week 7 company law

Role of Promoters

Promoters play a key role in setting up a company by taking procedural steps and making business preparations, with a duty of care, skill, and fiduciary duty towards the company.

Registering a Company

To form a new company, documents like memorandum of association, statement of compliance, and the appropriate fee must be submitted to the Registrar of Companies.

Off-the-Shelf Companies

Dormant companies already registered at Companies House and left dormant, beneficial for businesses wanting an established appearance.

Company Name Regulations

Rules include uniqueness, ending requirements for private and public companies, prohibited names, approval for certain words, symbols usage, and display obligations.

Pre-incorporation Contracts

Contracts made by promoters on behalf of a company before its formation, not binding on the company but enforceable against promoters unless stated otherwise.

Alteration of Articles

Changing a company's Articles of Association by special resolution, ensuring amendments are made in good faith for the company's benefit.

Financing Methods

Companies can finance through share capital, loan capital, premium on shares, redeemable shares, and treasury shares.

Shares vs

Shares represent ownership with voting rights, paid from taxed profits, while debentures represent loans without voting rights, paid before shareholders in case of winding up.

Company Shares

Represent ownership in a company, with different types like ordinary, preference, and redeemable shares, issued to raise capital and entitle shareholders to dividends.

Share Capital

Total value of shares issued by a company, used to finance operations and growth, giving shareholders ownership rights and obligations.

Dividends

Payments made by a company to its shareholders from profits, providing a return on their investment.

Transfer of Shares

Process of transferring ownership of shares from one party to another, subject to any restrictions in the company's articles.

Issue of Shares

Process of creating and selling new shares, typically authorized by a general meeting of shareholders.

Rights Issue

Involves pre-emption rights of existing shareholders when new shares are issued, allowing them to purchase additional shares in proportion to their existing holdings.

Shareholders' Rights

Include the right to transfer shares, receive dividends, and attend/vote at meetings, making them part-owners with a stake in profits and decision-making.

Ordinary Shares

Shares without special rights, usually with the most voting rights and paid dividends after preference shares.

Preference Shares

Shares with priority rights, often entitled to fixed dividends before ordinary shareholders and preferential treatment in case of winding up.

Cumulative Shares

Preference shares where unpaid dividends accumulate and must be paid before ordinary shareholders.

Fixed Dividends

Characteristic of preference shares entitling shareholders to a predetermined annual dividend amount.

Redeemable Shares

Shares that can be repurchased by the company at a future date, providing flexibility in capital management.

Treasury Shares

Shares repurchased by the company and held in reserve, without voting rights but available for reissue or sale.

Loan Capital

Funds borrowed by a company through debentures, with terms specified in the debenture document and assets used as security.

Debentures

Written documents outlining loan terms, including interest and repayment, with types such as single debentures, series debentures, and debenture stock.

Fixed Charges

Security interests on specific assets, preventing disposal without repayment, and requiring registration within 21 days of creation.

Floating Charges

Security interests on changing assets, allowing business operations until crystallization, which converts it to a fixed charge, also requiring registration within 21 days.