Search for notes by fellow students, in your own course and all over the country.
Browse our notes for titles which look like what you need, you can preview any of the notes via a sample of the contents. After you're happy these are the notes you're after simply pop them into your shopping cart.
Document Preview
Extracts from the notes are below, to see the PDF you'll receive please use the links above
By: Ankur Mittal
COMPANY LAW - LECTURE NOTES
I
...
Definition of a "Company"
A company is a "corporation" - an artificial person created by law
...
A company is a "legal" person
...
2
...
A partnership is
created by the express or implied agreement of the parties, and requires no
formalities, though it is common to have a written agreement
...
(c) A company is an artificial legal person distinct from its members
...
4(2) of
the Partnership Act 1890, this is much more limited than the personality
conferred on companies
...
A partnership must have at least two members and has an upper
limit of 20 (with some exceptions)
...
A partner cannot transfer his share of the partnership without the
consent of all the other partners
...
Every partner is entitled to take
e-mail:mittal
...
com
By: Ankur Mittal
part in the management of the partnership business unless the partnership
agreement provides otherwise
...
A partner in
a firm is an agent of the firm, which will be bound by his acts
...
A partner in an ordinary partnership can be made
liable without limit for the debts and obligations of the firm
...
Partners have more freedom to
alter the nature of their business by agreement and without formality, and to
make their own arrangements as to the manner in which the firm will be run
...
(k) The affairs of a company are subject to more publicity than those of a
partnership - e
...
companies must file accounts which are available for public
inspection
...
A partnership cannot create a floating charge
...
A partner who is owed
money by the partnership cannot claim payment in competition with other
creditors
...
A
company cannot normally be wound up on the will of a single member,
and the death, bankruptcy or insanity of a member will not result in its
being wound up
...
History
e-mail:mittal
...
com
By: Ankur Mittal
4
...
Promoters of the company petition the Privy Council attaching draft of proposed
charter to the petition
...
No longer used to incorporate trading companies
...
Formerly used to incorporate public utilities such as gas, electricity and railways
...
(c) By Registration (Registered Companies)
Formed by registration under the Companies Act 1985 (as amended) or one of the
preceding Companies Acts
...
CA 1985, s
...
"
Classification of Registered Companies
Important Note
e-mail:mittal
...
com
By: Ankur Mittal
"Limited Liability" - this refers to the liability of the members, not the liability of the
company
...
The liability of the members, whether limited or unlimited, is to the company, not to
the individual creditors of the company
...
)
(ii)Cannot be public companies
...
(iv)Not subject to the same restrictions on alteration of capital as other
types of company, and do not normally have to file annual accounts
...
(Total amount
payable by all members is called the "guarantee fund")
(ii) Members do not have to pay anything as long as company is a going
concern - so company has no contributed capital
...
(iv) Prior to 1980, a company could be registered as a company limited
by guarantee, but also have a share capital - these are called "hybrid
companies"
...
(ii)Members of the company take shares issued by the company
...
Members may also agree to pay
an extra amount - called a premium
...
ankur1988@gmail
...
The memorandum also states the number of shares to be issued:
e
...
10,000 shares of £1 each = registered capital of £10,000
...
( Shareholder is also contractually bound to pay any premium
which has not been paid)
...
Companies Limited by Shares may be Public or Private
(i) Public Companies
CA 1985, s
...
"
Main requirements:
- A company cannot be registered as a public company unless it has a minimum
allotted share capital of £50,000, at least one quarter of which has actually been
paid
...
(ii) Private Companies
CA 1985 defines a private company as "any company that is not a public company"
...
A private company is only required to have one director and, since 1992, it can be
formed with only one member
...
ankur1988@gmail
...
II
...
Promoters
Promotion of a company is concerned with taking the steps necessary for
incorporation
...
Some attempts at definition have been made by the courts:
Twycross v Grant (Case 1)
Whaley Bridge Printing Co v Green (Case 2)
Whether someone is acting as promoter of a company is a question of fact rather than
a question of law
...
The courts then began to impose a fiduciary duty on promoters similar to that imposed
on agents
...
(c) Remedies for Breach of Promoters Duty
(i) Where promoter has sold his own property to the company, without disclosing this
- the company can rescind the contract and recover the purchase price:
e-mail:mittal
...
com
By: Ankur Mittal
Erlanger v New Sombrero Phosphate Co (Case 3)
Right of recission is lost if restitutio in integrum is not possible
...
Gluckstein v Barnes (Case 4)
(iii)The company may be able to sue the promoter for damages for breach of
fiduciary duty
...
In Scotland, memorandum or articles of the company can be drawn up with a
provision that the company will pay fees and expenses incurred in promoting the
company
...
2(1)
The court can make a disqualification order against a person who has been convicted
of an indictable offence in connection with the promotion, formation or management
of a company
...
2
...
(a) Effect of Pre-Incorporation Contract on the Company
Company cannot be bound to the contract because it had no contractual capacity
...
ankur1988@gmail
...
Company cannot sue or be sued on the contract
...
(Kelner v Baxter)
...
Newborne v Sensolid (GB) Ltd (Case 6)
This was unsatisfactory and was first changed by legislation in 1972
...
36C of the Companies Act 1985:
"A contract which purports to be made by or on behalf of a company at a time when
the company has not been formed has effect, subject to any agreement to the contrary,
as one made with the person purporting to act for the company or as agent for it, and
he is personally liable on the contract accordingly
...
Exceptions:
(i) Companies Bought "Off the Shelf"
s
...
The company can then ratify the contract
...
36C does not apply where a company has been in existence but has been struck off
the register
...
Cotronic (UK) Ltd v Dezonie (Case 7)
(c) Avoiding Personal Liability
e-mail:mittal
...
com
By: Ankur Mittal
(i) s
...
This requires express agreement - courts will not infer it
...
(novation =
substitution of a new obligation for an old one)
Promoter could agree with third party that promoter’s liability will end when the
company, once formed, enters new contract on same terms
...
REGISTRATION OF A COMPANY
1
...
Duties include registering new
companies, maintaining company files and supervising compliance with the
administrative and disclosure requirements of the Companies Act
...
2
...
10:
(a) Memorandum of Association
(b) Articles of Association
These are the documents which make up the constitution of the company
...
A public company’s memorandum must be in accordance with Table F of the
Regulations
...
ankur1988@gmail
...
The Memorandum must be signed (subscribed) unless submitted in electronic form,
and must show the number of shares each subscriber is taking
...
Statement must be signed by the subscribers to the memorandum
and include a written consent to act signed by those named as
directors/secretary
...
The statutory declaration must be signed by a solicitor involved in
the formation of the company or by one of the persons named as
director or secretary
...
3
...
This is the company’s "birth
certificate"
...
Certificate is conclusive evidence that registration requirements have been met
...
Registrar is entitled to refuse to register a company where it has been formed for an
unlawful purpose:
R v Registrar of Joint Stock Companies, ex p Moore (Case 9)
e-mail:mittal
...
com
By: Ankur Mittal
The court may also be petitioned to cancel a registration if it appears that the company
has been registered for purposes which are unlawful or contrary to public policy:
R v Registrar of Companies, ex p Attorney-General (Case 10)
Trading Certificates
Private companies can begin to trade as soon as the certificate of incorporation has
been issued
...
117 certificate or trading
certificate
...
117 certificate if satisfied that minimum capital
requirements for a public company have been met
...
(This does not affect the validity of any contracts entered into by the company)
...
CONSEQUENCES OF INCORPORATION
1
...
This has several important
consequences:
(a) Company is liable for its own debts
The shareholders are not liable for the debts and liabilities of the company and cannot
be sued by the company’s creditors
...
Salomon v A Salomon & Co Ltd (Case 11)
Lee v Lee’s Air Farming Ltd (Case 12)
(b) Limited Liability
The fact that the company is a separate person from its shareholders makes limited
liability possible
...
ankur1988@gmail
...
)
(c) Company Property
A company owns its own property - the shareholders have no direct right to this or
any share of it
...
A shareholder has no legal interest in the company’s property and cannot insure it
against theft, damage, etc
...
)
(d) Contractual Capacity
A company has full contractual capacity - and only the company can enforce its
contracts
...
(e) Crimes
A company can be convicted of a crime, regardless of whether its directors are also
convicted
...
There are particular problems with crimes which require mens rea ("a guilty mind") most common law crimes require mens rea, while many statutory offences involve
strict criminal liability
...
ankur1988@gmail
...
However, the courts have been very restrictive in their use of this approach:
Tesco Supermarkets v Nattrass (Case 15)
R v P&O European Ferries (Dover) Ltd (Case 16)
R v Kite and OLL Ltd (Case 17)
Transco plc v HM Advocate (No 1) (Case 18)
Crimes Against the Company
A company can be the victim of crime
...
Membership may change or members may die - the
company continues in existence until wound up
...
Only a company can
create a floating charge
...
The charge "floats" because is does not
attach to any particular asset, but floats over the company’s assets as they exist from
time to time
...
2
...
The screen separating the company from its individual shareholders and directors is
commonly referred to as "the veil of incorporation"
...
ankur1988@gmail
...
Piercing the Corporate Veil
Sometimes the law is prepared to examine the reality which lies behind the company
façade - this is described as "lifting" or "piercing" the corporate veil
...
Presumption is in favour of separate personality and courts will not normally infer that
legislation is intended to pierce the corporate veil
...
24 - where membership of a company falls below two for
more than six months
...
(s
...
117(8) - where public company trades without obtaining a
trading certificate
...
(iii) Companies Act 1985, s
...
This provision is rigidly enforced:
Durham Fancy Goods v Michael Jackson (Fancy Goods) Ltd (Case 21)
(iv) Insolvency Act 1986, ss
...
213 applies where company is being wound up and it appears
that business has been carried on with intent to defraud creditors
...
214 applies where company is in insolvent liquidation and the
director(s) should have known this, but did not take sufficient
steps to minimise losses to creditors
...
ankur1988@gmail
...
(v) Insolvency Act 1986, s
...
If he does
he can be made personally liable for all the debts of the new company
...
15
A person will be jointly and severally liable with the company for all the company’s
debts if he takes part in the management of the company while he is under a
disqualification order
...
(b) Common Law
The courts are willing to pierce the veil of incorporation in some circumstances:
(i) Fraud, Façade or Sham
Courts will examine the reality behind the company where the company was set up
purely to evade a legal obligation, or to allow someone to do something he would not
be allowed to do as an individual:
Gilford Motor Co v Horne (Case 22)
Jones v Lipman (Case 23)
Re Bugle Press Ltd (Case 24)
(ii) Agency
Court may lift the veil on the basis that one company is merely carrying on business
as the agent of another - so that transactions entered into by the subsidiary can be
regarded as transactions of the holding company:
Smith, Stone & Knight v Birmingham Corporation (Case 25)
Firestone Tyre & Rubber Co v Lewellin (Case 26)
e-mail:mittal
...
com
By: Ankur Mittal
But see: Adams v Cape Industries Ltd (Case 27)
(iii) Single Economic Unit
In the past, courts have been willing to lift the veil on the basis that a group of
companies was not a group of separate persons, but a single economic unit:
DHN Food Distributors v Tower Hamlets (Case 28)
Later cases have doubted this principle:
Woolfson v Strathclyde Regional Council (Case 29)
Adams v Cape Industries Ltd (Case 27)
(iv) State of Hostility
In times of war, courts may regard a British company as an enemy alien if the
company is controlled by nationals of an enemy country:
Daimler Co Ltd v Continental Tyre and Rubber Co (GB) Ltd (Case 30)
(v) Justice and Equity
Courts have sometimes been prepared to pierce the corporate veil where they feel this
is in the interests of justice:
Re a Company (Case 31)
Creasey v Breachwood Motors Ltd (Case 32)
But see: Adams v Cape Industries Ltd (Case 27)
Ord v Belhaven Pubs Ltd (Case 33)
Yukong Lines Ltd v Rendsburg Investment Corp (Case 34)
V
...
1
...
ankur1988@gmail
...
25 - the name of a public limited company must end with the words
"public limited company", the name of a private limited company must end with the
word "Limited"
...
It is an offence to carry on business under a name which uses these words or
abbreviations when not entitled to do so - the penalty is a fine
...
26, it is not possible to register a company name which includes the
words "public limited company", "limited", "unlimited" or their abbreviations
anywhere except at the end of the name
...
26, a company cannot be registered under a name which is identical to a
name already registered
...
(iii) A company cannot be registered under a name which suggests that the company
is connected with the government or a local authority - or under any name including a
word listed in the Company and Business Names Regulations 1981 - unless the
Secretary of State gives permission for the name to be used
...
26 does not prevent the registration of a name very similar to that of another
company - but if the similarity is deceptive and likely to lead to confusion, the
established business may bring an action to restrain the new company from using the
name
...
Court will take into account:
- scope of pursuer’s reputation
- similarity of kind of business
Ewing v Buttercup Margarine Co Ltd (Case 35)
Dunlop Pneumatic Tyre v Dunlop Motor Co (Case 36)
Aerators Ltd v Tollitt (Case 37)
Exxon Corpn v Exxon Insurance (Case 38)
e-mail:mittal
...
com
By: Ankur Mittal
(v) A company must have its name printed on all business documents and it must be
displayed at the registered office and all business premises
...
(vi) Insolvency Act 1986, s
...
(vii) A company can change its name by special resolution (requires approval of
holders of 75% of the company’s shares)
...
The Secretary of State can order a compulsory name change at any time if he
discovers that the name gives a misleading impression of the activities of the
company
...
2 - the memorandum states whether registered office is to be in England
and Wales or in Scotland
...
Registered office is important because:
- it determines the jurisdiction in which the company can be sued
...
- it is the address at which the company’s registers and records must be kept
and made available for inspection by the public
...
(c) Objects Clause
e-mail:mittal
...
com
By: Ankur Mittal
Company’s memorandum must contain an objects clause - a clause which states the
purpose or purposes for which the company was incorporated
...
Previously this was of great importance - transaction entered into beyond the
company’s powers was void and could not be enforced by or against the company,
and it could not be ratified
...
Ashbury Carriage and Iron Co v Riche (Case 39)
(ii) Abolition of the Rule
The Rule has been abolished by statute as far as third parties are concerned
...
35(1) CA 1985 - the validity of an act done by a company shall not be called into
question on the grounds of lack of capacity by anything in the company’s
memorandum
...
(The court will not restrain the company from doing anything it is already under a
legal obligation to do)
A director may be liable to the company for any costs incurred by the company on an
ultra vires transaction
...
3A allows a company to state in its
memorandum that its object is to carry on business as a general commercial company
...
(iii) Change of Objects Clause
Under CA 1985, s
...
Members (holding at least 15% of the nominal issued share capital) who did not
consent to the change can apply to the court to have the alteration set aside
...
5)
Application must be made within 21 days of the resolution being passed
...
e-mail:mittal
...
com
By: Ankur Mittal
(d) Limitation of Liability Clause
If members’ liability is to be limited, memorandum must have a clause to this effect
...
No minimum capital for private companies; £50,000 minimum for public companies
...
This is followed by signatures of
subscribers (attested by one witness) and the number of shares each has agreed to
take
...
No other clauses are necessary but it is possible to have others
...
2(7) - a company cannot change its memorandum except in the
circumstances and manner expressly provided for in the Act
...
Company can be changed from unlimited company to limited by special resolution change from limited to unlimited requires written consent of all the members
...
CA 1985, s
...
e-mail:mittal
...
com
By: Ankur Mittal
CA 1985, s
...
When company resolves to alter its memorandum, a copy of the resolution, and the
amended memorandum, must be sent to the Registrar within 15 days - failure to do
this is a criminal offence punishable by a fine
...
Articles of Association
(a) Articles Generally
The articles govern the internal management and organisation of the company
...
Re Duncan Gilmore & Co Ltd (Case 40)
Companies (Tables A - F) Regulations 1985 provides a model set of articles for a
company limited by shares
...
(ii) It may adopt Table A with modifications
...
(Table A has existed in various forms since 1862 - a company which adopts Table A
will be bound by the Table A existing at the time it was incorporated, not a later
version)
...
9 - articles can be altered by special resolution, which must be notified to
the Registrar of Companies within 15 days
...
ankur1988@gmail
...
There are certain restrictions on the company’s power to alter its articles:
(i) Express Statutory Restrictions
s
...
s
...
(ii) General Law and Public Policy
A provision in the articles which is contrary to public policy is void
...
(iii) Court Order
Certain sections of the 1985 Act give the court power to order that no alteration be
made to the articles
...
(v) Improper Use of Power to Alter Articles
The Power to alter the articles must be exercised bona fide for the benefit of the
company as a whole
...
Allen v Gold Reefs of West Africa Ltd (Case 42)
Greenhalgh v Arderne Cinemas Ltd (Case 43)
e-mail:mittal
...
com
By: Ankur Mittal
The courts will usually allow the alteration, but have sometimes found that it is not
bona fide for the benefit of the company as a whole:
Brown v British Abrasive Wheel (Case 44)
Dafen Tinplate Co Ltd v Llanelly Steel Co (Case 45)
3
...
14 CA 1985
...
The effect of this is:
(a) Each member, in his capacity as a member, is bound to the
company as if he personally had signed the memorandum and
articles
...
Wood v Odessa Waterworks Co (Case 47)
(c)The memorandum and articles do not constitute a contract
binding the company or any member to an outsider - or to a
shareholder in any other capacity than as a member
...
This can happen in one of three ways:
(i) Where provisions of the memorandum or articles
are expressly incorporated into an express contract
between the company and the outsider
...
ankur1988@gmail
...
(iii) Where there is an express contract which is
silent on a particular matter, and relevant provisions
in the articles or memorandum are used to fill in any
gaps
...
Re New British Iron Co, ex parte Beckwith (Case 50)
(e) A member has a right to compel the company to act according
to the articles even if not enforcing a right which is personal to
himself as a member
...
Rayfield v Hands (Case 52)
VI
...
Nature of Shares and Share Capital
(a) What is a Share?
A share is the unit of measure for determining a member’s interest in the company
...
(b) Share Capital
There are different aspects to this:
Authorised Share Capital
e-mail:mittal
...
com
By: Ankur Mittal
Total value of shares the company is allowed to allot - also known as nominal or
registered capital
...
Paid-up Share Capital
Amount that members have paid on their shares, excluding any premium
...
Uncalled Capital and Reserve Capital
Uncalled capital is the amount owing on partly paid shares which members have not
yet been called on to pay
...
2
...
(b) Preference Shares
Give preferential right to a dividend of fixed amount or fixed percentage per share this dividend is paid before anything is paid to ordinary shareholders
...
Preference shares usually give a preferential right to repayment of capital on a
winding up
...
ankur1988@gmail
...
(c) Ordinary Shares
Dividend depends on company profits and there is no automatic right to a dividend
...
Issue and Allotment of Shares
Issuing is the process by which members take shares in the company
...
(a) Allotment Contracts
Usual rules of contract apply
...
A
prospectus is not an offer to sell shares, it is an invitation to treat
...
These option can be traded like shares
...
80 - Directors cannot allot shares without authority given by the existing
shareholders or the articles
...
It is a criminal
offence to allot shares without proper authorisation, but the allotment remains valid
...
89 - existing shareholders must be offered the opportunity to buy any new
issue of shares before they are offered elsewhere
...
Private companies can avoid pre-emption rights
...
Transfer of Shares
CA 1985, s
...
Private companies usually restrict members’ rights to transfer shares
...
ankur1988@gmail
...
- if only part of shareholding is being transferred, form and certificate are sent
to the company instead, for certification
...
New share certificate is issued after two months
...
- companies that support CREST can transfer listed shares electronically records are computerised and no share certificate is issued
...
It takes place in a
number of circumstances
...
(ii) Insanity of Shareholder
If shareholder becomes a patient under the Mental Health Acts and a public guardian
is appointed, the shares transmit to the public guardian
...
Holder of shares through transmission has the same rights and benefits as a member
even if not registered as a member - but he cannot vote
...
5
...
A company cannot return capital to
the members
...
e-mail:mittal
...
com
By: Ankur Mittal
CA 1985 sets out some legal methods by which the capital of a company can be
returned to the members
...
135-141
A company can reduce its capital if this is authorised by the articles and the reduction
is confirmed by the court
...
The court will only confirm the reduction if satisfied that the company’s creditors
have been paid or have consented to the reduction
...
159(1)
A company can issue redeemable shares if power to do so is given by the articles
...
When shares are redeemed they must be cancelled by the company
...
Any premium payable on redemption must be paid out of profits
...
(c) Company Purchasing its own Shares
Generally this is prohibited by s
...
162 allows a company to buy its own
shares in the circumstances provided by the Act and if authority is given in the
company’s articles
...
ankur1988@gmail
...
The authority
cannot last more than 18 months
...
If the
company is a public company, the authority to buy must expire within 18 months
...
VII
...
Shareholders and Shares
Day to day management of a company is in the hands of the directors, not the
shareholders - but the shareholders retain some important powers - many decisions
require a resolution of the shareholders and cannot be decided by the directors alone
...
(ii)Any other person who agrees to become a member and whose
name is entered on the register of members
...
352 requires every company to keep a register of its members
...
- date person became a member and, where applicable, the date he ceased to be
a member
...
2
...
ankur1988@gmail
...
(i) CA 1985 s
...
A newly incorporated company must hold its
first AGM within 18 months of incorporation
...
367 - if a company does not hold an AGM as required, any member
can apply to the Secretary of State to call or to direct the calling of the meeting
...
366A - members of a private company can choose to dispense with the
holding of an AGM by elective resolution - but any member of such a company can
require that an AGM be held in a particular year by giving notice at least 3 months
before the end of the year
...
371 - if it is impracticable to call a meeting or conduct a meeting in the
manner prescribed by the company’s articles, any member or director who would be
entitled to vote can apply to the court which can order the meeting to be called or
held
...
(ii) Auditor's term of office ends at AGM, so they must be re-appointed or new
auditors must be appointed
...
(iv) The Articles may provide that directors are to retire in rotation
...
(v) Resolutions may be required to pay directors’ and auditors’ fees
...
(vi) Shareholders may have their own resolutions placed on the agenda
...
ankur1988@gmail
...
Table A provides that only directors can call an
EGM, unless there are too few directors in the UK to make up a quorum - then any
member can call one
...
368 - directors must call an EGM if requisitioned by holders of 10% of the
paid up capital of the company
...
371 - power of the court to order the holding of an AGM also applies to
EGMs
...
142 - public company must hold an EGM if the company’s net assets have
fallen to less than half of its called up capital
...
CA 1985, s
...
3
...
If person without authority issues notice of a meeting the notice is void
...
Table A provides that notice must be given to all
shareholders, directors and auditors
...
ankur1988@gmail
...
Bradman v Trinity Estates Ltd (Case 56)
The Companies Act 1985 (Electronic Communications) Order 2000 allows notice to
be given by electronic means such as
via a website provided the member agrees to being given notice in this way
...
369, notice must be at least 21 days for
an AGM, or 14 days for an EGM - unless all members agree shorter notice period
...
Table A requires notice to specify date, time and place of meeting
and a general indication of business to be dealt with
...
If meeting is being convened to pass a special or extraordinary resolution, or a
resolution for which special notice is required, these resolutions must be set out in full
in the notice
...
Baillie v Oriental Telephone & Electric Co Ltd (Case 57)
(vi) Special Notice
Some kinds of resolution require special notice to be given:
- resolution to dismiss a director
- resolution to appoint replacement director at same meeting as dismissal
...
- resolutions concerning dismissal or appointment of auditors
...
The company must then give the members at least 21 days notice of the
meeting
...
ankur1988@gmail
...
Conduct of Meetings
(a) Quorum
"Quorum" = the minimum number of persons who must be present before the meeting
will be valid
...
If Table A has been excluded without providing an alternative, CA 1985 s
...
Single Member Private Companies - one member will form a quorum,
notwithstanding anything in the articles
...
Chairman’s role is to keep order - he/she has no power to adjourn or dismiss a
meeting unless this is specified in the articles
...
(Table A gives a
casting vote
...
Chairman signs the minutes - they then become prima facie evidence of what occurred
at the meeting
...
372 - all companies must allow a member who cannot attend a meeting to
allow a proxy to vote in his place
...
ankur1988@gmail
...
There are two methods of voting at company meetings:
(i) Show of Hands
Voting can be by show of hands unless articles provide otherwise
...
Result is conclusive once recorded in
the minutes
...
(ii) Voting by Poll
A company cannot refuse a demand for a poll made by:
- at least 5 members having the right to vote, or
- any member/members representing one-tenth or more of the total voting
rights
...
Members are entitled to exercise their votes according to their own interests
...
Resolutions
(a) Special Resolutions
Requires vote of 75% of members present in person or by proxy, who are entitled to
vote and do vote
...
Certain matters can only be decided by special resolution and the articles cannot
provide to the contrary
...
ankur1988@gmail
...
(b) Extraordinary Resolutions
Same requirements as for special resolution except for notice period required, which
depends on type of meeting
...
Extraordinary resolution must be used:
- for voluntary winding up when company cannot pay its debts (IA 1986
s
...
165(2))
(c) Elective Resolutions
Apply only to private companies
...
379A CA 1985 lists circumstances - e
...
election
to dispense with AGM
...
Must be filed with Registrar within 15 days of being passed
...
(d) Ordinary Resolutions
Most matters can be decided by ordinary resolution and some must be (e
...
decision to
remove a director)
...
(e) Written Resolutions
CA 1985 s
...
e-mail:mittal
...
com
By: Ankur Mittal
Written resolution is passed by being signed by or on behalf of all members who
would be entitled to attend and vote at a meeting
...
381A procedure by anything in the
articles
...
VIII
...
Appointment of Directors
CA 1985 s
...
(a) First Directors
Persons named in the statement of first directors and secretary submitted on
registration are deemed to be appointed as directors as soon as company is
incorporated
...
(c) Persons Who cannot be Appointed Directors
(i) Share Qualification
If the articles provide for a share qualification, director must
obtain this within two months
...
Person cannot be appointed as director of a public company if he
has reached the age of 70 (CA 1985 s
...
11 - criminal offence unless permission given by
the court
...
ankur1988@gmail
...
11 is a strict liability offence:
R v Brockley (Case 61)
(iv) Persons Disqualified by the Court
CDDA 1986 - it is a criminal offence to act as director of a
company while under a disqualification order
...
- Person has been in persistent default in filing returns or documents with the
Registrar (Maximum 5 years)
...
)
- DTI requests a disqualification order in the public interest after and
investigation
...
)
- Person has been found liable for wrongful trading under s
...
(Minimum 2 years, Maximum 15 years)
R v Austen (Case 62)
Re Sevenoaks Stationers (Retail) Ltd (Case 63)
Re Firedart Ltd (Case 64)
(v) Auditors and Secretaries
- Auditor of a company cannot also be a director of it
...
2
...
ankur1988@gmail
...
Re Homer District Gold Mines (Case 65)
Browne v La Trinidad (Case 66)
Bentley Stephens v Jones (Case 67)
Shaw v Tati Concessions Ltd (Case 68)
(ii) Quorum for Board Meetings
Whatever the articles provide
...
3
...
Third parties are protected by CA ss
...
4
...
ankur1988@gmail
...
Percival v Wright (Case 73)
Allan v Hyatt (Case 74)
The Fiduciary Duties are:
(i) A duty to act bona fide for the benefit of the company as a whole:
Re W & M Roith Ltd (Case 75)
(ii) A duty to use powers only for the purpose for which they were
conferred:
Howard Smith v Ampol Petroleum (Case 70)
(iii) A duty to avoid a conflict between his own interests and those of the
company
...
317 a director with any interest in a proposed contract must disclose this to the
board:
Guinness plc v Saunders (Case 77)
Neptune (Vehicle Washing Equipment) Ltd v Fitzgerald (Case 78)
(iv) A duty not to make a personal profit out of his connection with the
company
...
ankur1988@gmail
...
Traditionally, the duty
has been minimal - director is judged according to his own knowledge and
experience:
Re City Equitable Fire Insurance Co Ltd (Case 83)
Re Brazilian Rubber Plantations & Estates (Case 84)
Dorchester Finance Co Ltd v Stebbing (Case 85)
More recent cases suggest a move to a tougher standard - the level of skill reasonably
to be expected from a person undertaking the same duties
...
Vacation of Office by Directors
(a) Age
A director of a public company must normally retire when he reaches the age of 70,
unless:
- Articles of the company provide otherwise, or
- Shareholders approve his continued appointment
...
Director can also resign by giving notice
...
ankur1988@gmail
...
303 - a director can be dismissed at any time by an ordinary resolution of
the company - this cannot be overridden by the articles or director’s service contract
...
The articles may give a director’s shares special voting rights - this may defeat the
operation of s
...
MAJORITY RULE AND MINORITY PROTECTION
The general rule in company law is that the wishes of the majority will prevail
...
The Rule in Foss v Harbottle
Foss v Harbottle (Case 89)
When a wrong is done to a company, it is for the company to decide what action to
take
...
(a) Reasons for the Rule
(i) The Proper Plaintiff Principle
The company is the proper plaintiff (pursuer) in any action to right a wrong against it
...
It is for the
company to decide whether it is being properly managed
...
(b) Problems with the Rule
e-mail:mittal
...
com
By: Ankur Mittal
The majority of shares often belong to directors
...
There is thus a need for minority protection - enforcement of minority rights falls into
three main categories
...
Exceptions to the Rule in Foss v Harbottle
(a) Preliminary Points
A number of matters must be established first:
(i) The company is entitled to the remedy - shareholder cannot have a
wider right to bring an action than the company itself would have had
...
459 or IA 1986 s
...
(iii)The action falls within one of the recognised exceptions to the Rule
in Foss v Harbottle
...
e
...
(b) The Recognised Exceptions
Edwards v Halliwell (Case 90) identified four exceptions:
- Fraud on the minority by wrongdoers in control
- Invasion of members personal rights
- Ultra vires acts
- Material procedural irregularities
In reality, only the first of these is a true exception to Foss - the others are cases where
the Rule has no application
...
ankur1988@gmail
...
Negligence is not enough to amount to fraud:
Pavlides v Jensen (Case 92)
But "self-serving" negligence might be:
Daniels v Daniels (Case 93)
Oppression of the minority will be regarded as fraud:
Menier v Hooper’s Telegraph Works (Case 94)
Cook v Deeks (Case 82)
Also conduct which is an abuse of majority powers:
Estmanco v GLC (Case 95)
(ii) Invasion of Personal Rights
Invasion of the shareholder’s personal rights is not really an exception to the rule in
Foss v Harbottle - because the shareholder would be the proper person to bring the
action:
Wood v Odessa Waterworks Co (Case 47)
Salmon v Quinn & Axtens Ltd (Case 51)
(iii) Illegal or Ultra Vires Acts
Any shareholder is entitle to bring an action to restrain the company from doing
something which is outside the company’s objects
...
If this exception did not exist, the company would be able to act in breach of its own
constitution
...
ankur1988@gmail
...
Unfairly Prejudicial Conduct
(a) Companies Act 1985 s
...
(but only
to his interests in his capacity as a member)
...
Re Saul Harrison & Sons plc (Case 97)
(iii) The words are flexible in meaning
...
Re London School of Electronics (Case 98)
(d) Irregularity Principle
The court will not hear a petition under s
...
(As in Browne v La Trinidad (Case 66) and
Bentley Stephens v Jones (Case 67))
(e) Grounds for a s
...
e-mail:mittal
...
com
By: Ankur Mittal
Re London School of Electronics Ltd (Case 98)
(iii) Non-Payment of Dividends
Majority pay themselves high directors’ salaries but the company pays no or very low
dividends
...
Re D & R Chemicals Ltd (Case 102)
(v) Serious Mismanagement
Bad management would not normally be grounds for a s
...
459 petition:
The concept that members have a legitimate expectation that the company will be run
in a was that differs from the articles of association will not normally apply to a public
company:
Re Astec BSR plc (Case 104)
The concept that breach of a legitimate expectation could give rise to a petition based
on s
...
In particular, it can:
- regulate the future affairs of the company
...
- order the purchase of the aggrieved shareholder’s shares
...
4
...
ankur1988@gmail
...
122(1)(g) - a company may be wound up by the court if the
court is of the opinion that this would be just and equitable
...
(b) "Just and Equitable"
This is not defined by the Act - the courts have described it as a broad and flexible
concept
...
122(1)(g) petition
...
122(1)(g) petitions are brought by members of quasi-partnerships
...
Ebrahimi v Westbourne Galleries Ltd (Case 107)
(iii) Lack of Probity of Directors
Where shareholders have joined a small family company or quasi-partnership on the
basis that it will be managed in a certain way and this has not been done, the petition
may be granted where the shareholders have lost confidence in the management
...
459
...
(d) Effect of Presentation of Petition
e-mail:mittal
...
com
By: Ankur Mittal
(i) Presentation of the petition freezes the companies affairs while the
matter is decided
...
(iii) The company can take out a cross-undertaking for damages against
the petitioner - the petitioner would then be liable for any loss suffered
by the company because of the petition if the petition eventually fails
...
ankur1988@gmail