COMPANY LAW
LLB
2020-2021
1
, SECTION 1
(a) Lecture Topics
TOPIC APPROX NO OF
LECTURES
1 Companies; corporate personality, formation 4
and ‘piercing the corporate veil’
2 Directors, shareholders and the balance of 2
powers
3 Directors: duties 5
4 Directors: enforcement of duties 2
5 Shareholders’ rights and minority protection 4
6 Corporate governance in larger companies 3
7 The capacity of the company and the 1
authority of its agents
2
, PART 1:
CORPORATE PERSONALITY, FORMATION AND
‘PIERCING THE CORPORATE VEIL’
Essential Reading:
Dignam & Lowry, Chs.1-3; Ch4, pp.58-61.
Additional Reading:
Kraakman et al, The Anatomy of Corporate Law (3rd Ed, 2017, OUP) Chapter 1. (A good
overview of what company law, as a whole, is ‘about’ – what it’s trying to achieve. The
whole book’s in the library – chapter 1 is also on Duo in ‘teaching materials’).
Kershaw, Chs 1-2.
Alternative textbook:
Hannigan: ch1; ch2 only pp20-23 (the material on the EU is beyond our module).
1. Legal forms for running businesses - what legal structure (vehicle) are you going to
employ to run your business? Each of the three choices are different legal structures.
Sole traders – the easiest and most straight-forward way to structure your business.
Personally enter into contracts with other parties. But things go wrong the creditor can go
after your own personal assets. You are fully liable to the extent of everything that you
own in order to satisfy the creditors. You have no limit on the amount for which you can
be held liable – unlimited liability.
Sole trader can try to protects his assets by putting his assets in another’s name (whom you
trust) or forming another legal structure. Insurance is another strategy as you can identify
the main risks that might cause your business to fail.
Partnerships – what is referred to as ordinary, general, unlimited partnership. The main
difference with a sole trader is that you must have at least two individuals who together
own the business. Apart from this, the partnership is like a sole trader as there is no limit to
the liability, partners can lose everything they own.
Since 200 there has been another type of partnership in the UK called LLP – limited
liability partnership. Most professional partnerships operate like this. It does confer the
benefit of unlimited liability.
Companies – the essence of a company is that if you follow the procedure that is laid down
in the statute to create a company, at the end of the process you would have created a new
legal entity which will have legal personality. This means that the company will be capable
of going out in the world and doing the same things as a natural person. The company
itself enters into contracts and not you yourself. The company alone is contractually liable
to creditors. The bank can only sue the company and not those standing behind it. What
happens when a company becomes insolvent:
3
, Insolvency Act 1986, section 74:
(1) When a company is wound up, every present and past member is liable to contribute to its
assets to any amount sufficient for payment of its debts and liabilities, and the expenses of the
winding up, and for the adjustment of the rights of the contributories among themselves. put
up difference between what company has and what it owns? Suggests that shareholders can be
called upon where there is not enough money?! BUT:
(2) (d) in the case of a company limited by shares, no contribution is required from any
member exceeding the amount (if any) unpaid on the shares in respect of which he is liable as a
present or past member; only exception is where shareholder has not fully paid the shares,
he is liable to pay up the balance of the purchase price that they have not paid yet, this is very
rare in present days.
The companies we shall focus on are ‘registered companies’ ie created by ‘registration’ under the
Companies Act 2006 (or one of its predecessors). There are some other types of company, such as
‘chartered companies’ and ‘statutory companies’. We won’t be addressing those.
Moreover, there are different types of registered company: public limited companies (‘PLCs’);
private limited companies (‘Ltd’); limited by shares; limited by ‘guarantee’; unlimited. Try to get
a sense of the main differences between these types, and therefore why someone would choose
one type or another; we’ll discuss this further in the first tutorial.
2. Forming a company
(i) Understand, from Dignam and Lowry, the basic process for ‘registering’ a company under the
Companies Act 2006.
The various bits of paperwork that are required (details of directors, shareholders,
‘registered office’, constitution, and so on, are sent to the Registrar of Companies at
Companies House (in Cardiff). Have a look at the Government’s website for details of the
different ways of doing this, which determine the speed and costs of incorporation:
https://www.gov.uk/topic/company-registration-filing/starting-company
Essential point: in UK, registration is always quick, and pretty cheap. Why?
One thing that is needed is the articles of association (if you haven’t agreed model ones are
used -- note new ‘Model Articles’ for private, and for public, companies (for companies
incorporated from 1/10/2009 onwards) (the last statutory instrument in your statute books).
(ii) IF they are happy with the documents they will issue Certificate of registration: CA 2006 –
s.15(4)
(iii) Shelf companies. – instead of forming your own company you can buy a shelf company.
http://www.companyformationstoday.co.uk/readymade%20companies.html?
gclid=CPSHirTSqMgCFWFM2wod5cQG_g
(iv) Pre-incorporation contracts: CA 2006, s.51 the Certificate of registration has a specific day
which has legal significance as it is only from then on that the company exists and can enter
into contracts. IF you do contract before this, you are at risk of personal liability, because the
4
LLB
2020-2021
1
, SECTION 1
(a) Lecture Topics
TOPIC APPROX NO OF
LECTURES
1 Companies; corporate personality, formation 4
and ‘piercing the corporate veil’
2 Directors, shareholders and the balance of 2
powers
3 Directors: duties 5
4 Directors: enforcement of duties 2
5 Shareholders’ rights and minority protection 4
6 Corporate governance in larger companies 3
7 The capacity of the company and the 1
authority of its agents
2
, PART 1:
CORPORATE PERSONALITY, FORMATION AND
‘PIERCING THE CORPORATE VEIL’
Essential Reading:
Dignam & Lowry, Chs.1-3; Ch4, pp.58-61.
Additional Reading:
Kraakman et al, The Anatomy of Corporate Law (3rd Ed, 2017, OUP) Chapter 1. (A good
overview of what company law, as a whole, is ‘about’ – what it’s trying to achieve. The
whole book’s in the library – chapter 1 is also on Duo in ‘teaching materials’).
Kershaw, Chs 1-2.
Alternative textbook:
Hannigan: ch1; ch2 only pp20-23 (the material on the EU is beyond our module).
1. Legal forms for running businesses - what legal structure (vehicle) are you going to
employ to run your business? Each of the three choices are different legal structures.
Sole traders – the easiest and most straight-forward way to structure your business.
Personally enter into contracts with other parties. But things go wrong the creditor can go
after your own personal assets. You are fully liable to the extent of everything that you
own in order to satisfy the creditors. You have no limit on the amount for which you can
be held liable – unlimited liability.
Sole trader can try to protects his assets by putting his assets in another’s name (whom you
trust) or forming another legal structure. Insurance is another strategy as you can identify
the main risks that might cause your business to fail.
Partnerships – what is referred to as ordinary, general, unlimited partnership. The main
difference with a sole trader is that you must have at least two individuals who together
own the business. Apart from this, the partnership is like a sole trader as there is no limit to
the liability, partners can lose everything they own.
Since 200 there has been another type of partnership in the UK called LLP – limited
liability partnership. Most professional partnerships operate like this. It does confer the
benefit of unlimited liability.
Companies – the essence of a company is that if you follow the procedure that is laid down
in the statute to create a company, at the end of the process you would have created a new
legal entity which will have legal personality. This means that the company will be capable
of going out in the world and doing the same things as a natural person. The company
itself enters into contracts and not you yourself. The company alone is contractually liable
to creditors. The bank can only sue the company and not those standing behind it. What
happens when a company becomes insolvent:
3
, Insolvency Act 1986, section 74:
(1) When a company is wound up, every present and past member is liable to contribute to its
assets to any amount sufficient for payment of its debts and liabilities, and the expenses of the
winding up, and for the adjustment of the rights of the contributories among themselves. put
up difference between what company has and what it owns? Suggests that shareholders can be
called upon where there is not enough money?! BUT:
(2) (d) in the case of a company limited by shares, no contribution is required from any
member exceeding the amount (if any) unpaid on the shares in respect of which he is liable as a
present or past member; only exception is where shareholder has not fully paid the shares,
he is liable to pay up the balance of the purchase price that they have not paid yet, this is very
rare in present days.
The companies we shall focus on are ‘registered companies’ ie created by ‘registration’ under the
Companies Act 2006 (or one of its predecessors). There are some other types of company, such as
‘chartered companies’ and ‘statutory companies’. We won’t be addressing those.
Moreover, there are different types of registered company: public limited companies (‘PLCs’);
private limited companies (‘Ltd’); limited by shares; limited by ‘guarantee’; unlimited. Try to get
a sense of the main differences between these types, and therefore why someone would choose
one type or another; we’ll discuss this further in the first tutorial.
2. Forming a company
(i) Understand, from Dignam and Lowry, the basic process for ‘registering’ a company under the
Companies Act 2006.
The various bits of paperwork that are required (details of directors, shareholders,
‘registered office’, constitution, and so on, are sent to the Registrar of Companies at
Companies House (in Cardiff). Have a look at the Government’s website for details of the
different ways of doing this, which determine the speed and costs of incorporation:
https://www.gov.uk/topic/company-registration-filing/starting-company
Essential point: in UK, registration is always quick, and pretty cheap. Why?
One thing that is needed is the articles of association (if you haven’t agreed model ones are
used -- note new ‘Model Articles’ for private, and for public, companies (for companies
incorporated from 1/10/2009 onwards) (the last statutory instrument in your statute books).
(ii) IF they are happy with the documents they will issue Certificate of registration: CA 2006 –
s.15(4)
(iii) Shelf companies. – instead of forming your own company you can buy a shelf company.
http://www.companyformationstoday.co.uk/readymade%20companies.html?
gclid=CPSHirTSqMgCFWFM2wod5cQG_g
(iv) Pre-incorporation contracts: CA 2006, s.51 the Certificate of registration has a specific day
which has legal significance as it is only from then on that the company exists and can enter
into contracts. IF you do contract before this, you are at risk of personal liability, because the
4
