
Exam Notes for Company Law
- Module
- Company law
- Institution
- University Campus Oldham
A comprehensive summary of lecture notes and textbook materials used in preparation for the assessment.
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01 INTRODUCTIONChoice of business medium & the business’ stakeholders
1. 3 fundamental considerations
Whether the business form will facilitate investment in the business
Whether the business form will minimise the risk involved in running the business
Whether the business form provides an efficient organisational structure
2. Types of business forms
Sole trader
A single-owner business operation with no formal structure No formalities
required for establishment; No formal organisational structure
The sole trader runs the business & he usually provides the capital with
personal savings / a bank loan
The sole trader contracts in his own name & has personal liability to the debts
of the business
Partnership
The relationship which subsists between persons carrying on a business in
common with a view of profit (PA 1890)
Regulated by PA 1890, although many of the provisions may be varied /
excluded by agreement between the partners
Essentially based on a contractual agreement between the partners, which
regulates the operation of the business & their mutual rights & duties
May arise as the result of a formal declaration / informally, where the conduct
of the parties constitutes them legal partners / where they have agreed to act
as such but made no formal arrangements
The partners are personally liable for the business’ debts
Limited liability partnership
Introduced by LLPA 2000; Many of the provisions of CA 2006 apply, by virtue
of a series of statutory instruments
The partners’ liability to the business’ debts is limited
Company
A business which has undergone the process of incorporation in terms of the
law Once incorporated, it becomes a distinct legal person independent of
its shareholders
Key legislations: CA 2006; IA 1986; SBEEA 2015
The shareholders’ liability to the business debts is (usually) limited
Types of companies
3. Public & private companies
Legal definitions (CA 2006 s 4)
Legal & practical distinctions
Apparent difference: The law requires that the status of the company should
be made clear by indicating whether it is a Public Limited Company “plc” /
Private Limited Company “ltd” (CA 2006 s 58)
Substantive difference: Only a public company is permitted to raise capital by
offering shares & other securities to the public (CA 2006 part 20 chap 1),
1
, whereas private companies are not allowed to make public offerings & doing
so constitutes a breach (CA 2006 s 755)
Definition of a public offering (CA 2006 s 756)
Typical structure & size: While there is no upper limit in terms of members
that can constitute a private company, in practice, public companies are
usually larger & have widely dispersed shareholders, while private companies
are smaller & more closely held
Regulation: Public companies are more heavily regulated
It is possible to convert a private company into a public company (& vice versa) as
long as the prescribed procedures are followed (CA 2006 part 7)
The incorporation process
4. Registration at the Companies House (CA 2006 part 2)
Involves the application for registration to the Registrar of Companies at the
Companies House, which requires the completion & submission of a set of
prescribed documents On receiving the documents, & having checked them, if the
Registrar is satisfied that the statutory registration requirements have been complied
with, he will register the delivered documents & issue a certificate of incorporation
(CA 2006 s 15) The date of incorporation marks the “birth” of the company as a
body corporate with its own legal powers & responsibilities (CA 2006 s 16)
Registration documents: Memorandum of association (CA 2006 s 8) & other
information (CA 2006 ss 9-13)
In the case of a public company another document is required: Application for
a trading certificate (CA 2006 s 762)
PSC register: Register of people with significant control over the company
(SBEEA 2015 ss 12A, 790M, part 21A)
The company’s constitution (CA 2006 s 17)
5. Articles of association
Regulate the internal affairs of the company by setting out the relationships between
different organs of the company
CA 2006 s 19 provides for the SoS to set up model provisions of the AA A
company can choose to adopt the model AA in their entirety / it can submit its own
“bespoke” AA, & the model AA also operate as the default AA for companies
Where the company’s own AA do not cover some aspects, resort can be made to the
model AA for that purpose (CA 2006 s 20)
3 sets of model AA are contained in Companies (Model Articles) Reg 2008: For
private companies limited by shares, private companies limited by guarantee &
public companies
Constitute a multi-party contract between the company & shareholders & between
each member of the company (CA 2006 s 33) Can be altered by way of a Special
Resolution of the members in a general meeting Can be enforced by a member
qua member
6. Resolutions & agreements
Must be registered if CA 2006 part 3, chap 3 applies to them
7. Shareholder agreements
Govern the shareholders’ relations & the company may / may not be a party to that
contract
2
, Unlike the AA, it is a private document & as such can overcome some of the
problems associated with the AA However, a key drawback is that, unlike the AA,
it does not have automatic binding effect on incoming members & so they will have to
demonstrate their consent to the agreement
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