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Companies Intro - Coggle Diagram

- - - - They invest money (share capital) in the company in return for a share in the ownership, evidenced by a share certificate. Shareholder’s rights like voting rights and right to dividend are set out in articles (and sometimes shareholder’s agreement)
      - Membership begins when member’s name is entered in the company’s register of members S112(2) CA 2006
      - A company can own shares in another company, shareholder need not be humans. Where company A owns all owns all shares in company B, company B will be a wholly owned subsidiary of company A. If company A only owns some shares of company B it will still be a subsidiary but not a wholly owned subsidiary. S1159 CA 2006 defines subsidiary. Subsidaries can also have their own subsidiaries. Company groups like this are often used to isolate risk and mitigate tax liability
      - Some fundamental decisions cannot be made by the board but are reserved for the shareholders, like changes to company articles under S21 CA 2006
    - - Must maintain register of these people open to public inspection- S790-790ZG CA 2006- must be filed at companies house along with confirmation statement
- - - - Art 11 MA confirms no proposal may be voted on at BM unless a quorum is participating in the meeting. Art 11(2) quorum for director’s meeting may be fixed from time to time by a decision of the directors but must never be less than two and unless otherwise fixed, is two.
- - - - S281 CA 2006- private companies may want to pass shareholders resolution without GM by using written resolution procedure (subject to S288 CA 2006)
      - Written resolution is a method of voting, not a type. They will always be voting by either ordinary or special resolution type
      - two decisions that cannot be made via written resolution: removal of director, removal of an auditor
      - S281 CA- only private companies may pass shareholders resolution by way of written resolution
      - S282 CA states written ordinary resolution can be passed by a simple majority of the total voting rights of eligible members
        
        S283 CA written special resolutions can be passed by majority of members representing not less than 75% of the total voting rights of elibible members
      - S284 CA where a company has share capital every member has one vote in respect of each share held byhim when voting on written resolution
  - - - S307(5) CA for a private company, a GM may be called on short notice if this is agreed by majority in number of members who together hold shares with nominal value of not less than 90% of the total nominal value of the shares which give right to attend a vote at GM. % can be increased up to 95% by company articles.
    - - - Copies of all resolutions affecting company’s constitution must be sent to registrar of companies within 15 days of being passed
        
        - All special resolutions must be filed as they form part of company’s constitutionS17(b)
        
        - Copies of amended articles must be filed S26(1)
        
        - Directors also responsible for updating statutory books like register of company members and directors, BM and GM minute books (or company secretary if they have one)
        
        Can be criminal sanctions: S248(3) and (4) if a company fails to record minutes in relevant statutory books, ever officer in default is liable to a fine
- - - - An LLP must indemnify its members for payments and personal liabilities incurred by them in the ordinary and proper conduct of business of the LLP
        
        Every member may take part in management but no member is entitled to remuneration for managing the LLP
        
        No person can become a member or assign their membership without the consent of all existing members
        
        Ordinary decision making is by majority vote. Any proposed change to the nature of the business requires consent of all members
        
        No implied power of expulsion of a member by the majority unless members have expressly provided for such a power in a Members’ Agreement
        
        members share equally in capital and profits
- - - - A company may in certain circumstances provide a procedure in articles which is more onerous than contained in CA 2006
    - - Secretary of State has prescribed MA for different types of company (S19 CA 2006). If a new company does not register articles of association at companies house, MA is used as default (S20(1) CA 2006)
      - amended MA: Many companies adopt MA but elect to exclude or modify some provisions
      - tailor made: can instruct a solicitor to draft articles which are tailor made
    - - Articles can be altered by special resolution S21(1) CA 2006. (decision of the shareholders)
      - S22 CA 2006 permits entrenchment of specific provisions within a companies’ articles though this rarelt occurs in practice. An entrenched provision is one which can only be amended or appealed if specific conditions are met or if procedures of a more restrictive special resolution are complied with. Entrenched articles can always be amended by agreement of all the members in any case, or by court order S22(3) CA 2006
      - any alteration must be made bona fide in the interests of the company as a whole (Allen v Gold Reefs)
      - An amendment is not valid if no reasonbale man would consider it to be for the benefit of the company (Shuttleworth v Cox)
      - Provision giving the directors power to buy out at a fair price the shareholding of any member who competed with the company’s business was kept as it was in good faith and bona dife in interests of the company (Sidebottom v Kershaw)
      - Amendment of articles to permit shares of a minority shareholder to be compulsory acquired under a takeover was valid. It was seen as a mere tidying up exercise which was consistent with the initial bargain
    - - Articles bind the company and it’s members S33(1) CA 2006
      - articles are evidence of a contract between company and it’s members in their capacity as members and with respect to their rights and obligations as members (Hickman v Kent)
        
        Courts are willing to prevent a company to infringe rights of members by breaching the articles by granting an injunction
        
        a member may not enforce any rights contained in the articles against the company that are not relevant to his capacity as a member
        
        Rights contained in articles that would probably be enforceable by members under S33 CA 2006 would be the right to vote or right to receive a final dividend once it has been declared
      - Rayfield v Hands shows if a member accepts a personal obligation to another member through the articles then that member can enforce the right against the other member directly
        
        Other than cases as in Rayfield case/principle: courts are of opinion members will only be able to enforce through company itself. If a member is likely to wish to enforce rights against other members, they would be advised to enter into a shareholder’s ahgreement which is enforceable between the members themselves