• Company Law module 1: Topic 1:
• Lecture 2: Forms of Business Organisation
• A Dignam and J Lowry, Company Law : ch 1 OR
• B Hannigan, Company Law : ch 1.
• Relevant factors for evaluation
o To establish a comparative view between different form of business
organization, it is crucial that there is a consistent test and criteria
o All business is about the effective combination of three things
• Money (facilitate investment in the business) or in other words generate
cash inflow by investment
• All business contains a certain extent of risk but does the
organization/model mitigates or minimizes the risk
• Dispute and disagreement between stakeholders are expected for all
business but is there a functioning business structure that has a clear
hierarchy when a decision is required.
• Sole Trader: (not limited) – unlimited
o one-person operation
§ no legal filing requirements and allowed to go into business
on their own
§ capitals come from personal savings or a bank loan (1.)
§ contract in their own name and personally liable for all debts
of the business
§ no distinction between trader’s personal and business assets
and if business goes badly the creditors can go after his or
her home
§ (3.) low risk of disagreement so no formal structure is
needed
§ (2.) high risk so not suitable for high scale investment
• Partnership
o Partnership – PA 1890
§ section 1(1) of the Partnership Act 1890 – ordinary
partnership as “the relation which subsists between persons
carrying on a business in common with a view to profit”
• generally, there is a written partnership agreement that
sets out the rights and obligations of the partners
, o ss24 and ss25 of the PA 1890 – imply a number
of default terms that will apply to the
partnership
§ statutes obligations still exists and imply
a number of default terms that will apply
to the partnership when there is no
existing partnership agreement
• conditions are following:
o partners are entitled to share
equally in the prof its of the
firm and contribute equally
towards the firm’s losses
o every partners may be
admitted to the firm without
the consent of all the other
partners
o agreement between the
partners can only be altered
with the express consent of
all the partners
o majority of the partners
cannot expel a partner
unless an express power to
do so has been agreed upon
by all the partners
o Section 5- 18 of the PA 1890 governs the
relationship between the partners and third
parties
§ which the partners can contractually bind
the firm and the other partners to a third
party – to the extent which the firm and
the other partners can be liable for the
acts or omissions of a single partner that
cause a third party to sustain loss
• agency: s5 of the PA 1890
•
o LLP 1907 (limited partnerships are rare) – form of partnership that forms
under this statute
§ LLPA 2000 (two or more persons can now form a limited
liability partnership.)
§ similarly to a company – when LLPA governs, partners are
referred as members of the company
• have corporate personality – separate legal entity
, § however, that factors such as limited liability and the
positive reputational effects of operating through a company
outweigh the other advantages of partnership
• Company:
o memorandum and constitution (s8 CA 2006) limited memorandum to limited
functions
§ the limited functions includes basic information and key
declarations to the public which state that subscribers wish
to form the company and agree to become members taking at
least one share each
• total amount of share capital that could be issued to
investors was requires in the CA 1985 but the CA
2006 s10 has streamlined – only require a statement of
the total number and nominal value of shares to be
taken on formation by the subscribers to the
memorandum of association
o restricts issuing shares below nominal value –
CA 2006 s542 – criminal offence
o Public and private companies
§ Different ways in raising capital
• private companies may raise capital through loans
with banks or money from founding members of the
company
o restriction in membership
o closer relationship between members
o directors have a say in who replaces them
o less restrictions and control
o pre-emption clause in articles
• public companies would raise capital through general
public
o aim of securing investment from the general
public and can advertise the fact they are
offering shares to the public
§ company must issue a prospectus and be
under much tighter scrutiny from
authority
o why would entrepreneur form a company:
- facilitating investment, minimizing risk and providing an
organizational structure
o capital raising vehicle
, Lecture 3: Corporate personality and limited liability
• Introduction
o separate corporate personality and the related issue of limited liability
o company has a tangible existence within our legal system and obtains rights
and obligations like a human entity
• Corporate personality
o companies are subject to the legal system just like human being
o religious order is the first that attained legal personality as a group
o when an abbot dies now, the passing of the land to the new abbot would not
be difficult anymore as the land belongs to the religious order instead of the
specific abbot
§ the difficulty that arises from this establishment
• the main beneficiary of these lands that were in
dispute was the crown because the conferring of legal
personality is tied directly to a discretion from the
crown in the form of a grant – death taxes levied on
what the crown deemed to be the abbot’s land
o as the power relationship between parliament and the crown changes now
§ the charter must be granted by an act of parliament
• due to irrational speculations in the stock market,
stock market crash known as South Sea Bubble
occurred
• The officials are very reluctant to grant charters for
companies
o forced business to utilize other instruments like
trust to confer the privileges of incorporation
§ fraud was easily committed
• government was forced to
intervene
• The Joint Stock Companies Act
1844 provided for incorporation by
simple registration provided
safeguards against fraud by
insisting on full publicity
o the flaw of the Joint Stock
Companies Act 1844 is its
failure to restrict members’
• Lecture 2: Forms of Business Organisation
• A Dignam and J Lowry, Company Law : ch 1 OR
• B Hannigan, Company Law : ch 1.
• Relevant factors for evaluation
o To establish a comparative view between different form of business
organization, it is crucial that there is a consistent test and criteria
o All business is about the effective combination of three things
• Money (facilitate investment in the business) or in other words generate
cash inflow by investment
• All business contains a certain extent of risk but does the
organization/model mitigates or minimizes the risk
• Dispute and disagreement between stakeholders are expected for all
business but is there a functioning business structure that has a clear
hierarchy when a decision is required.
• Sole Trader: (not limited) – unlimited
o one-person operation
§ no legal filing requirements and allowed to go into business
on their own
§ capitals come from personal savings or a bank loan (1.)
§ contract in their own name and personally liable for all debts
of the business
§ no distinction between trader’s personal and business assets
and if business goes badly the creditors can go after his or
her home
§ (3.) low risk of disagreement so no formal structure is
needed
§ (2.) high risk so not suitable for high scale investment
• Partnership
o Partnership – PA 1890
§ section 1(1) of the Partnership Act 1890 – ordinary
partnership as “the relation which subsists between persons
carrying on a business in common with a view to profit”
• generally, there is a written partnership agreement that
sets out the rights and obligations of the partners
, o ss24 and ss25 of the PA 1890 – imply a number
of default terms that will apply to the
partnership
§ statutes obligations still exists and imply
a number of default terms that will apply
to the partnership when there is no
existing partnership agreement
• conditions are following:
o partners are entitled to share
equally in the prof its of the
firm and contribute equally
towards the firm’s losses
o every partners may be
admitted to the firm without
the consent of all the other
partners
o agreement between the
partners can only be altered
with the express consent of
all the partners
o majority of the partners
cannot expel a partner
unless an express power to
do so has been agreed upon
by all the partners
o Section 5- 18 of the PA 1890 governs the
relationship between the partners and third
parties
§ which the partners can contractually bind
the firm and the other partners to a third
party – to the extent which the firm and
the other partners can be liable for the
acts or omissions of a single partner that
cause a third party to sustain loss
• agency: s5 of the PA 1890
•
o LLP 1907 (limited partnerships are rare) – form of partnership that forms
under this statute
§ LLPA 2000 (two or more persons can now form a limited
liability partnership.)
§ similarly to a company – when LLPA governs, partners are
referred as members of the company
• have corporate personality – separate legal entity
, § however, that factors such as limited liability and the
positive reputational effects of operating through a company
outweigh the other advantages of partnership
• Company:
o memorandum and constitution (s8 CA 2006) limited memorandum to limited
functions
§ the limited functions includes basic information and key
declarations to the public which state that subscribers wish
to form the company and agree to become members taking at
least one share each
• total amount of share capital that could be issued to
investors was requires in the CA 1985 but the CA
2006 s10 has streamlined – only require a statement of
the total number and nominal value of shares to be
taken on formation by the subscribers to the
memorandum of association
o restricts issuing shares below nominal value –
CA 2006 s542 – criminal offence
o Public and private companies
§ Different ways in raising capital
• private companies may raise capital through loans
with banks or money from founding members of the
company
o restriction in membership
o closer relationship between members
o directors have a say in who replaces them
o less restrictions and control
o pre-emption clause in articles
• public companies would raise capital through general
public
o aim of securing investment from the general
public and can advertise the fact they are
offering shares to the public
§ company must issue a prospectus and be
under much tighter scrutiny from
authority
o why would entrepreneur form a company:
- facilitating investment, minimizing risk and providing an
organizational structure
o capital raising vehicle
, Lecture 3: Corporate personality and limited liability
• Introduction
o separate corporate personality and the related issue of limited liability
o company has a tangible existence within our legal system and obtains rights
and obligations like a human entity
• Corporate personality
o companies are subject to the legal system just like human being
o religious order is the first that attained legal personality as a group
o when an abbot dies now, the passing of the land to the new abbot would not
be difficult anymore as the land belongs to the religious order instead of the
specific abbot
§ the difficulty that arises from this establishment
• the main beneficiary of these lands that were in
dispute was the crown because the conferring of legal
personality is tied directly to a discretion from the
crown in the form of a grant – death taxes levied on
what the crown deemed to be the abbot’s land
o as the power relationship between parliament and the crown changes now
§ the charter must be granted by an act of parliament
• due to irrational speculations in the stock market,
stock market crash known as South Sea Bubble
occurred
• The officials are very reluctant to grant charters for
companies
o forced business to utilize other instruments like
trust to confer the privileges of incorporation
§ fraud was easily committed
• government was forced to
intervene
• The Joint Stock Companies Act
1844 provided for incorporation by
simple registration provided
safeguards against fraud by
insisting on full publicity
o the flaw of the Joint Stock
Companies Act 1844 is its
failure to restrict members’
