BPP University College Of Professional Studies Limited (BPP)
Full revision notes for BLP. Includes all topics except tax and business accounts e.g. shelf company procedure plan, pre-emption rights, wrongful & unfair dismissal, the rights of minority shareholders, the various insolvency procedures.
NB. document abbreviations: C =. company, D = director, SH...
BPP University College Of Professional Studies Limited (BPP)
BPP University College Of Professional Studies Limited
Business Law & Practice (BLP)
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Setting up a company
1. Send to the Registrar of Companies at CH
An application form (IN01) containing:
a. the name of C (s.9(2)(a)):
i. this cannot be misleading (ss.75 & 76);
ii. or be offensive (s.53);
iii. or suggest association with the government (s.54);
iv. or use sensitive words (s.55);
v. or be too similar to another C’s name (s.66);
vi. but it must end in plc if its public (s.58) and limited/ltd if its private (s.59).
b. whether the registered offices will be in E&W, Scotland, or Northern Ireland (s.9(2)(b));
c. whether the liability is limited and, if so, whether by share or guarantee (s.9(2)(c));
d. whether the company is private or public (s.9(2)(d));
e. a statement of capital and initial shareholdings (s.9(4)(a));
f. the intended address of the company’s registered office (s.9(5)(a)).
The statement of capital outlining:
i. the total number of shares being taken out (s.10(2)(a));
ii. the aggregate nominal value of the shares (s.10(2)(b));
iii. the total number of shares in each class & rights attaching to them (s.10(2)
(c);
iv. the amount paid up of each share (s.10(2)(d) (not at least 25% paid up
(s.586(1)
v. details of the above (a-d) for each individual subscriber (s.10(4)).
The memorandum of association signed by each subscriber (s.8(2)) stating (per s.8(1)):
a. that the subscribers wish to form a company; and
b. that they agree to take at least each one share each.
The AAs (s.9(5)(b)). If none are sent the MAs will automatically apply (ss.18(2) & 20(1)). To
entrench any articles, registrar must be notified & statement of compliance given (ss.22-24).
A fee (of £12 for electronic filing (£30 if same day) or £40 for paper filing (£100 if same
day)).
2. Under s.15, once the application is approved, a certificate of incorporation is sent to C giving:
i. the name of the company (change only effective once certificate has been issued);
ii. the company’s registered number;
iii. the date of incorporation.
3. C is a legal entity from the date of incorporation on the certificate of incorporation (s.15).
Contracts entered into on behalf of C before incorporation leave individual personally liable
(s.51).
The legality test
Article of association change Legal?
Change length of BM notice given Yes—CA silent on the issue.
Remove chair’s casting vote Yes—CA silent on the issue.
Change name without approval Yes—if it falls in the scope of s.77(1)(b).
Allow Ds to amend AAs No—s.21(1) requires SR for AA change.
Unanimity for SHs to remove D No—s.168(1) D may be removed by OR.
Change GM quorum Yes if it’s not a single member C (s.318).
Prevent WR procedure No—articles preventing the use of WRs are void (s.300).
Change Ds spending limit w/o approval Yes—CA silent on the issue.
Removing/changing MA 14 Yes—CA silent on the issue.
Alter D duties Yes—but only to make them more onerous, not less so.
,Shelf company procedure plan
Advantages = speed: doable 24/7 whereas from scratch incorporation only poss. in CH opening hours.
BM1
Propose BRs to:
appoint new Ds (MA 17(1)(b)). Old D replaced by new D as chairman (MA 12(1));
accept resignations of old Ds (MA 18(f)) with immediate effect;
appoint company secretary (though CS not necessary (s.270(1));
receive and approve transfers of subscriber shares to new SH(s) (s.771 & MA 26);
change registered office (ss.86 & 87);
appoint auditors (s.485).
Instruct company secretary to deal with PPM1 listed below.
Approve the form of notice of the GM and call it (s.302) to propose SRs to:
i. change company name (s.77(1));
ii. amend AAs as required. Common amendments are:
removing the chairman’s casting vote under MA 13;
increasing the quorum for board meetings above 2 under MA 11(2);
allowing Ds to vote on matters in which they are interested (MA 14(1));
allowing C to change its name by something other than SR (ss.77(1)(b) & 79).
All decisions must be made majority (MA 7(1)).
Close BM1.
PPM1
Company secretary files:
forms AP01 & AP03: Ds’ (s.167(1)) & CS’s (276(1)) appointment within 14 days;
forms TM01 & TM02: Ds’ (s.167(1)) & CS’s (s.276(1)) resignation within 14 days;
form PSC02 (new PSCs) & PSC07 (leaving PSCs) (s.790VA) & update PSC register (s.790M);
enter new SHs in the register of members (s.112(2) & s.113(2));
to issue new share certificate(s) to new SH(s) (s.776) and cancel the old ones;
prepare board minutes (s.248(1));
update C’s register of directors & secretaries (ss.162 & 275).
GM: pass resolutions.
BM2
Open with necessary quorate etc.
Propose board resolutions to:
a. change the accounting reference date (s.392(1));
b. direct company secretary to deal with the PPMs.
Close BM2.
PPM2
Company secretary files:
form AD01 for change of address;
copies of SRs within 15 days (s.30(1));
copy of the amended AAs within 15 days (s.26(1));
form NM01 (for change of name) and any applicable fee ASAP (s.78(1));
form AA1 (for change of accounting reference date) ASAP (s.392);
prepare board minutes (s.248(1)) and minutes for the GM (s.355(1)).
,The procedure to issue new shares (pre-emption rights etc.)
1. Is there a cap on the number of shares that may be issued?
i. Is there a cap?
If C was incorporated under CA 1985, it has will have an Authorised Share Capital in its
memorandum of association limiting the number of shares that can be issued (s.28(1) CA
2006).
If C was incorporated under CA 2006 (i.e. post-1/10/09) there is no requirement to have an
ASC but SHs may have amended the AAs to include one. If there is no cap go to 2. If not:
ii. How can the cap be removed?
CA 1985 Cs: under s.121 CA 1985 Cs can increase their ASC by OR.
CA 2006 Cs: under s.617(2)(a) CA 2006 when C issues shares its share capital increases
automatically. Therefore:
1. check if any resolutions to remove/impose/change the cap have been passed; and
2. whether any shares have been issued by checking the register of members or the
most recent confirmation statement filed at CH.
If there are insufficient unissued shares available for the proposed issue then the limit can be
removed or modified by SR (s.21(1) CA 2006).
2. Do the Ds need authority to allot? (N.B. authority to allot is before s.561 disapplication
(s.570(1)).
Under s.546 CA 2006, Ds cannot allot shares except in accordance with s.551 or s.550.
i. Private Cs with only one class of share ( s.550): Ds can allow shares of the same class
unless prohibited by the AAs. If a C incorporated under 1985 CA wishes to rely on
s.550, it must pass an OR.
ii. Otherwise, authority may be given in the AAs or by resolution ( s.551): resolution =
OR unless the AA provide otherwise (s.281(3)). Authority to allot under s.551 can
only be given subject to time and number of shares (s.551(3)). Therefore, if C has
already granted Ds s.551 authority, it is important to check whether it’s still valid.
Authority to allot is also required under s.80 CA 1985, and it is given by OR.
N.B. allotment of shares without authority = valid, but Ds commit an offence under s.549(4).
N.B. existing s.551 authority to allot = revoked by OR (s.551(4)(b)) even if in AAs (s.551(8)).
In such a case, any s.561 disapplication will also no longer be valid (s.570(3)).
3. Must s.561 pre-emption rights (i.e. rights of first refusal) be disapplied on allotment?
No need to disapply s.561 pre-emption rights if allotment is not being paid in cash (s.565)
s.561(1)(a) CA 2006: Cs cannot allot equity securities to anyone unless they have made an
offer to current SHs in proportion to their existing shareholdings on the same or better terms.
See s.562 for how to communicate pre-emption offers to SHs.
s.560(1) CA 2006: ‘equity securities’ = (i) ordinary shares, or (ii) rights to subscribe for (or
convert securities into) ordinary shares.
s.560(1) CA 2006: ‘ordinary shares’ = shares other than shares that—as respects dividends
and capital—carry a right to participate only up to a specified amount in a distribution i.e. if a
class of shares carries a right to receive dividends and (on winding up) capital payments and
both these rights are capped, then the shares ≠ ordinary shares & therefore ≠ equity
securities, and will not need to be offered pre-emptively. If the shares ≠ equity securities, go to
5. If not:
N.B. shares that rank pari passu with ordinary shares = uncapped.
4. Disapplying pre-emption rights.
The procedure for disapplying pre-emption rights is found at s.562, but this is lengthy and
complex, and needn’t be followed if all SHs agree that C ought to bring in a new SH:
i. If Ds are authorised under s.550 , SHs can disapply pre-emption rights by SR via
s.569.
, ii. If Ds have been given s.551 authority , SHs can give Ds general authority to
disapply pre-emption rights. Under s.570(1)), SHs can pass an SR either to disapply
pre-emption rights for a particular transaction or enter a special provision in its AAs.
iii. If Ds have been given s.551 authority , SHs can give Ds specific authority (e.g. to a
particular person) to disapply pre-emption rights. This is uncommon in practice, but
to use this procedure under s.571(6), Ds must hand SHs a written statement
explaining:
a. the reasons for the specific disapplication; and
b. the amount paid to C pursuant to the allotment & a justification for that amount.
N.B. s.567 allows private Cs to exclude s.561 pre-emption rights permanently by altering
AAs. This is rare: it gives SHs no protection from dilution as there is no MA provision.
5. Must new class rights be created for the shares?
If C makes a new class of shares, it must insert new provisions in its AAs outlining the rights
attached to them, requiring an SR.
6. Directors pass a BR in BM2 to allot the new shares.
Note: D allotted new shares counts in quorum as share issue = permitted cause (MA 14(4)
(b)).
Ds must resolve by BR to allot new shares. GM will not be needed if the C:
a. has no limit in its constitution on the number of shares which can be issued by C;
b. does not require Ds’ authorisation because C is private with only one class of
shares and there is no restriction in C’s articles or C already given Ds authority to
allot;
c. is issuing the shares to existing shareholders in proportion to their existing
shareholdings and follows the procedure in s.562;
d. has disapplied s.561 via s.569 or has taken advantage of s.567;
e. has the relevant class rights in its AAs.
7. Post-meeting matters
If removing the cap on the number of shares that can be issued :
i. file new articles (s.26(1));
ii. for CA 2006, file resolution (SR to amend articles: s.26(1)(a) and s.30(1));
iii. for CA 1985, file OR to remove cap (SI 2008/2860, Schedule 2, paragraph 42(3);
ss.29(1)(e) & 30(1) CA 2006).
If granting Ds authority to allot:
i. under s.551: file OR at CH (s.551(9), s.29(1)(e), and s.30(1)) within 15 days;
ii. under s.550: no action required for CA 2006. If CA 1985, file OR granting Ds
authority to rely on s.550 at CH (SI 2008/2860, Schedule 2, paragraph 42(3); ss.29(1)
(e) & 30(1) CA 2006) within 15 days.
If disapplying pre-emption rights:
i. file SR disapplying pre-emption rights at CH (s.29(1)(a) and s.30(1) within 15 days.
If creating class rights i.e. they’re not contained in AAs:
i. file SR amending AAs (s.30(1)) at CH within 15 days after it is passed; or
ii. file OR amending AAs if C incorporated under 1985 act; and
iii. file amended AAs (s.26(1)) within 15 days after it is passed.
Allotment of shares by BR:
i. file form for return of allotment of shares (SH01) at CH (under s.555(2)) within one
month of allotment;
ii. file a statement of capital under s.555(3)(b);
iii. update its register of members (s.112 and 113) within two months (s.554);
iv. send a share certificate to new members within 2 months of allotment (s.769);
v. consider whether the PSCs have changed and, if so, update the PSC register. Update
PSC register within 14 days of changes & notify CH within another 14 days.
N.B. under s.755, private Cs limited by shares cannot offer its shares to the public.
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