Companies

Companies

veil of incorporation
1. lifting the veil
  1. in certain circumstances courts can look through the company to identify real owners
    1. under statute
      1. IA 1986: members/directors liable for wrongful/fraudulent trading may be personally liable for losses
      2. plc trading w/o trading certificate => directors personally liable for any loss/damage to 3rd parties
      3. CDDA 1986: disqualified director participates in management => jointly or severably liable for company's debts
    2. in common law
      1. group accounts
        also to benefit creditors and make other companies within group liable for debts
      2. sham companies
        a company set up by an individual to evade his legal obligations
      3. nationality
        war: trade with enemy is illegal
  2. usual result: members/directors personally liable for debts
  3. only where special circumstances indicate that it is a mere facade concealing true facts
2. company is a separate legal entity from its owners and managers
3. consequences of incorporation
  1. limited liability
    1. company liable for its own debts
    2. shareholders liable only in the amount of unpaid share capital
  2. company enters in the contracts under its own name, can sue and be sued
  3. perpetual succession
    1. shares are transferable
  4. company owns its own property
  5. management is separate from ownership
  6. subject to CA 2006
  7. where a company suffers an injury, it must take an action itself (its shareholders MAY NOT)
pay corporations tax
created by registration
formal liquidation procedure
must comply w/CA 2006 reqs regarding meetings
can create fixed and floating charges
cannot return capital to its members
must make info about financial affairs publicly available
types
1. public
  1. limited by shares
    1. registered as a public company
  2. name ends with plc
  3. capital
    1. must not be less than authorised minimum (currently £50K) and in order to trade have allotted shares of at least that amount
    2. may raise capital by advertising its securities (shares and debentures) as available for public subscription)
  4. to begin trading needs to obtain trading certificate
  5. must have minimum 2 directors
  6. must have one qualified secretary
  7. accounts
    1. 6 months to file to Registrar
    2. audit
    3. must lay accs before AGM
  8. can't pass written resolutions
  9. AGM must be held each year
2. private
  1. unlimited
    1. no need to file accounts
    2. liability
      1. members liable to contribute so company could pay its debts in case of liquidation
  2. limited
    1. by shares
    2. by guarantee
      1. created usually for non-profit purposes
      2. liability of members is limited by the amount agreed to be contributed
    3. name ends with Ltd
    4. no reqs for capital
    5. prohibited from offering its securities to the public
    6. may begin trading from the date of incorporation
    7. must have minimum 1 director
    8. doesn't need to have a secretary
    9. accounts
      1. 9 months to file to Registrar
      2. no need for audit if turnover <£6.5m
      3. no need to lay accs before GM
    10. can pass written resolutions
promoter
1. no statutory definition
2. a person who undertakes to form a company and who takes the necessary steps to accomplish that purpose
3. is in position of power to investors
  1. fiduciary duties
    1. disclose any interest in transactions to the company and not make a secret profit
      1. if secret profit was made, company may
        rescind the contract
        obtain damages
        proof of loss required
        recover the profit
        prove promoter's failure to disclose
    2. disclose any benefit acquired to shareholders and/or independent board
4. pre-incorporation contracts
  1. a company prior to its incorporation doesn't have contractual capacity
    1. therefore promoter is personally liable
      1. possible protection
        postpone finalising contracts until the company is incorporated
        enter in agreement of novation
        original contract discharged and replaced with a new one
        buy an off-the-shelf company
        cheap and simple
        can trade immediately
        no problem of pre-incorporation contracts
        agree with the company that there is no personal liability for promoter
        include a term in contract a term giving the company right to sue under Contracts Act 1999
    2. company cannot ratify contract after incorporation either

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	Created by Evgeniya Kachan about 11 years ago