Practice Notes on Private Company Law

Mark Stamp

• Publisher: Routledge-Cavendish
• Year: 2013
• Topic: Law
• eBook ISBN:
  9781135346300
• Subtopic: Financial Law
• Index: Law

This book is a succinct guide to company law. The reader is guided through the elements involved in forming a company, and other vital areas are explained in detail, including: the availability of public information on companies and how to find it; directors' obligations; minority shareholders' rights; the memorandum and articles of association; how a company should execute a document; company meetings and charges; and debentures.

This third edition has been updated to include consideration of recent important cases, as well as key statutory instruments that have impacted upon company law since the last edition. It also includes a section on dividends and an analysis of the DTIs proposals for reform of company charges.

1 Sources and Definitions

1.1 Source material

The Companies Act 1985 contains the major consolidation of the law relating to both private and public companies, and its provisions incorporate many of those contained in the Companies Acts 1948, 1967, 1980 and 1981. The Act has been amended by the Companies Act 1989, but, even 11 years later, a number of its provisions still have not been (and will probably never be) brought into force. Further statutory provisions include the Business Names Act 1985, Insolvency Act 1986, Financial Services Act 1986, Company Directors Disqualification Act 1986 and Pt V of the Criminal Justice Act 1993, which contains the provisions relating to the prohibition of insider dealing. Underpinning these statutes is a morass of statutory instruments, including the Companies (Tables A to F) Regulations 1985 (SI 1985/805, as amended by SI 1985/1052); the Financial Services Act 1986 (Commencement) (No 13) Order 1995 (SI 1995/1538); the Companies and Business Name Regulations 1981 (SI 1981/1685, as amended by SI 1982/1653, SI 1992/1196 and SI 1995/3022); the Companies (Inspection and Copying of Registers, Indices and Documents) Regulations 1991 (SI 1991/1998); the Companies (Single Member Private Limited Companies) Regulations 1992 (SI 1992/1699); the Foreign Companies (Execution of Documents) Regulations 1994 (SI 1994/950 as amended by SI 1995/1729); and the Companies Act 1985 (Audit Exemption) (Amendment) Regulations 2000 (SI 2000/1430). References to a section number throughout this work are references to the Companies Act 1985, unless specific provision is made to the contrary.

1.2 Definitions

See Table

The Act	The Companies Act 1985 as amended by the Companies Act 1989.
Allotment of shares	The unconditional right for a person to be included in a company’s register of members in respect of shares (s 738).
Alternate director	A person appointed by a director to act in his place and who is entitled to exercise the powers of a director to the extent permitted by the articles of association.
Annual general meeting or AGM	The general meeting, convened on at least 21 days’ notice, which every company is required to hold within 18 months of incorporation and in every subsequent 15 month period (s 366), unless an elective resolution has been passed dispensing with such a requirement (s 366A) (see ‘short notice’). The business conducted at an AGM will normally include approval of accounts, declaration of a dividend and appointment of directors and auditors.
Annual return	The form which is required to be submitted to the Registrar of Companies within 28 days of the first anniversary of the company’s incorporation or the date on which the last return was made up, containing details of, amongst other things, share capital, shareholders and directors (ss 363–65).
Articles of Association	The regulations of a company which establish the rights and obligations of shareholders, the division of power between the general meeting and the board of directors and specify the administrative and procedural manner in which the company can conduct business (see ‘Table A’).
Authorised or nominal share capital	The share capital which is authorised by the memorandum of association, whether or not allotted or issued (see ‘issued share capital’).
Board of directors	The directors of a company acting collectively who will, invariably, be given the power in the articles of association to manage the business of the company.
Bonus or capitalisation issue	An issue of shares to existing shareholders pro rata to their holdings and paid up out of the reserves of the company, normally from an otherwise undistributable reserve, such as the share premium account.
Class rights	Rights that attach to a particular class of shares or are given to shareholders in their capacity as shareholders and which cannot be varied unless approval of the relevant class is obtained in accordance with the requirements of s 125 and, if appropriate, the memorandum and articles of association.
Call on shares	Demand by the company for a shareholder to pay the whole or part of the amount outstanding on any shares held by him (see ‘partly paid shares’).
Company secretary	A person who is generally responsible for ensuring that the administrative provisions of the articles of association and the Act are complied with, such as minuting board meetings and ensuring that the appropriate forms are registered with the Registrar of Companies.
Corporate representative	A representative who has been duly appointed by a company (whether or not incorporated under the Act) to attend and vote at a general meeting and who is treated as if he were an individual shareholder (s 375).
Debenture	Acknowledgment of a company’s debt. The debt may be either unsecured or secured by a fixed or floating charge over its assets.
Director	A person appointed alone or together with others to manage the business of a company in accordance with the articles of association.
Dividend	Income distribution made out of ‘profits available for the purpose’ (as defined in s 263) and paid to shareholders in proportion to the number of, and in accordance with the rights attaching to, shares held by them.
DTI	The Department of Trade and Industry.
Elective regime	Those provisions introduced by the Companies Act 1989 which permit companies to dispense with certain administrative provisions of the Act by passing an appropriate elective resolution. This Act contemplates that legislation might be introduced in the future in order to allow companies to simplify compliance with, or avoid entirely, certain provisions of the Act.
Elective resolution	A resolution passed at a general meeting of shareholders held on at least 21 days’ notice and agreed to at the meeting, in person or by proxy, by all shareholders entitled to attend and vote at the meeting, in order to dispense with certain administrative provisions of the Act (s 379A) (see ‘written resolution’).
Extraordinary general meeting	Any general meeting of shareholders other than the annual general meeting.
Extraordinary resolution	A resolution passed at a general meeting held on at least 14 days’ notice and agreed to by not less than 75% of those shareholders present in person or by proxy at the meeting (s 378(1)) and required by the Insolvency Act 1986 to be used in circumstances relating to the winding-up of a company and used at meetings of a class of shareholders to vary class rights (see ‘short notice’, ‘written resolution’).
Fixed charge	A charge over specified assets as security for obligations owed to a third party which requires the consent of the third party before the company is able to dispose of the charged assets.
Floating charge	A charge over the general undertaking of a company’s property as security for obligations owed to a third party which allows the company to freely deal with the assets which are the subject of the charge until an event of crystallisation occurs, usually, amongst other things, the appointment of a receiver or liquidator, when the charge becomes a fixed equitable charge.
General meeting	A meeting of shareholders which has the powers specified in the articles of association.
Issued share capital	The share capital of a company which has been issued to its shareholders (see ‘authorised share capital’, ‘partly paid shares’).
Limited liability company	A company in which a shareholder’s liability to contribute to its assets in the event of the company having insufficient resources to discharge its debts is limited to any unpaid amount on his shares (see ‘partly paid shares’, ‘unlimited company’).
Liquidator	The person appointed to deal with the assets and liabilities of the company once the resolution to wind up has been passed or a compulsory winding-up order has been made (see ‘winding-up’).
Member or shareholder	The holder of shares in a company.
Memorandum of association	Constitutional document which sets out the company’s name, whether the shareholders have limited liability, the country in which its registered office is to be located, the objects clause and its authorised share capital.
Objects clause	The clause in the memorandum of association which sets out the objects of the company and the powers which can be used for the attainment of such objects (see ‘ultra vires’).
Officer	Includes the following persons: director, manager or secretary of a company (s 744).
Ordinary resolution	A resolution passed at a general meeting held on at least 14 days’ notice and agreed to by a majority of those shareholders present in person or by proxy at the meeting. An ordinary resolution is used whenever the Act or the articles of association do not require the passing of an elective, extraordinary or special resolution (see ‘short notice’, ‘written resolution’).
Ordinary shares	Shares which have a residual right to receive dividends and the surplus on a winding-up after the payment of dividends or surplus to holders of preference shares.
Ostensible or apparent authority	The authority that an agent, such as a director, has to bind the company (in circumstances where he does not have actual authority to do so) by virtue of the agent being held out by the company as having the powers associated with the position held by him.
Partly paid shares	Shares in respect of which there is a liability to pay a sum of money which becomes due once demanded by the company (see ‘call on shares’).
Preference shares	Shares which are entitled to receive dividends and/or a specified amount on a winding-up in priority to holders of ordinary shares. Such shares do not normally carry a right to v...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Acknowledgments
• 1 Sources and Definitions
• 2 Introduction
• 3 Formation
• 4 The Companies Register
• 5 The Memorandum of Association and the Doctrine of Ultra Vires
• 6 The Articles of Association
• 7 Share Capital and Dividends
• 8 Directors
• 9 Meetings
• 10 The Elective Regime
• 11 Execution of Documents by a Company
• 12 Minority Shareholder Rights
• 13 Charges and Debentures
• 14 Company Law Reform
• 15 Forms
• 16 Useful Addresses
• 17 Time Periods and Penalties
• 18 Further Reading