Exam Notes for Company Law

01 INTRODUCTION

Choice of business medium & the business’ stakeholders
1. 3 fundamental considerations
 Whether the business form will facilitate investment in the business
 Whether the business form will minimise the risk involved in running the business
 Whether the business form provides an efficient organisational structure

2. Types of business forms
 Sole trader
 A single-owner business operation with no formal structure  No formalities
required for establishment; No formal organisational structure
 The sole trader runs the business & he usually provides the capital with
personal savings / a bank loan
 The sole trader contracts in his own name & has personal liability to the debts
of the business
 Partnership
 The relationship which subsists between persons carrying on a business in
common with a view of profit (PA 1890)
 Regulated by PA 1890, although many of the provisions may be varied /
excluded by agreement between the partners
 Essentially based on a contractual agreement between the partners, which
regulates the operation of the business & their mutual rights & duties
 May arise as the result of a formal declaration / informally, where the conduct
of the parties constitutes them legal partners / where they have agreed to act
as such but made no formal arrangements
 The partners are personally liable for the business’ debts
 Limited liability partnership
 Introduced by LLPA 2000; Many of the provisions of CA 2006 apply, by virtue
of a series of statutory instruments
 The partners’ liability to the business’ debts is limited
 Company
 A business which has undergone the process of incorporation in terms of the
law  Once incorporated, it becomes a distinct legal person independent of
its shareholders
 Key legislations: CA 2006; IA 1986; SBEEA 2015
 The shareholders’ liability to the business debts is (usually) limited

Types of companies
3. Public & private companies
 Legal definitions (CA 2006 s 4)
 Legal & practical distinctions
 Apparent difference: The law requires that the status of the company should
be made clear by indicating whether it is a Public Limited Company “plc” /
Private Limited Company “ltd” (CA 2006 s 58)




 Substantive difference: Only a public company is permitted to raise capital by
offering shares & other securities to the public (CA 2006 part 20 chap 1),



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, whereas private companies are not allowed to make public offerings & doing
so constitutes a breach (CA 2006 s 755)
 Definition of a public offering (CA 2006 s 756)
 Typical structure & size: While there is no upper limit in terms of members
that can constitute a private company, in practice, public companies are
usually larger & have widely dispersed shareholders, while private companies
are smaller & more closely held
 Regulation: Public companies are more heavily regulated
 It is possible to convert a private company into a public company (& vice versa) as
long as the prescribed procedures are followed (CA 2006 part 7)

The incorporation process
4. Registration at the Companies House (CA 2006 part 2)
 Involves the application for registration to the Registrar of Companies at the
Companies House, which requires the completion & submission of a set of
prescribed documents  On receiving the documents, & having checked them, if the
Registrar is satisfied that the statutory registration requirements have been complied
with, he will register the delivered documents & issue a certificate of incorporation
(CA 2006 s 15)  The date of incorporation marks the “birth” of the company as a
body corporate with its own legal powers & responsibilities (CA 2006 s 16)
 Registration documents: Memorandum of association (CA 2006 s 8) & other
information (CA 2006 ss 9-13)
 In the case of a public company another document is required: Application for
a trading certificate (CA 2006 s 762)
 PSC register: Register of people with significant control over the company
(SBEEA 2015 ss 12A, 790M, part 21A)

The company’s constitution (CA 2006 s 17)
5. Articles of association
 Regulate the internal affairs of the company by setting out the relationships between
different organs of the company
 CA 2006 s 19 provides for the SoS to set up model provisions of the AA  A
company can choose to adopt the model AA in their entirety / it can submit its own
“bespoke” AA, & the model AA also operate as the default AA for companies 
Where the company’s own AA do not cover some aspects, resort can be made to the
model AA for that purpose (CA 2006 s 20)
 3 sets of model AA are contained in Companies (Model Articles) Reg 2008: For
private companies limited by shares, private companies limited by guarantee &
public companies
 Constitute a multi-party contract between the company & shareholders & between
each member of the company (CA 2006 s 33)  Can be altered by way of a Special
Resolution of the members in a general meeting  Can be enforced by a member
qua member

6. Resolutions & agreements
 Must be registered if CA 2006 part 3, chap 3 applies to them


7. Shareholder agreements
 Govern the shareholders’ relations & the company may / may not be a party to that
contract



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,  Unlike the AA, it is a private document & as such can overcome some of the
problems associated with the AA  However, a key drawback is that, unlike the AA,
it does not have automatic binding effect on incoming members & so they will have to
demonstrate their consent to the agreement




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