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Choice of a business medium
Three choices

Company

Partnership

Sole trader

Company:
• Separate legal entity
• Separate legal personality (so conceptually, a person in its own right, quite separate from its shareholders, directors and
employees)
• Perpetual succession= Members may leave or die, or new members join, without any effect on the company
• can own its own property
• contracts in its own name
• liable for its own debts
Can the courts “lift/pierce the corporate veil” – disregard the company’s separate personality and fix its members with the legal
consequences of the company’s acts? Prest v Petrodel Resources Ltd & Ords [2013] UKSC 34- it sets out when the courts will go
beyond the corporate veil- divorcing husband was avoiding tax
...
Court will do this If a) person was under an
existing legal obligation/ restriction and b)deliberately evades / frustrates by imposing a company under his control
• Liability of directors: can happen in limited circumstances, where statue says so eg s2 of Insolvency Act
• Providing security: Charge over property of director etc
...
The Act forces upon all companies certain management and decision
making structures and processes
...
Nevertheless they must be adhered to
...

• Separate taxation: Since a company is a separate legal person it has its own tax life
...
A
company is taxed separately from its shareholders
...
First, the trading and capital profits are charged to corporation tax in the hands of the company, and secondly, when the
money is extracted from the company to the shareholders by way of dividend, it is taxed to either income or corporation tax,
depending upon whether the shareholder is a company or an individual
...
This mechanism works as follows:
Shares are issued to persons (who can be described as shareholders or as members - the two are synonymous in a company where
liability limited by shares), in return for capital
...
The shares also provide a mechanism for voting, for distribution of profit by way of dividends, and for
dealing with ownership and capital growth (if the company prospers the shares might be sold for more than their purchase price)
...
There are no shares to perform the functions outlined
above
...
They are most commonly used to incorporate non profit making
organisations such as clubs, professional bodies, etc
...
-only plc
Listed or unlisted?
• In order to offer its shares to the public in an effective way a Plc may seek to be listed on a recognised investment exchange (e
...

the London stock market, etc
...
If listing is sought, then the Plc must
comply with the additional rules and requirements of the investment exchange in question, as well as the requirements of the
Companies Act

Setting up a company
Requirements:
• largely a matter of filling in the proper forms and sending them to the Registrar of Companies (or completing the forms online)
...


7

8

9

Method of forming a company
(1) Company formed by one or more persons(a) Subscribing their names to a memorandum of association (s8)
(b) Complying with the requirements of the act regarding registration (s9-13)
A Memorandum of association is a memo stating that the subscribers
(a) Wish to form a company under this Act
(b) Agree to become members of the company and, in the case of a company that is to have a share capital, take at least one
share each
...
]
5A)The information as to the company's type must be given by reference to the classification scheme prescribed for the purposes
of this section
...
]

10

11
12

12A

13
14

15
16

(6)The application must be delivered—
(a)to the registrar of companies for England and Wales, if the registered office of the company is to be situated in England and
Wales (or in Wales);
(b)to the registrar of companies for Scotland, if the registered office of the company is to be situated in Scotland;
(c)to the registrar of companies for Northern Ireland, if the registered office of the company is to be situated in Northern Ireland
...
Statement of capital must state: number of shares & their nominal value; with respect to each
subscriber: the value and class of their shares
If company to be limited by guarantee, must deliver a statement of guarantee according to conditions in this section
...

On registration the company should be given a certificate of incorporation
...

(3)That body corporate is capable of exercising all the functions of an incorporated company
...

(5)In the case of a company having a share capital, the subscribers to the memorandum become holders of the shares specified in
the statement of capital and initial shareholdings
...

(1)A company may amend its articles by special resolution
...

54
55
56

Names suggesting connection with government or public authority
Need approval for these
Other sensitive words specified in regulation also need approval
Under regulation secretary of state may require that, in connection with an application for the approval of the Secretary of State
under that section, the applicant must seek the view of a specified Government department or other body
...
L
...

Related to someone objecting to the company’s registered name based on it being the same nmame used by applicant, or is
sufficiently similar
...

76
(1)If in the opinion of the Secretary of State the name by which a company is registered gives so misleading an indication of the
(1)
nature of its activities as to be likely to cause harm to the public, the Secretary of State may direct the company to change its name
...
This is in addition to the obligation to forward a copy of the resolution to the registrar
...

Register of members
112
The members of a company
(1)The subscribers of a company's memorandum are deemed to have agreed to become members of the company, and on its
registration become members and must be entered as such in its register of members
...

113
Every company must keep a register of members- this indicated what particulars need to be included in the register
...
Must include particulars
...
Must give notice to registrar where it keeps it
...

(3)Where a provision of the Companies Acts—
(a)requires a resolution of a company, or of the members (or a class of members) of a company, and
(b)does not specify what kind of resolution is required,
what is required is an ordinary resolution unless the company's articles require a higher majority (or unanimity)
...

(2)The following may not be passed as a written resolution—
(a)a resolution under section 168 removing a director before the expiration of his period of office;
(b)a resolution under section 510 removing an auditor before the expiration of his term of office
...

(4)References in enactments passed or made before this Chapter comes into force to—
(a)a resolution of a company in general meeting, or
(b)a resolution of a meeting of a class of members of the company,
have effect as if they included references to a written resolution of the members, or of a class of members, of a private company (as
appropriate)
...


289

Eligible members
(1)In relation to a resolution proposed as a written resolution of a private company, the eligible members are the members who
would have been entitled to vote on the resolution on the circulation date of the resolution (see section 290)
...


291

Circulation of written resolutions proposed by directors
(1)This section applies to a resolution proposed as a written resolution by the directors of the company
...


(3)The company must do so—
(a)by sending copies at the same time (so far as reasonably practicable) to all eligible members in hard copy form, in electronic
form or by means of a website, or
(b)if it is possible to do so without undue delay, by submitting the same copy to each eligible member in turn (or different copies
to each of a number of eligible members in turn),
or by sending copies to some members in accordance with paragraph (a) and submitting a copy or copies to other members in
accordance with paragraph (b)
...

296

Procedure for signifying agreement to written resolution
(1)A member signifies his agreement to a proposed written resolution when the company receives from him (or from someone
acting on his behalf) an authenticated document—
(a)identifying the resolution to which it relates, and
(b)indicating his agreement to the resolution
...

(3)A member's agreement to a written resolution, once signified, may not be revoked
...


297

Period for agreeing to written resolution
(1)A proposed written resolution lapses if it is not passed before the end of—
(a)the period specified for this purpose in the company's articles, or
(b)if none is specified, the period of 28 days beginning with the circulation date
...


284

Votes: general rules
(1)On a vote on a written resolution—
(a)in the case of a company having a share capital, every member has one vote in respect of each share or each £10 of stock held
by him, and
(b)in any other case, every member has one vote
...

(3)On a vote on a resolution on a poll taken at a meeting—
(a)in the case of a company having a share capital, every member has one vote in respect of each share or each £10 of stock held
by him, and
(b)in any other case, every member has one vote
...


Records of shareholder
355
1)Every company must keep records comprising—
(a)copies of all resolutions of members passed otherwise than at general meetings,
(b)minutes of all proceedings of general meetings, and
(c)details provided to the company in accordance with section 357 (decisions of sole member)
...

Model Articles
3
Directors to
Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may
exercise all the powers of the company
...

(2) If—
(a)the company only has one director, and
(b)no provision of the articles requires it to have more than one director,
the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating
to directors’ decision-making
...

(2) Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to
which each eligible director has otherwise indicated agreement in writing
...

(4) A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such a
meeting
...

(2) Notice of any directors’ meeting must indicate—
(a)its proposed date and time;
(b)where it is to take place; and
(c)if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should
communicate with each other during the meeting
...

(4) Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving
notice to that effect to the company not more than 7 days after the date on which the meeting is held
...

10

Participation in directors’ meetings
(1) Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when—
(a)the meeting has been called and takes place in accordance with the articles, and
(b)they can each communicate to the others any information or opinions they have on any particular item of the business of the
meeting
...

(3) If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as
taking place wherever any of them is
...

(2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than
two, and unless otherwise fixed it is two
...


12

Chairing of directors’ meetings

...

(2) The person so appointed for the time being is known as the chairman
...

(4) If the chairman is not participating in a directors’ meeting within ten minutes of the time at which it was to start, the participating
directors must appoint one of themselves to chair it
...


Casting vote
—(1) If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting
vote
...


15
...
—(1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director—
(a)by ordinary resolution, or
(b)by a decision of the directors
...

(3) For the purposes of paragraph (2), where 2 or more shareholders die in circumstances rendering it uncertain who was the last to
die, a younger shareholder is deemed to have survived an older shareholder
...
— Share certificates
(
1) The company must issue each shareholder, free of charge, with one or more certificates in respect of the shares which that
shareholder holds
...

(3) No certificate may be issued in respect of shares of more than one class
...

(5) Certificates must—
(a)have affixed to them the company’s common seal, or
(b)be otherwise executed in accordance with the Companies Acts
...


Voting: general
A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance
with the articles
...
These rules commonly govern such matters as:
•
•
•
•
•
•

Powers of directors
Conduct at board meetings (who can call, how much notice, what is the minimum number required to attend to run the meeting)
Share capital-do they carry voting rights/ rights hen winding up etc
...

Shareholder decision-making-

A company has a number of choices as to the form of its articles:

Table A- a set of standard articles which were created by statutory instrument in 1985
...

Model Articles- introduced by The Companies Act 2006 instead of Table A
...
The Model Articles are the default articles for companies incorporated from 1 October 2009 onwards
...
Therefore, when they incorporate, they say they will use the Model Articles for the most part, but will stipulate that they
want to change a few of those rules to something more suitable for their company
...
(2 for PLC)
The directors of a company are the people who manage the business on a day to day basis
...

The statutory duties are set out in sections 170 – 182 and include the following:
•
•
•
•
•
•
•

Exercise power for the proper purposes ( and can’t act beyond these powers)
Act in good faith
Exercise independent judgement
Care, skill & diligence which would be exercised by a reasonably diligent person
No 3rd party benefits- everything has to be declared and approved otherwise
Avoid conflicts of interests
Declare interests

Directors are also responsible for ensuring that the right paperwork is sent to the Registrar at Companies House, when appropriate, such
as notice of a change in the company’s directors, its registered office or its name
Can anyone be a director?
Given the important role that directors play in a company, UK company law is surprisingly relaxed about who can volunteer for the job
...

First director(s)-IN01
During its lifetime, a company will lose some directors, perhaps because they choose to retire
...
The Companies Act 2006,
however, says nothing about how a company should go about appointing new directors
...

Executive Role - Executive directors
MA 3 – general power to run the company
...

MA 19 - power to determine their own remuneration package
...

• Under the Companies Act 2006 section 168(1), a director can be removed from office by ordinary resolution of the shareholders
...
Includes resigning
• Executive position- board must give notice in accordance with employment contract
• It is possible to be disqualified from acting as a director, either automatically or by a court order
...

Is it essential to have a company secretary?
In the case of a private company, the Companies Act 2006 does NOT require it to have a company secretary
...
Shareholders have invested their money in the company and
have received a share certificate in exchange
...
This is fine, because that’s what the directors are paid to do
...
Therefore, being
a shareholder will bring with it certain rights to attend meetings and vote upon shareholder resolutions
...

Transfer -A transfer is something that happens at a later date, some time after shares have been allotted
...
Generally, this means you must use a pre-printed form known as a Stock
Transfer Form
...
S768 CA 2006
...
S769 CA 2006
...
S
776 CA 2006
...
There are certain exemptions, including:
• Allotments
• Gifts where price doesn’t exceed 1,000
Who pays? The transferee pays
...
The transferee must send the Stock Transfer Form
to the Stamp Office
Rate? The rate is half a percent of the price paid for the shares, rounded up to the nearest £5
...
conventional “traditional” partnership (governed by the Partnership Act 1890 (“PA 1890”)
...
limited partnerships (governed by the Limited Partnership Act 1907 (“LPA”)
...
); and
3
...
(governed by the Limited Liability Partnerships Act 2000 (“LLPA”)
...
It was introduced in response to the demands of large professional partnerships (accountancy firms)
...
By and large the drafting is clear and simple
...
Partnerships come into existence whenever the definition in S
...
The PA 1890 sets out the basic structure of partnership law
...

(while it is for a view to make a profit, this does not need to actually happen)
• Partnerships have no separate corporate personality
• Unlimited liability= Every partner is liable without limit for all or any of the debts of the partnership
...
The 1890 Act provides a set of fall back rules to the extent that they do
not do this
...

• No separate taxation- Partnerships are transparent for tax purposes
...
The monies received in the hands of the
partners are only taxed once
...


LIMITED PARTNERSHIPS under the Limited Partnerships Act 1907
• governed by the same law as traditional partnerships (under the PA 1890) unless those provisions are specifically overridden by
the LPA
• permits the creation of partnerships with a degree of limited liability to one or more partners, whilst still retaining tax transparency
for the members of the Limited Partnership
...

Formation, Constitution and Filing Requirements
•
•
•
•

A Limited Partnership must consist of at least one ‘general partner’ and one ‘limited partner’
...
The limited partner may not take part in management
...

If unregistered, ideemed to be a traditional partnership and every limited partner is deemed to be a general partner (s
...
(thus
all will be liable for the debts and obligations of the firm)

No separate personality- despite being formed by registration they have no separate personality
...

Liability- Each limited partnership must have a mix of ‘limited partners’, who have limited liability (similar to a shareholder in a
company), and ‘general partners’, who have unlimited liability for all the debts of the partnership, as in a conventional partnership
...
If a limited partner participates in
management they become liable for the debts of the partnership as if they were a general partner
...
- hybrid between partnership and company
• Separate corporate personality
• Note carefully that, despite its title, the LLPA does not create a new kind of partnership
...

S1(2): A LLP is a body corporate (with legal personality separate from its members)
...

• However, reg 7 LLP Regs SI 2001/1090 contains similar default provisions to those found in s24 PA 1890
...

• Limited Liability Partnerships (Register of People with Significant Control) Regs 2016
Perpetual succession- Carries on like a company
No separate taxation- tax purposes LLP members are treated similarly to partners in a partnership
...

• Every LLP must have a least 2 “designated” members – these will be the subscribers on the incorporation documents
...
It is only 19 sections long
...
It is not easy to work with
...
The LLPA is by no means comprehensive
...
The cost of creation of this Agreement may be
disproportionate for a small start-ups business
...

Unlimited personal liability
Costs- no costs to set it up

Individuals/ partners carrying on business
S 1200-1204 applied to individua/partnerships operating under a business name
Business name means any name other than , :
For an individual, his surname without any additions other than a ‘permitted addition’(forename or initial)
For a partnership, surname of all partners who are individuals and the corporate name of all partners who are bodies corporate, without
any conditions other than the permitted additions

Information required to be disclosed:
*actual name
*a service address for each individual/ partner
*address for place of business
*info must be on all business documents
*displayed everywhere

Articles of association
Important model Articles
3

7

8

Directors general authority
Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may
exercise all the powers of the company
...

(2) If—
(a)the company only has one director, and
(b)no provision of the articles requires it to have more than one director,
the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles
relating to directors’ decision-making
...

(2) Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or
to which each eligible director has otherwise indicated agreement in writing
...

(4) A decision may not be taken in accordance with this article if the eligible directors would not have formed a quorum at such
a meeting
...

(2) Notice of any directors’ meeting must indicate—
(a)its proposed date and time;
(b)where it is to take place; and
(c)if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should
communicate with each other during the meeting
...

(4) Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving
notice to that effect to the company not more than 7 days after the date on which the meeting is held
...


10

Participation in directors’ meetings
(1) Subject to the articles, directors participate in a directors’ meeting, or part of a directors’ meeting, when—
(a)the meeting has been called and takes place in accordance with the articles, and
(b)they can each communicate to the others any information or opinions they have on any particular item of the business of the
meeting
...

(3) If all the directors participating in a meeting are not in the same place, they may decide that the meeting is to be treated as
taking place wherever any of them is
...

(2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less
than two, and unless otherwise fixed it is two
...


12

Chairing of directors’ meetings
(1) The directors may appoint a director to chair their meetings
...

(3) The directors may terminate the chairman’s appointment at any time
...


13
...

(2) But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating
in the decision-making process for quorum or voting purposes
...

(2) But if paragraph (3) applies, a director who is interested in an actual or proposed transaction or arrangement with the
company is to be counted as participating in the decision-making process for quorum and voting purposes
...

(4) For the purposes of this article, the following are permitted causes—
(a) a guarantee given, or to be given, by or to a director in respect of an obligation incurred by or on behalf of the company or
any of its subsidiaries;
(b) subscription, or an agreement to subscribe, for shares or other securities of the company or any of its subsidiaries, or to
underwrite, sub-underwrite, or guarantee subscription for any such shares or securities; and
(c) arrangements pursuant to which benefits are made available to employees and directors or former employees and directors
of the company or any of its subsidiaries which do not provide special benefits for directors or former directors
...

(6) Subject to paragraph (7), if a question arises at a meeting of directors or of a committee of directors as to the right of a
director to participate in the meeting (or part of the meeting) for voting or quorum purposes, the question may, before the

conclusion of the meeting, be referred to the chairman whose ruling in relation to any director other than the chairman is to be
final and conclusive
...

26
Share transfers
(1) Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the
directors, which is executed by or on behalf of the transferor
...

(3) The company may retain any instrument of transfer which is registered
...

(5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to
the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent
...

Companies Act
17
A company's constitution
Unless the context otherwise requires, references in the Companies Acts to a company's constitution include—
(a)the company's articles, and
(b)any resolutions and agreements to which Chapter 3 applies
18
Articles of association
(1)A company must have articles of association prescribing regulations for the company
...

(3)Articles of association registered by a company must—
(a)be contained in a single document, and
(b)be divided into paragraphs numbered consecutively
...

20
Default application of model articles
(1)On the formation of a limited company—
(a)if articles are not registered, or
(b)if articles are registered, in so far as they do not exclude or modify the relevant model articles,
the relevant model articles (so far as applicable) form part of the company's articles in the same manner and to the same extent
as if articles in the form of those articles had been duly registered
...

21
Amendment of articles
(1)A company may amend its articles by special resolution
...

29(1)(a) Resolutions and agreements affecting a company's constitution
(1)This Chapter applies to—(a)any special resolution
30(1)
Copies of resolutions or agreements to be forwarded to registrar
(1)A copy of every resolution or agreement to which this Chapter applies, or (in the case of a resolution or agreement that is
not in writing) a written memorandum setting out its terms, must be forwarded to the registrar within 15 days after it is passed
or made
...

177
Duty to declare interest in proposed transaction or arrangement
(1)If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the
company, he must declare the nature and extent of that interest to the other directors
...

(3)If a declaration of interest under this section proves to be, or becomes, inaccurate or incomplete, a further declaration must
be made
...

(5)This section does not require a declaration of an interest of which the director is not aware or where the director is not
aware of the transaction or arrangement in question
...

(6)A director need not declare an interest—
(a)if it cannot reasonably be regarded as likely to give rise to a conflict of interest;

(b)if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as
aware of anything of which they ought reasonably to be aware); or
(c)if, or to the extent that, it concerns terms of his service contract that have been or are to be considered—
(i)by a meeting of the directors, or
(ii)by a committee of the directors appointed for the purpose under the company's constitution
...

Consent, approval or authorisation by members
(1)In a case where—
(a)section 175 (duty to avoid conflicts of interest) is complied with by authorisation by the directors, or
(b)section 177 (duty to declare interest in proposed transaction or arrangement) is complied with,
the transaction or arrangement is not liable to be set aside by virtue of any common law rule or equitable principle requiring
the consent or approval of the members of the company
...

This section does not apply if or to the extent that the interest has been declared under section 177 (duty to declare interest in
proposed transaction or arrangement)
...


184

Declaration made by notice in writing
(1)This section applies to a declaration of interest made by notice in writing
...

(3)The notice may be sent in hard copy form or, if the recipient has agreed to receive it in electronic form, in an agreed
electronic form
...

(5)Where a director declares an interest by notice in writing in accordance with this section—
(a)the making of the declaration is deemed to form part of the proceedings at the next meeting of the directors after the notice
is given, and
(b)the provisions of section 248 (minutes of meetings of directors) apply as if the declaration had been made at that meeting
...

(2)General notice is notice given to the directors of a company to the effect that the director—
(a)has an interest (as member, officer, employee or otherwise) in a specified body corporate or firm and is to be regarded as
interested in any transaction or arrangement that may, after the date of the notice, be made with that body corporate or firm, or
(b)is connected with a specified person (other than a body corporate or firm) and is to be regarded as interested in any
transaction or arrangement that may, after the date of the notice, be made with that person
...

(4)General notice is not effective unless—
(a)it is given at a meeting of the directors, or
(b)the director takes reasonable steps to secure that it is brought up and read at the next meeting of the directors after it is
given
...

302
Directors' power to call general meetings
The directors of a company may call a general meeting of the company
307(1) Notice required of general meeting
(1)A general meeting of a private company (other than an adjourned meeting) must be called by notice of at least 14 days
...

(2)The following may not be passed as a written resolution—
(a)a resolution under section 168 removing a director before the expiration of his period of office;

289(1)

290

291

296

297

300

(b)a resolution under section 510 removing an auditor before the expiration of his term of office
...

(4)References in enactments passed or made before this Chapter comes into force to—
(a)a resolution of a company in general meeting, or
(b)a resolution of a meeting of a class of members of the company,
have effect as if they included references to a written resolution of the members, or of a class of members, of a private
company (as appropriate)
...

Circulation date
References in this Part to the circulation date of a written resolution are to the date on which copies of it are sent or submitted
to members in accordance with this Chapter (or if copies are sent or submitted to members on different days, to the first of
those days)
...

(2)The company must send or submit a copy of the resolution to every eligible member
...

(4)The copy of the resolution must be accompanied by a statement informing the member—
(a)how to signify agreement to the resolution (see section 296), and
(b)as to the date by which the resolution must be passed if it is not to lapse (see section 297)
...

(6)A person guilty of an offence under this section is liable—
(a)on conviction on indictment, to a fine;
(b)on summary conviction, to a fine not exceeding the statutory maximum
...

(2)The document must be sent to the company in hard copy form or in electronic form
...

(4)A written resolution is passed when the required majority of eligible members have signified their agreement to it
...

(2)The agreement of a member to a written resolution is ineffective if signified after the expiry of that period
Relationship between this Chapter and provisions of company's articles
A provision of the articles of a private company is void in so far as it would have the effect that a resolution that is required by
or otherwise provided for in an enactment could not be proposed and passed as a written resolution
...
Applying conflict of interest
...
(1)if a director of a company, in any way directly or indirectly is interested
in a proposed transaction or arrangement [then] he must declare the nature and extent of that interest to the other directors
2) What does interested mean in this context? Example 1 director’s wife selling a piece of industrial land to the company, the director
selling this piece of land to the company->yes Example 2: director selling shares in the company to his brother-> this is actually
not because director is seller of shares, brother is buyer; there is no company in the transaction
...
if 14(3) applies, this restriction does not count
...
A & B do not want the shares of the company to be transferred to “outsiders”
...

• They can just refuse to register as per Model article 26 (5) – however this would not give them an absolute right to give shares to
their families as the other could just refuse
...
283- Special resolution- no less than
75%
• CA 30(1)-Copies of resolutions or agreements to be forwarded to registrar: (1)A copy of every resolution or agreement to which
this Chapter applies, or (in the case of a resolution or agreement that is not in writing) a written memorandum setting out its terms,
must be forwarded to the registrar within 15 days after it is passed or made
...


Exam Q3 Is there a way around directors having to meet every time they need to make a decision?
• Model Article 7-(1) decisions must be either majority or according to Art 8
• Article 8- unanimous decision- - 8(1)directors may take decisions when they indicate to each other by any means that they share a
common view on a matter
...
10 (3)- if
they are in different places, they may decide that the meeting is to be treated as taking place wherever any of them is
...
Written resolutions may
be proposed by directors and has the same effect as if passed by the company in a general meeting
...

Signing– rules contained in 296-(1) Sets out how a member can signify (2)- may be hard copy or electronic (3) Once a member signifies,
cant revoke (4) A WR is passed when the required majority of eligible members have signified their agreement to it
Lapse-s 297- (1) Proposed WR lapses if you don’t get the relevant percentage agreeing to it within 28 days
...


Allotment
S
Exercise by directors of power to allot shares
549
(1) Directors must not allot any shares, or grant rights to subscribe , or convert securities into shares, except in accordance
to 550 (private company with single class of shares) or 551 (authorization by company)
(2) If in breach, director commits an offence
(3) Liable for fine if offending
(4) This does not affect the validity of allotment
S
Private company with only one class of shares
550
Where a private company only has a single class of shares, director may allot/ grant rights to subscribe/ convert security
into shares, unless prohibited by articles of the company
...

(8)a resolution for this purpose may be made by ordinary resolution despite altering the company’s articles
S
Shares are allotted when someone acquired the unconditional right to be included in the company’s register of members in
558
respect of the shares
S
This does not apply to the taking of shares by the subscribers to the memorandum on the formulation of the company
...
g
...

Minutes of meetings
(1) Minutes of directors meetings must be recorded
(2) These must be kept for at least 10 years from meeting

355

554

555

(3) Offence if not complied with
(4) Liable for summary offence with fine not exceeding level 3 on standard scale
Records of resolutions and meetings
(1) Companies must keep copies of resolutions of members passed other than in general meetings, minutes of all
general meetings, details provided to company in accordance to 357
...

769 (1)
Duty of company to issue certificated on allotment
Within two months of allotment, company must complete and have ready for delivery the certificates of allotted
shares
...
(same as to legal entities
Notification of changes
Applies to where a company enters particulars on PSC register, alters required particulars in its PSC register, notes in
its PSC register an additional matter
(3) Company must give notice to registrar of change made to PSC register (and date of change) before 14 days after
change
(4) Default=offence by company and defaulting officers

S 12A

Schedule
1A,
paras 15

Statement of initial significant control
(1) Statement of initial significant control delivered to registrar must state whether for purpose of 790M anyone will
count as registrable person/ legal entity, include their particulars and any matters which are required to be entered
kin the company’s PSC
3 Where particulars are included, this must be done with the individual’s knowledge
References to people with significant control
1
...
They must hold, directly or indirectly, at least 25% of shares
3
...
They must hold the right, directly or indirectly, to appoint or remove a majority of the board of directors
5
...


Filing requirements when allotting shares:
Internal
Section 248- keep minutes of boardmeetings
...
The way this
would work would be- 1
...
Have a
shareholder meeting to allow directors to allot shares (call it
according to 302)-> then a resolution under directors to allow
allotting under MA 3- Under s355(1), formal records must be
kept of all GMs and resolutions passed by shareholders

External
Section 555- (2) Must, within a month of making the
allotment, deliver to the registrar for registration a return of the
allotment (3)Return must contain the prescribed information &
be accompanied by statement of capital
If s 551 rather 550 applied, you will also need to send the
registrar a copy of the resolution which allowed the director to
allot

A bit on pre-emption
...
(always define equity
securities as per 561)
...

• Provided you would like to exclude or disapply this:
• 569-if only one class of shares, could have disapplied 561 by special resolution and or given director this right through
modified articles
• 567-could have excluded it permanently
• 565- also 561 would not even apply if paid for otherwise than in cash
• !!! Remember this won’t apply if shares aren’t ordinary (e
...
preference dividend, limited voting rights etc)

Share transfers:
Companies Act
770
Registration of transfer
(1) Company may not register a transfer of shares unless (a) a proper instrument of transfer has been delivered to it or
b) the transfer is exempt within the Stock transfer 1982, is in accordance with regulations under Chapter 2
(2) Can register if person became shareholder by operation of law
771
procedure on transfer being lodged
(1) When a transfer of shares lodged with the company, company must register the transfer/ give the transferee notice
of refusal to register the transfer , as soon as practicable, and within 2 months
(2) If company refuses to register transfer, it must give further information on the reasons (but it does not need to
provide the transferee with meeting minutes)
(3) If failing to comply, offence by company and every officer in default
776
Duty of company as to issue of certificates etc on transfer
(1)A company must, within two months after the date on which a transfer of any of its shares, complete and have ready for
delivery—
(a)the certificates of the shares transferred,
...
41),
but does not include a transfer that the company is for any reason entitled to refuse to register and does not register
...

(4)Subsection (1) has effect subject to section 777 (cases where the Stock Transfer Act 1982 applies)
...

(6)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the
standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard
scale
...
—(1) The company must issue each shareholder, free of charge, with one or more certificates in respect of the shares
which that shareholder holds
...

(3) No certificate may be issued in respect of shares of more than one class
...

(5) Certificates must—
(a)have affixed to them the company’s common seal, or
(b)be otherwise executed in accordance with the Companies Acts
...
g
...
5% of share price rounded to nearest £5
If under £1k, no stamp duty, but need to complete back of the form
Gift- no stamp duty &no completing back of transfer form (certificate 1)

Q1
...
‘may’ automatically means this is best to be decided at a board
meeting
...
This
alongside the share certificate should be sent to the company for registration
...

(5) Service address may be stated as company’s registered office
Register of directors’ residential addresses
(1) Every company must keep register of director’s residential addresses
(2) The register must state the usual residential address for all directors
(3) If directors residential address is same as service address, the register of directors residential address only needs an
entry in that effect
...

(4) Default=offence
(5) Liability for offence
Resolution to remove a director
(1) May be removed by ordinary resolution in a meeting before expiration of period of office
(2) Special notice is required for such resolution to remove a director or replace a director with someone new after removal
(3) A vacancy created by removal, if not filled during the meeting, may be filled as a casual vacancy
(4) A person appointed director in place of someone removed, for the purpose of determining when they can retire, is
deemed to have started on the day when the person they are replacing was last appointed
(5) This does not deprive the removed person from compensation and damages if relevant, nor does it derogate from any
power to remove a director
Directors’ long-term service contracts: requirement for members approval
(1) Applies where guaranteed term of directors employment is or may be longer than 2 years
(2) A company may not agree to such provision unless it is approved by resolution of the members
(3) Guaranteed term is where the period of employment is (a) to continue and cannot be terminated by notice (or can only
be terminated in specific circumstances) (b) where employment is terminable by notice, the period of notice required to
be given
(4) If more than 6 months before the end of guaranteed term the company enters into a further service contract, the
unexpired period gets added to the new term
(5) A resolution approving provision to which this section applies must not be passed without a memorandum with the
proposed contract is presented to members: (a) for written resolution by being sent and submitted to every member (b)
in case of resolution at meeting, by being made available for inspection at the registered office for at least 15 days prior
to meeting, and at the meeting itself
...

Payments for loss of office
(1) This is payable to director (a) by way of compensation for loss of office as director (b) by way of compensation for loss,
while director of company or in connection to ceasing to be a director, of any other office or employment in connection
with the management of the affairs of company/ holding company, (c) as consideration for his retirement from office as

director, (d) in connection with his retirement while director or while ceasing to be director, from any office in
connection to management of affairs
(2) References for compensation and consideration include benefits other than cash
217 Payment by company: requirement of members’ approval
(1) Company may not make payment for loss of office unless approved by resolution of members
(2) Same for loss of office of holding company
(3) A resolution can only be passed if a memorandum setting out the particulars of payment was made available to
members : (a) for written resolution by being sent and submitted to every member (b) in case of resolution at meeting,
by being made available for inspection at the registered office for at least 15 days prior to meeting, and at the meeting
itself
...

(f) Notification is received by company from director that they are resigning from office, and this resignation took effect
according to the terms
Director’s remuneration
(1) Directors may undertake any services they decide
(2) Entitled to whichever remuneration they determine for their services both as director and any other services
(3) Subject to articles, the remuneration may take any form, and include arrangements in connection with the payment of a
pension, allowance or gratuity
(4) Unless they decide otherwise, the director’s remuneration accrues from day to day
(5) Unless they decide otherwise, they will not be accountable for any remuneration which they receive
Directors’ expenses
Company may pay directors any reasonable expenses which incur in connection with their attendance at:
(a) Meetings of directors or committees
(b) General meetings
(c) Separate meetings of the holders of any class of shares of debentures
Or otherwise in connection with their exercise of powers and discharge of their obligations in relation to the company

Appointing a Director/Service Contracts/Removal of a Director Business Revision Notes

Before outlining the diagram on appointing a director + executive director + removal of director these notes will first provide some
basic information on this topic
...

A non-executive director does not participate in day to day running of the business
...
These are typically found in public companies rather than private ones
...

Subsequent directors being appointed depends on the articles of the company but typically it is either through ordinary resolution of
shareholders or board resolution by existing directors
...
The board will decide the terms of each service contract, which include the directors responsibilities, authority of
director and salary etc
...
Look at 18 (f) model Articles
b) Removal by board of directors sometimes, power is given to the board of directors through articles to dismiss a fellow director
through a majority vote at a board meeting
...
This essentially
means that the reasons for this must be serious, such as gross negligence by a director or failure to perform duties over time
...
A shareholder wanting to propose
a resolution to remove a director must give special notice (s 168 (2)
...

(f) Notification is received by company from director that they are resigning from office, and this resignation took effect according to
the terms
(5)

How (if at all) does an executive director’s loss of office affect his executive (employment) position?

If a director is removed from the board then he automatically loses any executive role that he might occupy within the company
because the executive role is dependent on his being a director
...
Therefore, the company will effectively be in breach of its obligations and so the
director potentially has a claim under wrongful dismissal as well as unfair dismissal
...
e
...
g
...

Financial implications – payments for loss of office via S
...
217 or termination
payment which calculated based on length of notice period
...
Stays director until he resigns (as stated in
the contract) but he would no longer be an employee
...

For clarity…
Payments for loss of office – S
...
217
(4) Company may not make payment for loss of office unless
approved by resolution of members
(5) Same for loss of office of holding company
(6) A resolution can only be passed if a memorandum setting out
the particulars of payment was made available to members : (a)
for written resolution by being sent and submitted to every
member (b) in case of resolution at meeting, by being made
available for inspection at the registered office for at least 15
days prior to meeting, and at the meeting itself
...
220
(3) Approval not required for a payment made in good-faith in
discharge of an existing legal obligation, by way of damages for
breach of obligation, by settlement or compromise of any claim
arising in connection with termination, by way of pension
(4) In relation to s 217, an existing legal obligation means the
obligation of a company that is not connected to the event
giving rise to the payment for loss of office
Exception for small payments – S
...

Model Article 17 – Appointing a Director
Any person who is permitted by law and is willing to do so may
be appointed by a director
(a) By ordinary resolution of shareholders or
(b) Decision by the directors (board resolution)

If going down the shareholder resolution route…
Section 302 – Director may call a general meeting of the
company

If going down the director’s decision route…
Model Article 9 (1) – call a directors meeting by giving notice to
the other directors
...

(2) It is irrelevant how they communicate with each other

Section 308 – Manner of Notice to be given
Notice must be given either in hard copy form/electronic
form/through a website or a combination of any of those
...


Model Article 42 – Voting at a general meeting
Must be by a show of hands unless someone demands a poll
vote via Section 321
...
The location of this register must be
known to the registrar
...

Notice of that person becoming a director must contain a
statement from the new director containing particulars of that
director and statement saying he consents to the role
...

(2) member approval is needed for such a transaction
(3) this defines ‘guaranteed term’ as:
The period for service and a period where the company cannot
terminate the contract save for certain circumstances or by
notice
...

The memorandum, if approval is through a written res, must be
sent to every eligible member (those who can vote) before the
proposed written resolution is sent
The memorandum, if approval is at a meeting, must be made
available not less than 15 days before the meeting and at the
meeting itself
...
Therefore, follow
the process seen above in making this happen regarding notice and
content/quorum/participating/voting/filing via S
...

Model Article 5 – directors may delegate to such person etc as
they think (i
...
appoint an executive)
Model Article 19 – directors are entitled to such remuneration
that they decide and it can take any form
...
The
meeting/notice/participating/voting should be followed like
previously
...

(4) The persons liable are:
(a) any director in contravention of 190
(b) any person connected with director who contravened 190
© the director with whom any such person is connected,
(D) any other director who authorized this arrangement
(7) wont apply if director can show they did not know the relevant circumstances constituting the contravention
196
Effect of subsequent affirmation
Where transaction entered in contravention of s 190, but within a reasonable period it is affirmed that :
(a) In case of breach of ss (1) by member’s resolution, (b) and in case of breach ofss (2) by resolutoion of members of holding
company, the transaction may no longer be avoided under 195
Loans / Quasi-loans / Credit Transactions to Directors
197
S
...

s
...

Written res should be given to everyone
Resolution at a meeting?
Memorandum must be available at companys registered office not less than 15 days ending with the date of the meeting
s
...

s
...

So process of approving loan = Shareholders meeting called under s
...
197 -> then board res
to enter into loan agreement under article 3
...

Quasi loans can be made by private companies without approval needed

199

What is a quasi loan? a transaction under which the creditor agrees to pay a sum owed on behalf of the borrower
...


200

What is a quasi loan? a transaction under which the creditor agrees to pay a sum owed on behalf of the borrower
...


201

credit transactions
...


202

credit transaction is where the creditor supplies any goods or sells and land under a high price agreement or conditional sale
agreement
or leases of hires any land or goods in return for periodical payments
or otherwise disposes of land or supplies goods or services on the understanding that payment is the be deferred
...

s
...
if the exception applies only a board res will be required
...
No ord res required where the loan or quasi loan added to relevant transaction does not exceed 10k
...


213

Civil consequences
...
Directors can be liable to account to the company for any gain that he has made directly or indirectly
...
197 – it means no shareholder approval is needed for this section
...

Persons connected of a director
252
S
...
252 (2) (b) – director is connected to certain body corporates
...


254

defined as a company where the director and those connected with him own at leasdt 20% of the voting shares in the company
...


Associated Bodies Corporate
256
(a) Bodies corporate are associated if one subsidiary of the other or both are subsidiary of the same body corporate and
(b) Companies are associated if one is a subsidiary of the other or both are subsidiaries of the same body corporate
Meaning of subsidiary
1159
(1) A company is a subsidiary of a ‘holding company’ if the other company:
(a) Holds a majority of the voting rights in it, or
(b) Is a member of it and has the right to appoint/remove a majority of its board of directors, Or
(c) Is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it,
Or if it is a subsidiary of a company that is itself a subsidiary of the other company
...

(2) A reference to the transfer or acquisition of a non-cash asset includes (a) the creation/ extinction of an estate, or interest in, or
right over any property and (b) the discharge of a liability of any person, other than a liability for a liquidated sum

This section will be in the form of a diagram showing a company can buy back its shares
...
658 General rule against a limited company buying back its
own shares
...
690 Power of limited company to purchase own shares
(1) a limited company can buy back through (a) these provisions
subject to (b) the company’s own articles
(2) cannot buy back if there will be no shares (other than
treasury or redeemable shares)

S
...
This can be easily remedied by the
shareholders signing a letter of waiver at this stage
...
691 (1) shares that are being bought back must be fully paid
(limited company)

S
...


(2) when the purchase occurs it must be paid for on purchase

This must be fully paid – Model Article 21
S
...
692 (2) (a) if (1ZA) does not apply then a purchase can only be
out of
(i) distributable profits
(ii) proceeds from a fresh issue of shares
S
...
692 (3) If shares to be purchased were issued at a premium,
any premium payable may be paid out of proceeds of a fresh
issue of shares made for the purpose of financing the purchase
up to (a) the aggregate of premiums received by the company
on the issue of shares purchased or (b) the current amount of
the company’s share premium account (WHICHEVER IS LESS)

S
...
830
S
...
So long
as profits have not been already used or losses are not already
written off
...
692 (1ZA) then the purchase
can only be via S
...

S
...
711 ‘Available Profits’ means, in relation to buyback of
shares, profits that are available for distribution
...
712 Available Profits of the company are determined as
follows:
(2) calculate profits/losses/assets/liabilities
(3) LESS any distributions or other relevant payments made
from the relevant account within the relevant period
(4) defines ‘other relevant payments’ as financial assistance,
money for buyback of shares and other payments under S
...

(6) ‘relevant accounts’ are those needed for (2)
(7) ‘relevant period’ means 3 months ending the date with the
Directors statement outlining the Permissible Payment for the
buyback of shares
...
713 Payments out of capital require the following to be met:
Directors statement and auditors report – S
...
716
Public notice of the proposed payment – S
...
720

____________________________________________________________________________________________________________________________________________
You are now instructed by the client that they want the buyback of shares to take place and that this is to be financed wholly out of distributable profits
...
693 (1) and various requirements need to be met
...
693 (2) a purchase is ‘off-market’ if
(a) they are not purchased on a recognised investment
exchange or
(b) they are purchase on a recognised investment exchange but
are not subject to standard marketing arrangements on that
exchange
...
694 (1) authority for an off-market share purchase can be
obtained by drafting and approving a contract prior to the
purchase
...


S
...

(2) (b) if the resolution is at a meeting then then at the office
for no less than 15 days and at the meeting itself
...


Insolvency

You are asked to look at a balance sheet and identify the implications of s 123 Insolvency Act
...

If the sum exceeds £750 and the creditor has served a written demand to pay the sum and for the 3 weeks the company did not pay then the company is
therefore seen as being unable to pay debts
…(e) if it is proved to the satisfaction of the court that the company cannot paid its debts as they fall due
(2) a company is also deemed unable to pay its debts of it is proved to the satisfaction of the court that the value of the companys assets is less than the amount
of its liabilities taking into account contingent and prospective liabilities
If on balance sheet the assets are greater than liabilities, you can state that the it is not balance sheet insolvent but as the act suggests it may be insolvent in
other ways e
...
cash flow insolvent, which will still mean the company may need winding up
...
g
...
Similarly, if it is not too recent (e
...
half a
year old, you should state that there would need to be a more recent account for an accurate evaluation)
1
...
S 170 and 171 f Companies Act
170 (1)The general duties specified in sections 171 to 177 are owed by a director of a company to the company
...

Most importantly, however: 172 (1)- A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of
the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) to—
(a)the likely consequences of any decision in the long term,
(b)the interests of the company's employees,
(c)the need to foster the company's business relationships with suppliers, customers and others,
(d)the impact of the company's operations on the community and the environment,
(e)the desirability of the company maintaining a reputation for high standards of business conduct, and
(f)the need to act fairly as between members of the company
...
Consider the effect of 214 on directors:
214- deals with wrongful trading
...
’

214 (4)- gives the test for knew or ought to have known references a ‘reasonably diligent person’: (a)- is objective: he general knowledge, skill and experience
that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company
(b) is subjective: the general knowledge, skill and experience that that director has

The relevant director to look at here is usually the named financial director in your company profile
...
Similarly, if they were trying at the time to say get another
contract for the company this may suggest they did all the reasonable steps to avoid insolvency
...
Advise directors as to their potential liabilities in accordance with the Company Directors Disqualification Act 1986
Disqualification max 15 years
S 6- Duty of court disqualify unfit directors of insolvent companies
The court shall make a disqualification order if it is satisfied that:
6 (1) (a) - that he has or is a director of a company which became insolvent and
6 (1) (b) - that his conduct as a director of that company makes him unfit to be concerned in the management of a company
...

Schedule 1-states the factors which will be considered when making such a decision
Also, if the financial director is part of a regulatory body for accountants etc they may be interested as well in what mistakes they’ve dpme
4
...
The bank would also expect the company to
provide it with more detailed financial information about the company on a more frequent basis than it had currently been receiving
...
Identify different insolvency procedures, how they are instigated, their aims, and effect on directorships?
Type 1- (LIQUIDATION- winding up)

Members voluntary liquidation
(commenced by usually solvent
company that wishes to stop trading or
is dormant)

Creditors voluntary liquidation
(commenced by insolvent company
usually due to creditors’ pressure)

84 circumstances in which company may be wound up voluntarily
1
...

OR IF THE COMPANY PASSES BY SPECIAL RESOLUTION THAT IT BE
WOUND UP VOLUNTARILY
(2A)before a company passes the resolution it must give a written notice of
the resolution to the holder of any qualifying floating charge to which 72 A
applies
(2B) where notice is given under 2A a resolution may only be passed after the
end of 5 business days beginning with the day when the notice is given, OR
(b) if the person to whom the notice was given has consented in writing to
the passing of the resolution
...

123 defines when a company may be unable to
pay off its debts

124- Application for winding up
Application for the winding up of a company can
be made by the company, or the directors, or a
creditor, a contributory, or a state liquidator
...
FOR MVL only- directors may make a statutory declaration to the effect
the company will be able to pay its debts in full, with interest at the
official rate, within a period not exceeding 12 months from
commencement
2
...

3
...


Administration (Schedule B1 Insolvency Act)

Purpose:3 (1)
Purpose of administration
1
...

Rescuing the company as a growing concern
b
...

Realising property in order to make a distribution to one or more secured preferential
creditors

Court Route para 12

Administration order
10 - An administration order is an order appointing a person as
the administrator of a company
...
Conditions: The court may make an administration order in
relation to a company only if satisfied—
(a)that the company is or is likely to become unable to pay its
debts, and (b)that the administration order is reasonably likely to
achieve the purpose of administration
...
43)

Out of court para 14 (by floating charge holder)

14 Power to appoint
14(1)The holder of a qualifying floating charge in respect
of a company’s property may appoint an administrator of
the company
...


Statutory moratorium – restricts third parties from enforcing their rights
without the consent of the administrator
...
Power to appoint
1
...
The directors of a company may appoint an
administrator

26 (1) A person who proposes to make an
appointment under para 22 shall give at least 5 days
written notice to (a) any person who is or may be
entitled to appoint an administrative reciever of the
company and (b) any person who is or may be
entitled to appoint an administrator
27 (1) A person who gives notice of intention to
appoint under 26 shall file with the court a copy of
the notice and any document accompanying it
...

29(1)- Any person who appoints an administrator
under para 22 must file with the court (a) a notice of
appointment (b) such other documents as may be
prescribed
31
...
As an administrator, discovering a transaction say where a director’s father loaned money to the company and there was a floating charge after
...
The notice of appointment was subsequently filed
with the court on 17 January 2019
...

There are two options: route s 245 or s 239
...

(1)This section applies as does section 238
(2)Subject as follows, a floating charge on the company’s undertaking or property created at a relevant time is invalid except
to the extent of the aggregate of—
(a)the value of so much of the consideration for the creation of the charge as consists of money paid, or goods or services
supplied, to the company at the same time as, or after, the creation of the charge,
[…]
(3)Subject to the next subsection, the time at which a floating charge is created by a company is a relevant time for the
purposes of this section if the charge is created—
(a)in the case of a charge which is created in favour of a person who is connected with the company, at a time in the period of
2 years ending with the onset of insolvency ,
(b)in the case of a charge which is created in favour of any other person, at a time in the period of 12 months ending with the
onset of insolvency,
...

(4)Where a company creates a floating charge at a time mentioned in subsection (3)(b) and the person in favour of whom the
charge is created is not connected with the company, that time is not a relevant time for the purposes of this section unless
the company—
(a)is at that time unable to pay its debts within the meaning of section 123 in Chapter VI of Part IV, or
(b)becomes unable to pay its debts within the meaning of that section in consequence of the transaction under which the
charge is created
...

(6)For the purposes of subsection (2)(a) the value of any goods or services supplied by way of consideration for a floating
charge is the amount in money which at the time they were supplied could reasonably have been expected to be obtained for
supplying the goods or services in the ordinary course of business and on the same terms (apart from the consideration) as
those on which they were supplied to the company
...
e
...

Alternatively :

S239-Preferences (England and Wales)
...

(2)Where the company has at a relevant time (defined in the next section) given a
preference to any person, the office-holder may apply to the court for an order under this
section
...

(4)For the purposes of this section and section 241, a company gives a preference to a
person if—
(a)that person is one of the company’s creditors or a surety or guarantor for any of the
company’s debts or other liabilities, and
(b)the company does anything or suffers anything to be done which (in either case) has the
effect of putting that person into a position which, in the event of the company going into
insolvent liquidation, will be better than the position he would have been in if that thing
had not been done
...

(6)A company which has given a preference to a person connected with the company
(otherwise than by reason only of being its employee) at the time the preference was given
is presumed, unless the contrary is shown, to have been influenced in deciding to give it
by such a desire as is mentioned in subsection (5)
...
e
...
S 240 (2) also important as if
persons are connected it will be presumed don’t have to show
123 is satisfied but for unconnected you do

...

Therefore, they did give him a preference
...
For compulsory winding up, look at S
...
Process for paying the debts:
1
...
g
...
Fixed charge holders (they essentially get whatever money the administrator sold the fixed asset for- state what the
shortfall is)
Commonly the bank
3
...
Preferential creditors
A list of preferential creditors (the ‘Prefs’) is set out in Schedule 6 of the Insolvency Act 1986
...

(if in a Problem Q you see something like ‘owed to employees-£10,000, this is when it’s paid)
5
...

For this, you have the statute in your resource pack literally after the insolvency act
...
Floating charge holders
Commonly the bank (which has taken a floating charge in the debenture)
...

7
...

8 Interest on debts
9 Shareholders
* When you get to stage and not enough for everyone-Pari Passu-paid proportionally according to how much is owed to how many people

Procedure as to paying an interim dividend:
Convene board meeting- MA 9 (1)- (meeting to take places according to articles+ each can communicate)

Meeting should be quorate- MA11 (2)- if only one director, must appoint another to satisfy the quorum

What money? Before agreeing, must first consider whether the company has distributable profits as per 830 (1)- A company shall not make a distribution except out
of profits available for the purpose”
...
”

Check by looking at the relevant accounts-s 836
836(1)- when looking at accounts, pay attention to profits, losses, assets and liabilities
836(2)-usually the company’s last accounts, if these show a profit (if not, look at interim accounts per 838)
837-839- additional procedural requirements for accounts used
Making sure the dividends are paid out of distributable profits are important due to S
...
e
...


Assuming there are sufficient distributable
profits for final dividend, resolve to
recommend dividend to shareholders’
meeting- MA 30 (2) states ordinary resolution
may not be passed without the
recommendation from directors in a meeting

Call general meeting-302, notice of 14 days307(2) or produce a written resolution-288
...


If shareholders resolve to pay dividend,
reconvene board meeting (or have new board
meeting, depending on timing) to approve
payment of dividend accordingly
...
IF there is a provision stating that any sum payable
becomes due and immediately payable, can only force them to pay if there are distributable profits as per 830
...

If one year made the loss and the following year made a profit, before distributing take away the loss
Always pay preference share before deciding how much is left to divide between ordinary share
Any interest on a loan is a debt so should be paid regardless whether there is a profit /loss

Loans to directors

1159 (2)A company
is a “wholly-owned
subsidiary” of
another company if
it has no members
except that other
and that other's
wholly-owned
subsidiaries or
persons acting on
behalf of that other
or its wholly-owned
subsidiaries
...

3)A resolution approving a transaction to which this section applies must not be passed unless a memorandum setting out the
matters mentioned in subsection (4) is made available to members—
(a)in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the
proposed resolution is sent or submitted to him;
(b)in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
(i)at the company's registered office for not less than 15 days ending with the date of the meeting, and (ii)at the meeting itself
...

(5)No approval is required under this section on the part of the members of a body corporate that—
(a)is not a UK-registered company, or
(b)is a wholly-owned subsidiary of another body corporate
...

(3)Whether or not the transaction or arrangement has been avoided, each of the persons specified in subsection (4) is liable—
(a)to account to the company for any gain that he has made directly or indirectly by the transaction or arrangement, and (b)(jointly and severally with any other person so liable under this
section) to indemnify the company for any loss or damage resulting from the transaction or arrangement
...

(7)In any case— (a)a person so connected is not liable by virtue of subsection (4)(b), and (b)a director is not liable by virtue of subsection (4)(d),
if he shows that, at the time the transaction or arrangement was entered into, he did not know the relevant circumstances constituting the contravention
...


exceptions

207Exceptions for minor and business transactions
(1)Approval is not required under section 197, 198 or 200 for a company to make a loan or quasi-loan, or to give a guarantee or provide security in connection with a loan or quasiloan, if the aggregate of—
(a)the value of the transaction, and (b)the value of any other relevant transactions or arrangements, does not exceed £10,000
...

(2)This section does not authorise a company to enter into a transaction if the aggregate of—
(a)the value of the transaction in question, and (b)the value of any other relevant transactions or arrangements, exceeds £50,000
...


256Associated bodies corporate
For the purposes of this Part—
(a)bodies corporate are associated if one is a
subsidiary of the other or both are subsidiaries of
the same body corporate, and
(b)companies are associated if one is a
subsidiary of the other or both are subsidiaries of
the same body corporate
...

(2)A company to which this section applies may not—
(a)make a quasi-loan to a director of the company or of its holding company, or
(b)give a guarantee or provide security in connection with a quasi-loan made by any person to such a director,
unless the transaction has been approved by a resolution of the members of the company
...

(5)The matters to be disclosed are— (a)the nature of the transaction, (b)the amount of the quasi-loan and the purpose for
which it is required, and (c)the extent of the company's liability under any transaction connected with the quasi-loan
...

199Meaning of “quasi-loan” and related expressions
(1)A “quasi-loan” is a transaction under which one party (“the creditor”) agrees to pay, or pays otherwise than in pursuance
of an agreement, a sum for another (“the borrower”) or agrees to reimburse, or reimburses otherwise than in pursuance of
an agreement, expenditure incurred by another party for another (“the borrower”)—
(a)on terms that the borrower (or a person on his behalf) will reimburse the creditor; or
(b)in circumstances giving rise to a liability on the borrower to reimburse the creditor
...

(2)A company to which this section applies may not—
(a)enter into a credit transaction as creditor for the benefit of a director of the company or of its holding company,
or a person connected with such a director, or
(b)give a guarantee or provide security in connection with a credit transaction entered into by any person for the
benefit of such a director, or a person connected with such a director,
unless the transaction (that is, the credit transaction, the giving of the guarantee or the provision of security, as
the case may be) has been approved by a resolution of the members of the company
...

(5)The matters to be disclosed are—
(a)the nature of the transaction, (b)the value of the credit transaction and the purpose for which the land, goods
or services sold or otherwise disposed of, leased, hired or supplied under the credit transaction are required, and
(c)the extent of the company's liability under any transaction connected with the credit transaction
...


213Loans etc: civil consequences of contravention
(1)This section applies where a company enters into a transaction or arrangement in contravention of section 197, 198, 200, 201 or 203 (requirement of members' approval for loans etc)
...

(3)Whether or not the transaction or arrangement has been avoided, each of the persons specified in subsection (4) is liable—
(a)to account to the company for any gain that he has made directly or indirectly by the transaction or arrangement, and
(b)(jointly and severally with any other person so liable under this section) to indemnify the company for any loss or damage resulting from the transaction or arrangement
...

(5)Subsections (3) and (4) are subject to the following two subsections
...

(7)In any case—
(a)a person so connected is not liable by virtue of subsection (4)(b), and
(b)a director is not liable by virtue of subsection (4)(d),
if he shows that, at the time the transaction or arrangement was entered into, he did not know the relevant circumstances constituting the contravention
...

214Loans etc: effect of subsequent affirmation
Where a transaction or arrangement is entered into by a company in contravention of section 197, 198, 200, 201 or 203 (requirement of members' approval for loans etc) but, within a reasonable period, it is affirmed—
(a)in the case of a contravention of the requirement for a resolution of the members of
the company, by a resolution of the members of the company, and
(b)in the case of a contravention of the requirement for a resolution of the members of the company's holding company, by a resolution of the members of the holding company,
the transaction or arrangement may no longer be avoided under section 213

---