Summary Company Law Topic Mindmaps for Revision

COMPANIES
Company Roles: Company Creation:

➢ The Company Lodge documents (online) – s.9(1) Companies
➢ Directors Act 2006
➢ Shareholders
Limited Liability: ▪ Memorandum of Association: s.8(2)
➢ Company Secretary
CA 2006
➢ Auditors The company is a separate legal ▪ Application for Registration: s.9(2)
entity from its members/directors. ▪ Articles of Association: s.9(5)
▪ Statement of capital & initial
So members/directors are not
shareholdings: s.9(4) + 10
financially liable for the company’s
▪ Statement of proposed officers: s.9(4)
finances.
+ 12
Types of Company: ▪ Statement of compliance: s.13
▪ Sole Traders And registration fee (varying charges: current
▪ Partnerships minimum is £12).
▪ LLP (Limited Liability Evaluation of using a company:
S.7(2) “A company may not be … formed for
Partnership)
✓ Limited liability an unlawful purpose”
▪ LTD (Private Company)
✓ Flexible organisational
▪ PLC (Public Company) Company then comes into existence upon
structure
✓ Flexible funding options registration (S.16 CA 2006)
Corporate Groups:
✓ Convenience and clarity
▪ A holding (parent) company ✓ Prestige
owns shares in the subsidiary  Formality
company(s).  Disclosure and publicity
obligations Role of Company Law:
 Costs
▪ Hands-off approach
 Potential consequences of
▪ Community/stakeholder
failure
approach
▪ Different theoretical
approaches

, Salomon [1897]: CORPORATE Consequences of Salomon:

High Court:
PERSONALITY Firmly established the principle of separate legal personality
and extended its application to ‘one-man companies’.
Issue: No money available for unsecured creditors from the
company. Company is responsible for its own debts and liabilities.

▪ Company insolvent (assets less than liabilities). A company is BOTH an The company itself enters contracts etc.

Action: Liquidator sought to recover creditors’ debts from association of its Litigation can be brought by the company itself.
A.S. personally. members and a separate
legal person. o Individuals can function in dual capacities – e.g. Lee v
▪ Held: In the High Court, A.S. was found to be personally Lee’s Air Farming
liable for the company’s debts. It is a separate entity o The company owns its property – even if a shareholder
from its members and owns all shares in the company – e.g. Macaura v Northern
Reasoning (Vaughn Williams J): directors. Assurance
▪ Incorporation was abuse of legislation; o The company owns its own business; the shareholders do
▪ Business was A.S.’s business and company was his agent not have rights in the business – Short v Treasury
o “… this business was Mr Salomon’s business and Commissioners
no one else’s ...” o The company carries on its own business – Tunstall v
▪ A.S. must therefore indemnify the company as his agent. Steigmann

Companies in corporate groups remain separate entities,
cannot exercise each other’s rights and aren’t prima facie
responsible for each other’s obligations.
Court of Appeal:

The Court of Appeal agreed – this was
an unacceptable scheme designed to House of Lords:
allow a sole trader to benefit from The House of Lords disagreed with the lower courts: Judgment of Court of Appeal reversed.
limited liability.
▪ The company had been lawfully incorporated:
▪ Company was an abuse of the o Followed the requirements of the statute;
corporate form o Statute did not require shareholders to have any involvement or real interest in
▪ Company merely A.S.’s the company.
shadow, or perhaps a ‘trustee’ ▪ Not an abuse of the corporate form:
for A.S. o Motive of reducing/removing personal liability not relevant.
▪ The company was separate from its members.