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Companies, Advantages - Coggle Diagram

- - - - No minimum number of members. Two-tier decision making in companies. May allow for greater flexibility in power-sharing based on the articles.
        Members are given a degree of control in deciding important issues while leaving day to day management to directors.
      - Liability
        
        Less personal exposure. Member's liability is limited to the nominal value. Directors can become personally liable if they breach their duties.
        Creditors may require personal guarantees from directors or members as security, which can result in personal liability.
  - - - One proprietor in charge of decision making and trader has full control over running the business and decisions on whether to sell.
    - - The owner of the business is personally liable for all debts and obligations
        Capital retention is not required
        No separate legal personality
- - - - To return surplus capital to shareholders
      - To release liabilities on partly paid shares
      - Increase distributable reserves to pay dividends or to buy back its own shares
    - - Reducing number of shares
      - Reducing Nominal Value of shares
      - Reducing amount paid up on shares
      - Reducing statutory reserves
    - - Step 1 Board Meeting
        
        Hold a BM to approve proposed reduction of capital
        
        And Director's Solvency Statement and either convene a GM or propose a Written Resolution to seek members' approval on the reduction
        
        All directors must sign the Solvency Statement NOT more than 15 days before the members' resolution (to confirm that there are no grounds on which company would be unable to pay its debts and that it will be able to continue as a growing concern for 12 months.
      - Step 2 Notice of General Meeting or Circulate a Written Resolution
        
        Option1- Written Resolution Procedure- Circulate the proposed Written Resolutions and copies of the signed Solvency Statement to all eligible members and the auditor. Companies usually use the Written Resolution Procedure rather than convene a GM
        
        Option 2- General Meeting- Send notice of the GM to all members, directors and the auditor. Must have solvency statement available throughout the whole of the meeting.
      - Step 3- Members Resolution- Special Resolution
      - Step 4- Admin Matters-
        
        Records update the balance sheet and share registers to reflect the reduction. Update the Registrar ot Members to reflect any shares cancellation and PSC Register if affected
        
        Companies House Filings- (1) Members Resolutions (2) Solvency Statement (3) Statement of Capital (4) Compliance Statement signed by all directors within 15 days
  - - - A limited company can buy its own shares back
      - A company can fund a buyback out of
        
        1) Distributable Profits
        
        (2) Proceeds of a Fresh Issue
        
        3) Permissible Capital-Following a strict prescribed procedure set out in the CA Accounts used to determine profits should not be more than 3 months old
        
        (4) De Minimis Exception- This allows a company (that may or may not have distributable profits to buy back small amounts of shares out of capital.... if authorised to do so by articles
    - - Step 1- Board Meeting
        
        Hold a BM to approve the buyback and either convene a GM or circulate a Written Resolution to approve the BuyBack Agreement. If necessary, propose amending the Articles to remove buy back restrictions
      - Step 2- Circulate a Written Resolution of Convene a General Meeting
        
        Option (1)- Written Resolution Procedure- circulate the proposed resolutions and buyback agreement... Option 2- General Meeting-- Send a notice to the GM to all members, directors and the auditor...
      - Step 3- Members Approval
        
        Ordinary Resolution is required to approve the buyback contract (before it is entered
      - Step 4- Execute Buyback- Execute buyback agreement (if not already executed)
      - Step 5- Admin Matters
  - - - Pre 1985 Companies- Memorandum of Association used to have a limit on max number of shares that may be alloted- OR is required to amend or revoke it
      - CA 2006- If the company was incorporated on or after October 2009 with MA or incorporated before... Special Resolution is required to remove or raise it
    - - Single shares s550- Directors have power to allot shares without approvals of other members
      - more than one class s551- Ordinary Res- Must state the max number of shares that can be allotted and the expiry date of authority...
      - If there is a prohibition in articles- amend by SR before allotment
    - - Follow articles procedure
      - No tailored pre-emption rights...
        
        statutory pre emption will apply
        
        (1) shares are ordinary
        
        (2) consideration is fully in cash
        
        not excluded or disapplied
      - Where pre-emption rights are applicable, company can take these steps
        
        1) Offer shares to existing members
        
        2)Each shareholder to sign letter of waiver
        
        (3)Disapply pre-emption rights by a Special Res
- - - - Wind up company
      - Amend articles
      - Reduce share capital/buy back shares
      - Change company name
    - - 15 days
  - - - Short Notice
    - - Show of hands
      - Poll vote
        
        one vote per share
        
        can be demanded by any five shareholders or more
        
        shareholders with not less than 10% of voting rights or 10% of the paid up capital
      - Written Resolution
        
        Cannot be used to dismiss a director or auditor
        
        Shareholders who hold atleast 5% of voting rights can be require a written resolution to be circulated...
        
        Circulated to all shareholders eligible to vote
        
        Must include--- statement informing the shareholder how to signify agreement
        
        When the resolution will lapse if not approved...
        
        ^^ TYPICALLY 28 DAYS
        
        For a written resolution... it is 50% for ordinary resolution and 75%+ for special resolution for ALL shareholders
    - - Approval starts with board meeting and board resolution approving the matter. 2. Board then resolves to call shareholders general meeting or circulate written resolution for shareholders to approve 3.Shareholders vote whether they pass the resolution and it is passed if they do. 4. Board then enters into the approved transaction- resolving this if relevant
- - - - De Minimis Threshold- Less than £5,000 is de minimis
    - - If it is between 5k and 100k it will be an SPT if it exceeds 10% of the company's net asset
        
        EXCEPTIONS?
        
        (1) Value up to £5k (not within meaning of substantial)
        
        Transaction in their character as a member
        
        Transaction between group companies
        
        Transaction related to entitlement under the director's service contract or payment for loss of office
    - - to or from its director or director of its holding company
    - - Ordinary Resolution
    - - Family Spouse or Civil Partner; Child; Step Child; Parents... Cohabitee... Cohabitee's step child if under 18 and living with director....
      - NOT grandparent, grandchild, sister, brother, aunt, uncle, nephew or neice
      - Body corporate- In which the director, together with connected persons are interested in atleast 20% of the equity share capital, or can excersise more than 20% of voting powers at a GM
      - Trustee of a trust- under which the director or a persons connected with the director is a beneficiary or Trustee's power can be excersised for their benefit
      - Partner of the director or connected person of director
      - Firm in which the director or a connected person is a partner, or on of its partners is a firm in which the director or connected person is a partner.
  - - - unless restitution is impossible
      - Company have been indemnified for Loss
      - Third party acquired rights in good faith for value and without notice would be affected
      - Has been affirmed
      - Possible defences to avoid liability
        
        (a) directors to show that they took reasonable steps to comply or were unaware at the time (b) the connected person who is a party to it shows that they were not aware of the breach