Issues
in
Company
Law
Topic I-Formation, Corporate Personality, Limited
Liability and Lifting the Veil
IF
FACTS
DON’T
POINT
ONE
WAY
OR
THE
OTHER
ADVISE
COMPANY
ON
WHAT
THEY
WOULD
NEED
TO
DO-NOT
VALIDATING
WHAT
THEY
DID
OR
DIDN’T
DO
Ordinary
Resolution=51%
(s.
282
CA
2006)
Special
Resolution=75%
(s.
282
CA
2006)
Choice
of
Medium
and
the
Stakeholders
Introduction
• Depending
on
the
business
medium,
legal
questions
will
arise
as
to
the
relationship
between
the
stakeholders
and
the
business.
• Choosing
the
business
form
is
significant
in
terms
of
the
legal
rules
applying
to
formation,
dissolution,
contractual
and
non-‐contractual
liability,
financial
involvement
and
ownership
of
the
assets
used
in
the
business.
• 3
Things
to
Consider
When
Evaluating
a
Business
Form:
1. Whether
the
form
will
facilitate
investment
(raising
of
capital)
2. Whether
the
form
will
minimize
the
risk
involved
3. Whether
the
form
provides
a
clear
organisational
structure.
Stakeholders
• Internal
o Managers
o Investors
o Employees
• External
o Lenders
o Customers
o Clients
o Supplies
o Tort/Crime
victims
o Environment/Community
o Professional
Advisors.
Types
of
Business
Medium
1. The
Sole
Trader
• One
person
operation
, • No
formalities/registration
requirements
• No
organisational
structure.
• Sole
trader
usually
provides
capital
from
savings
or
loan.
• He
has
personal
liability
to
the
debts
of
the
business-‐unlimited
liability.
2. The
Partnership
• Two
or
more
parties-“persons
carrying
on
a
business
in
common
with
a
view
of
profit”.
• Traditionally
chosen
medium
for
“the
professions”
e.g
law
firms
but
just
as
popular
for
small
ventures.
• Regulated
by
the
Partnership
Act
1890.
Mostly
a
codification
of
the
common
law
and
equitable
rules.
• Contractual
agreement
between
the
partners
regulating
the
operation
of
the
business
and
their
mutual
rights
and
duties.
Deed
of
Partnership.
• May
arise
from
formal
declaration
(a
deed)
or
informally
(based
on
conduct)
• Usually
termed
a
“firm”-s.
4
PA
1890.
• Unlimited
liability-each
has
personal
liability
for
the
entire
debts
of
the
business.
3. Limited
Liability
Partnerships
(LLP)
• Hybrid-falls
between
a
partnership
and
a
company
limited
by
shares.
• Introduced
by
the
Limited
Liability
Partnerships
Act
2000.
• Many
provisions
of
Companies
Act
2006
apply
by
virtue
of
statutory
instruments.
4. The
Company
• The
medium,
which
has
undergone
the
process
of
incorporation
in
terms
of
the
law.
Registration
at
Companies
House
• Companies
Act
2006
is
primary
legislation.
Key
policy
objectives:
o Enhancing
stakeholder
engagement
and
long
term
investment
culture.
o Ensuring
better
regulation
o Making
it
easier
to
set
up
and
run
a
company
• Various
other
relevant
legislation
including
The
Insolvency
Act
1986
or
the
Corporate
Manslaughter
and
Corporate
Homicide
Act
2007.
Various
aspects
also
a
result
of
EU
directives.
• Once
incorporated
the
company
becomes
a
distinct
legal
personality
independent
of
its
shareholders.
• Usually
limited
liability
for
shareholders.
• Can
be
limited
by
either
guarantee
or
by
shares.
,Types
of
Companies
Public
v
Private
Companies
• Companies
which
are
limited
by
shares
can
be
either
public
or
private.
• Companies
Act
2006,
s.
4-‐defines
the
two
types.
Legal
and
Practical
Distinctions
• Company
Status-Part
5
o Public
Limited
Company=”plc”
o Private
Limited
Company=”ltd”.
• Capital-Part
20
o Only
a
public
company
is
permitted
to
raise
it
by
offering
shares
to
the
public-‐
o Private
companies
are
not
allowed
as
seen
in
CA
2006,
s.
755
o Offer
is
not
made
to
public
when
it
is
(s.
756):
Made
to
persons
already
connected
with
the
company.
Made
in
connection
with
an
employee
share
scheme.
Not
“calculated
to
result”
in
the
shares
being
offered
to
persons
other
than
the
original
recipients
of
the
offer.
Not
clear
whether
this
is
subjective
or
objective.
o Company
can
be
public
without
being
listed
on
a
stock
exchange.
Though
usually
makes
sense
for
bigger
businesses.
Private
companies
cannot
be
listed.
o 99.7%
of
all
companies
are
private
companies.
• Size
o Public
companies
tend
to
be
larger
and
have
more
widely
dispersed
shareholders
but
not
always.
o Also
tends
to
be
a
separation
between
ownership
and
control
in
public
companies.
• Regulation
o Public
companies
are
more
heavily
regulated:
PLC-Minimum
share
capital
requirement-‐CA
2006,
Part
20,
s.
761/763-‐£50,000.
Brought
to
prevent
overly-risky
activity
taking
place
as
a
result
of
limited
liability-the
less
capital
the
greater
the
risks
that
will
be
taken.
Similar
to
mandatory
insurance.
LTD-A
nominal
amount
like
£1.
PLC-At
least
two
directors-‐CA
2006,
s.
154.
LTD-Only
require
one
director.
PLC-Formalities
such
as
an
AGM
and
more
onerous
accounting/audit
requirements.
PLC-A
high
level
of
compliance
required
with
the
internal
rules
of
particular
stock
markets.
• Possible
to
convert
one
type
of
company
into
another
, The
Process
of
Incorporation
Registration
at
Companies
House
(Part
2)
• Application
to
the
Registrar
of
Companies
which
requires
completion
of
a
number
of
constitutional
documents.
• If
satisfied,
the
Registrar
will
issue
a
Certificate
of
Incorporation-CA
2006,
s.
15.
• The
date
of
incorporation
marks
the
birth
of
the
company
as
a
corporate
body
with
its
own
legal
powers
and
responsibilities.
• Registration
Documents:
o Memorandum
of
Association
(MA)
(CA
2006,
s.
8)
Use
to
be
one
of
the
most
significant
documents
but
now
only
contains
a
statement
that
subscribers
wish
to
form
a
company
and
agree
to
take
at
least
one
share
each.
Companies
Act
2006
repealed
the
old
requirement
of
listing
the
objects
of
the
company
as
the
new
approach
is
to
treat
companies
as
having
unlimited
objects
unless
they
are
expressly
restricted.
Provisions
from
old
style
memorandums
are
to
be
treated
as
provisions
of
the
Article
of
Association
from
2008-‐s.
28.
o Other
Information
(CA
2006,
ss.
9-13)
Name
Location
(country)
Address
of
registered
office
Whether
liability
is
limited
Private
or
public
Statement
of
share
capital
and
initial
shareholdings
or
statement
of
guarantee
Proposed
directors
Articles
of
Association
Statement
of
Compliance
o Public
companies
require
a
Trading
Certificate-‐s.
762.
Contains
a
statement
that
the
share
capital
is
not
below
the
authorised
minimum
and
must
also
state
the
amount
of
expenses
and
any
amount
intended
to
be
paid
or
given
to
any
promoter
of
the
company.
• Effect
of
Incorporation
o Birth
of
company
as
distinct
legal
person-s.
16
CA.
o In
a
company
limited
by
shares
two
key
doctrines
will
operate:
Corporate
Personality
Limited
Liability
in
Company
Law
Topic I-Formation, Corporate Personality, Limited
Liability and Lifting the Veil
IF
FACTS
DON’T
POINT
ONE
WAY
OR
THE
OTHER
ADVISE
COMPANY
ON
WHAT
THEY
WOULD
NEED
TO
DO-NOT
VALIDATING
WHAT
THEY
DID
OR
DIDN’T
DO
Ordinary
Resolution=51%
(s.
282
CA
2006)
Special
Resolution=75%
(s.
282
CA
2006)
Choice
of
Medium
and
the
Stakeholders
Introduction
• Depending
on
the
business
medium,
legal
questions
will
arise
as
to
the
relationship
between
the
stakeholders
and
the
business.
• Choosing
the
business
form
is
significant
in
terms
of
the
legal
rules
applying
to
formation,
dissolution,
contractual
and
non-‐contractual
liability,
financial
involvement
and
ownership
of
the
assets
used
in
the
business.
• 3
Things
to
Consider
When
Evaluating
a
Business
Form:
1. Whether
the
form
will
facilitate
investment
(raising
of
capital)
2. Whether
the
form
will
minimize
the
risk
involved
3. Whether
the
form
provides
a
clear
organisational
structure.
Stakeholders
• Internal
o Managers
o Investors
o Employees
• External
o Lenders
o Customers
o Clients
o Supplies
o Tort/Crime
victims
o Environment/Community
o Professional
Advisors.
Types
of
Business
Medium
1. The
Sole
Trader
• One
person
operation
, • No
formalities/registration
requirements
• No
organisational
structure.
• Sole
trader
usually
provides
capital
from
savings
or
loan.
• He
has
personal
liability
to
the
debts
of
the
business-‐unlimited
liability.
2. The
Partnership
• Two
or
more
parties-“persons
carrying
on
a
business
in
common
with
a
view
of
profit”.
• Traditionally
chosen
medium
for
“the
professions”
e.g
law
firms
but
just
as
popular
for
small
ventures.
• Regulated
by
the
Partnership
Act
1890.
Mostly
a
codification
of
the
common
law
and
equitable
rules.
• Contractual
agreement
between
the
partners
regulating
the
operation
of
the
business
and
their
mutual
rights
and
duties.
Deed
of
Partnership.
• May
arise
from
formal
declaration
(a
deed)
or
informally
(based
on
conduct)
• Usually
termed
a
“firm”-s.
4
PA
1890.
• Unlimited
liability-each
has
personal
liability
for
the
entire
debts
of
the
business.
3. Limited
Liability
Partnerships
(LLP)
• Hybrid-falls
between
a
partnership
and
a
company
limited
by
shares.
• Introduced
by
the
Limited
Liability
Partnerships
Act
2000.
• Many
provisions
of
Companies
Act
2006
apply
by
virtue
of
statutory
instruments.
4. The
Company
• The
medium,
which
has
undergone
the
process
of
incorporation
in
terms
of
the
law.
Registration
at
Companies
House
• Companies
Act
2006
is
primary
legislation.
Key
policy
objectives:
o Enhancing
stakeholder
engagement
and
long
term
investment
culture.
o Ensuring
better
regulation
o Making
it
easier
to
set
up
and
run
a
company
• Various
other
relevant
legislation
including
The
Insolvency
Act
1986
or
the
Corporate
Manslaughter
and
Corporate
Homicide
Act
2007.
Various
aspects
also
a
result
of
EU
directives.
• Once
incorporated
the
company
becomes
a
distinct
legal
personality
independent
of
its
shareholders.
• Usually
limited
liability
for
shareholders.
• Can
be
limited
by
either
guarantee
or
by
shares.
,Types
of
Companies
Public
v
Private
Companies
• Companies
which
are
limited
by
shares
can
be
either
public
or
private.
• Companies
Act
2006,
s.
4-‐defines
the
two
types.
Legal
and
Practical
Distinctions
• Company
Status-Part
5
o Public
Limited
Company=”plc”
o Private
Limited
Company=”ltd”.
• Capital-Part
20
o Only
a
public
company
is
permitted
to
raise
it
by
offering
shares
to
the
public-‐
o Private
companies
are
not
allowed
as
seen
in
CA
2006,
s.
755
o Offer
is
not
made
to
public
when
it
is
(s.
756):
Made
to
persons
already
connected
with
the
company.
Made
in
connection
with
an
employee
share
scheme.
Not
“calculated
to
result”
in
the
shares
being
offered
to
persons
other
than
the
original
recipients
of
the
offer.
Not
clear
whether
this
is
subjective
or
objective.
o Company
can
be
public
without
being
listed
on
a
stock
exchange.
Though
usually
makes
sense
for
bigger
businesses.
Private
companies
cannot
be
listed.
o 99.7%
of
all
companies
are
private
companies.
• Size
o Public
companies
tend
to
be
larger
and
have
more
widely
dispersed
shareholders
but
not
always.
o Also
tends
to
be
a
separation
between
ownership
and
control
in
public
companies.
• Regulation
o Public
companies
are
more
heavily
regulated:
PLC-Minimum
share
capital
requirement-‐CA
2006,
Part
20,
s.
761/763-‐£50,000.
Brought
to
prevent
overly-risky
activity
taking
place
as
a
result
of
limited
liability-the
less
capital
the
greater
the
risks
that
will
be
taken.
Similar
to
mandatory
insurance.
LTD-A
nominal
amount
like
£1.
PLC-At
least
two
directors-‐CA
2006,
s.
154.
LTD-Only
require
one
director.
PLC-Formalities
such
as
an
AGM
and
more
onerous
accounting/audit
requirements.
PLC-A
high
level
of
compliance
required
with
the
internal
rules
of
particular
stock
markets.
• Possible
to
convert
one
type
of
company
into
another
, The
Process
of
Incorporation
Registration
at
Companies
House
(Part
2)
• Application
to
the
Registrar
of
Companies
which
requires
completion
of
a
number
of
constitutional
documents.
• If
satisfied,
the
Registrar
will
issue
a
Certificate
of
Incorporation-CA
2006,
s.
15.
• The
date
of
incorporation
marks
the
birth
of
the
company
as
a
corporate
body
with
its
own
legal
powers
and
responsibilities.
• Registration
Documents:
o Memorandum
of
Association
(MA)
(CA
2006,
s.
8)
Use
to
be
one
of
the
most
significant
documents
but
now
only
contains
a
statement
that
subscribers
wish
to
form
a
company
and
agree
to
take
at
least
one
share
each.
Companies
Act
2006
repealed
the
old
requirement
of
listing
the
objects
of
the
company
as
the
new
approach
is
to
treat
companies
as
having
unlimited
objects
unless
they
are
expressly
restricted.
Provisions
from
old
style
memorandums
are
to
be
treated
as
provisions
of
the
Article
of
Association
from
2008-‐s.
28.
o Other
Information
(CA
2006,
ss.
9-13)
Name
Location
(country)
Address
of
registered
office
Whether
liability
is
limited
Private
or
public
Statement
of
share
capital
and
initial
shareholdings
or
statement
of
guarantee
Proposed
directors
Articles
of
Association
Statement
of
Compliance
o Public
companies
require
a
Trading
Certificate-‐s.
762.
Contains
a
statement
that
the
share
capital
is
not
below
the
authorised
minimum
and
must
also
state
the
amount
of
expenses
and
any
amount
intended
to
be
paid
or
given
to
any
promoter
of
the
company.
• Effect
of
Incorporation
o Birth
of
company
as
distinct
legal
person-s.
16
CA.
o In
a
company
limited
by
shares
two
key
doctrines
will
operate:
Corporate
Personality
Limited
Liability
