Forming a company

Salomon vs Salomon & co ltd (1897)
1. 1892: Business sold to new company
  1. Recieved 20,001 of the 40,000 shares, £29,000 in cash, secured debenture for £10,000
  2. 1893: Company into recievership
corporate veil
1. once registration is complete a new legal person is created seperate from the company members
2. this principle was established in the case of Salomon v salomon & co ltd (1897 HL) but has since been enshrined in statute CA 2006
Process of Incorpotaion
1. Promoters are the people who set the company up and they send to the Companies Registry:
  1. Memorandum of association
  2. Application for registration which includes company name, address, articles of association, names/addresses of directors, statement of compliance and fee
    1. Provided everything in order a certificate of incorporation is issued.
      1. Why might a certificate not be issued?
        Problem with documentation Name – offensive, too similar to an existing business
Buying a company off the shelf
1. Promoters can buy a company off the shelf
2. Seller registers company and then renders it dormant
  1. Generally quicker and cheaper than completing the registration process.
3. When company sold shares are transferred to the new owners
4. Buyers register themselves as new directors
5. problems
  1. Company may have previous debts which new business may become liable for.
  2. These changes take time
  3. Costs involved in order to change company, names of directors and company address.
COMPANY’S CAPACITY TO CONTRACT
1. A contract is a legally binding agreement. Once a contract has been formed both parties must honour its terms or take the legal consequences.
  1. Pre-Incorporation: ** Does company exist? ** Who is liable?
  2. ost-Incorporation: ** What powers does company have? ** What protection to 3rd parties?
“FORMATION OF THE COMPANY”
1. Promoter
  1. Two Subscribers
    1. Certificate of Incorporation
      1. Trading Certificate (PLC only)
LAW
1. S9(2) CA 2006 – in order to register a company the following must be sent to the Registrar:
  1. Memorandum of Association
    1. MEMORANDUM of ASSOCIATION Now a mere historical snapshot of the company members on formation of the company. However pre-2006 it included the following : Name of Company Place of Registration Objects of Company Limited Liability of Members Amount of Share Capital … OR Amount that each Member guarantees For companies formed after 2006 these rules are now included in the Articles of Association.
    2. Prior to the CA2006 Act: THE OBJECTS CLAUSE “what the company could do” To protect shareholders To protect persons dealing with the company Objects Clause now in the Articles CA 2006 Act withdraws any limitation un less specified.
  2. The purpose of the Memorandum is to state the intention of the subscribers to form the company and become members of it.
  3. Memorandum was made shorter and simpler by CA2006
ARTICLES of ASSOCIATION
1. Share Capital (rights; alteration) General Meetings (occurrence; proceedings) Voting powers of Members Borrowing Powers Directors (appointment; power; removal) Secretary Dividends & Reserves Accounts & Audit
“CONSTITUTION OF THE COMPANY”
1. Company
  1. Memorandum of association
    1. External affairs of company
  2. Articles of association
    1. Internal affairs of company
      1. contract binds company and members

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Forming a company

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	Created by b.campbell5322 almost 11 years ago