Overhead Transparencies on Company Law
These OHPs are used to support an introductory class entitled Business Structures and Processes
- The Corporation as a Legal Personality
- The Registered Company
- Limited and Unlimited Companies
- Private and Public Companies
- Pre-incorporation Contracts
- Registering a Company
- Company Membership
- Shareholders Rights
- Directors and Company Secretary
- Executive and Non-executive Directors
- Company Insolvency
The Registered Company
...the basic form of corporate business structure.
The law relating to companies in the UK is governed by:-
- The Companies Act [1985] and subsequent legislation
- Case Law
Registered Companies can be:
- Limited
or
- Unlimited
- Public
or
- Private
Limited Companies
- The majority of registered companies
- Liability of shareholders is limited
- Limited to the nominal value of their shares together
with any premium
- Any unpaid element must be paid if asked to do so by either the Company or the Receiver
Unlimited Companies
- The members and the company have unlimited liability.
- Unpopular because of this.
- Principal advantage is that unlimited companies do not have to disclose accounts through the Registrar of Companies
Public and Private Companies
Public Companies
- Limited by shares
- Clause in Memorandum of Association stating that it is public.
Private Companies
Companies Act [1985] defines a public company but merely
states for a private company that it is:
- "a company which does not satisfy the public limited
company definition
The Financial Services Act [1986] prohibits private
companies from advertising their securities to the
public.
Both Public and Private
- Cannot commence trading until incorporated
- Must register with the Registrar of Companies
- Minimum of 2 members
Pre-Incorporation Contracts
A company cannot:
- Be bound by contracts made before incorporation
- Make contracts until it has been incorporated
- Adopt contracts made before incorporation after becoming
incorporated.
Registration of Companies
Effected by submitting certain documents to the Registrar
of Companies
- The Memorandum of Association (the constitution)
- The Articles of Association (rules of internal management)
- Written declarations that various statutory declarations
have been met
Membership of a Company
membership is secured by
- subscribing to the Memorandum of Association
or
- entering name on Register of Members
or
- obtaining shares
- directly from the company
- indirectly from existing members
Shareholders Rights
- Transfer shares
- Receive notice of and attend meetings
- Receive dividends
- Receive accounts
Directors and the Company Secretary
Every PUBLIC COMPANY has at least 2 Directors
Every PRIVATE COMPANY has at least 1 Director
Every company must have a separate Company Secretary.
Directors
- manage the Company
- they are agents of the company
- they owe a duty of care not to act negligently in managing
company affairs
- they are appointed and removed by Shareholders
Company Secretary
- Controls the legal administration of the Company
- Submits annual return to Registrar of Companies
Generally Company Articles provide:-
- A certain number of Directors shall retire each year by rotation
- A director vacates office by notifying their registration
to the company
Note: Directors may also be disqualified by the Court
- Directors (Disqualifications Act) [1986]
Executive and Non-executive Directors
Executive Directors
- Normally employed for their business expertise.
- Implied term in their contract that they will exercise reasonable care and skill expected of people with their background and standing
Non-executive Directors
WITH relevant qualifications and business experience
They must exercise such reasonable care and skill as may
be expected from a person of their professional standing
and experience.
WITHOUT relevant qualifications and/or business experience
They are bound to conduct the Company's business in a way that
would be expected from persons of their actual knowledge
and experience.
Their duties include having regard to the interests of their
employees and members.
Company Insolvency
Winding up procedures bring a company's 'life' to an end
ADMINISTRATION is a corporate rescue which may help
a company
An administration order is given by the court
The court must be satisfied that:
- The Company is, or will be, unable to pay its debts
- That at least one of the purposes of the Insolvency
Act will be achieved
Main purposes of the order are:-
- it will promote the survival of the company as a going
concern
or
- The assets will be more advantageously realised than
they would be in a sale under liquidation
