Company Law Flashcards

Flashcards about Company Law based on lecture notes.

What is Company Law?

The study of how shareholders, directors, employees, creditors, and other stakeholders interact under the internal rules of the entity.

What does the Companies Act 2004 state about an incorporated company?

It is a corporation that has a separate legal entity or artificial legal person and exists independently.

What is the principle of separate legal entity?

An incorporated company limits the liability of their members to the share capital they invested, such that no member of the company will be personally liable for all the company’s debts, obligations or acts

What is 'The Veil of Incorporation'?

The company alone is liable for all the acts done and the debts incurred by it and not the directors or the shareholders who are in fact the beneficial owners of the company.

What is the primary advantage of a company structure?

It provides the shareholders with a right to participate in the profits (by dividends) without any personal liability (the company absorbs the entire liability of the business).

What are the classifications of Companies?

Companies are to be classified on the basis of liabilities, members and on the basis of control.

What is the most important Companies Act?

The Companies Act 2006.

What is a Private Company?

In most cases, the company is owned by its founders, management, or a group of private investors.

What is a Public Company?

A company that has sold all or a portion of itself to the public via an initial public offering (IPO), meaning shareholders have a claim to part of the company's assets and profits.

What is a Holding Company?

The company is said to be the holding company if that particular company holds/owns at least 50% of the other companies and has the authority to make management decisions, influences and controls the company’s board of directors.

What is a Subsidiary Company?

The subsidiary company is the company that is controlled by the holding or parent company, where the holding company controls the composition of the Board of Directors.

What are the four stages of Company Formation?

1. Promotion Stage, 2. Incorporation or Registration Stage, 3. Capital Subscription Stage, 4. Commencement of Business Stage.

What is 'Promotion' concerning company formation?

Refers to the aggregate of activities designed to bring into being an enterprise to operate a business.

What is the function of the Memorandum of Association?

The document that sets up the company.

What is the function of the Articles of Association?

Set out how the company is run, governed and owned, and includes the responsibilities and powers of the directors, and the means by which the members exert control over the board of directors.

What are Ordinary Shares?

Ordinary shares represent the company’s basic voting rights and reflect the equity ownership of a company

What are Deferred Shares?

Deferred shares carry fewer rights than ordinary shares

What are Redeemable Shares?

Shares that can be bought back by the company at some point in the future.

What is an Executive Director?

Holds the statutory office of director but is also an employee of the company, normally in charge of a particular business area.

What is a Non-Executive Director?

Not employees, but sometimes provide consultancy services. Non-executive directors provide independent oversight of the company’s strategy, ethics and integrity

What is quorum?

The mini-mum number of members required to hold a meeting.

What are proxies?

Any member, entitled to attend and vote in a meeting, can appoint another person to attend and vote on his behalf.

What is a company voluntary liquidation?

A Creditors’ Voluntary Liquidation maximises creditors’ potential to receive a return as all company assets will be sold as part of the process.

What does a liquidator do?

The appointed liquidator will realise company assets and make distributions to creditors.