#3206 - Registration Of A Company - Business Law and Practice

1. A company has a ‘separate legal personality’:

1. It has rights and obligations distinct from those of its owners (i.e. shareholders)

Salomon v Salomon [1897]: “veil of incorporation” – courts only look behind the veil in cases of fraud or deliberate breach of trust.

2. It can own property (the company owns the business assets)

3. It is liable for debts

4. Can sue / be sued – contracts are conducted / defended in the company’s name.

5. Perpetual succession – the company continues to exist until it is formally wound up. It does not end with a change of ownership.

6. Transferability of ownership – shares can be bought and sold

7. Owners have limited liability: limited to the agreed price of member’s share. This includes any amount that is unpaid on shares.

8. Separation of ownership (shareholders / ‘members’) and control (directors)

9. It can raise money by borrowing (debt and equity finance)

10. It can create “floating” charges over the company’s assets

2. Power in the company

3. Advantages and disadvantages of incorporation:

Formalities

• Companies Act 2006 [CA]

• Must be complied with before company enters into a contract.

  • S.7 CA: at least one shareholder needed to form a company

  • S.8 CA: Memorandum of Association [upon incorporation] sets out that subscribers agree to become members of the company and hold at least one share.

The Companies (Registration) Regulation 2008, Schedule 1 = subscribers must agree “to take at least one share”

• S.9 CA : sets out registration documents to be sent to Companies House

• S.10: Requirements for registration – statement of capital and initial shareholdings.

1. Application for Registration:

• Form IN01 [S.9(2) CA details what this must include]:

Proposed name

Company type (private or public)

Situation and intended address of registered office

Statement of capital and initial shareholdings

Statement of proposed officers

• Articles of Association (to the extent the Model Articles do not apply)

• Any additional information relevant to the company (e.g. does the name require authorisation?)

• Statement of compliance (S.13 CA)

• Fee (Standard = 40; Same day by 3pm = 100)

• Methods of filing the information = paper / electronic / web incorporation service

2. Pre-Incorporation contracts

• S.51 CA 2006: person who signs the contract is personally liable for carrying out any obligations under the contract.

• Therefore, avoid personal liability by avoiding entering into a contract until company is incorporated.

3. Birth of the company

• S.15 – Registrar will issue a ‘Certificate of Incorporation’ Unique Company Number. This brings company into existence.

• S.16 effect of registration Company is born.

• S.1064 incorporation must be published in Gazette

• If it is a Public Company – must get Trading Certificate before it can start trading.

4. Other obligations that a company should consider:

• Register for VAT

• Stationery

• Employees

• Insurance

• Appoint auditor

• Schedule first board meeting