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