1/ Why study corporate law ?
2/ What is corporate law ?
3/ What is a company ?
4/ What are the diffirence sorts of company ?
5/ How is a company created ?
6/ How is a company managed ?
7/ How does the company do business ?
8/ How does the company fonction ?
9/ How does the company ... ?
10/ What are company flotations-bebentures ? (
garanties )
11/ The charges in a company
® Merges and acquisitions
® Companies failures ( How does a company die ?
)
1/ Corporations are the actors of the
world economie. Choosing the right legal ferm is the first criticial step for a
company to be set up.
Corporate
law is the law of corporation.
Corporate
law is a succession or ... of persons having at law an existance, rights and
duties.
These
rights and duties are distinct from the existance. The rights and duties of the
persons who are from time to time members.
(Sharesholders
: They have an existance, rights directly linked to the company).
In
all jurisdiction ( legal system or competance) business corporation have a
fondamentaly similar set of legal caracteristics which include the similar
legal caracteristics.
1. Legal
personality
As an
economic entity, a firm is a single contracting party that coordinate the
activities of suppliers and of consumers of products and services.
Corporate law provides for this
purpose the creation of a legal person, of a legal constracting party distinct
from the various individuals who own or manage the firm.
This care element ( élément central
) of separate personality is called seperate patrimony.
What does the concept of seperate
patrimony incur ?
It incurs two things :
_ The abilities for the firm to own
assets that are distinct form the property of others persons: such as the firm
investors.
_ The ability for the firm to be
free to use and sell this assets but also to pledge them to creditors.
A strong legal personality when
combined with limited liability ( responsabilité) isolates the value of the
firm from the personal financial affairs of a firm. Shareholders/owners
sufficiently to permit the firms share to be traded freely.
2. Limited
liability
The principal of limited liability
is that creditors are limited to making claims against assets that are the
properly of the firm itself. The creditors have no further claims against the
persons asset of the firm shareholders. The limited liability principal reserve
shareholders individual assets exclusively for this personal creditors.
Legal personality and limited
liability together set up a secured regime whereby shareholders personal assets
are pledged as security to his personal creditors.
3. Concept of
transferable of shares.
Transferability of shares enables
for firms to condect business uninteruptably as the identity of its owners
changes. Fully transferable shares do not necessarely mean freely tradable
shakes. Shares may be fully transferable but tradable on public market with
restrictions.
4.
Delegate
management under a “board”
Delegation
permits the centralization of management necessary to coordinate productive
activity. The authority in corporation is commonly vested in a board of
directors or similar committee organ that is periodicly elected exclusively or
primarily by the firm shareholders.
The
board is formaly distinct from shareholders. The board thereby provides a check
by controling shareholders. This check is either toward other shareholders or
toward other parties who deal with the firm such as creditors or employees.
5.
Investor
ownership
Ownership means two keys element
The
right to controle the firm and the right to receive the firm’s net earnings.
This right is proportional to the amount of capital contributed to the firm.
® Corporation sale: make consiste in only one member at a time
holding a perpetual office.
® Corporation aggregate: A number of people are so associated that in
law they form a single person.
Ex: The
registe company
The
corporation aggregate maybe divided by the method of they creation.
Ex: The
charted companies are formed by grant of a charter by the Crown. These
companies are used to incorporate professional bodies such as the institute of Chartered Accountance England Wales
The statutory company
® Case law (Jurisprudence)
® Statutory law comes from satutes states Gathen Acts of Parliament.
They are companies formed by a
special Act of Parliament. These companies are used for republic utilities such
as gas, electricity, water and railway.
6.
Registered
companies
99% in the English economic area
there are companies which are formed under the companies Acts 1985 or under
previous Acts. In any cases, registered companies are governed by the companies
Act 1985 and by the relevant case law. The companies Act 1985 has been amended
many times including all amendments.
Among registered companies there
is another distinction: Public Companies
Public Companies:
Shares of public companies are
tradable on a public market (stock exchange)
Two persons minimum are required
to form a public company. The name of the public company must systematically
ends with the initials. The authorised capital of a public company is at least
£ 50,000. The certificate of incorporation is the conclusive evidence that the
Acts have been compliced with and the company is indeed a public company.
Section ® S 117 certificate:
_ It’s a section of the Acts 1985
S117 of the Acts 1985 is to be
obtained by the S 117 is only granted if the companies share capital is at
least £ 50,000 and if not less than a quarter of the nominal value of each
issued share and the whole of any premium has been received by the company in
cash or otherwise.
® Nominal
value:
Share capital: 1000
1000 shares of £ 1 ® nominal value
Investor increase the capital by
500 shares
Value per share = £ 30
® Premium
(prime d’imission):
Usually companies are formed as
private companies and then go public at a later satege.
Private Companies
Private Companies concerne smaller
business. It is a company which is not public. It is much more flexible than
public company.
One person only is required to set
up a private company (It’s the case of the European Directive 1992).
A private company which is formed
by two persons or more may convert to a single member company by simple
transfer of all shares in one hand. There is a distinction to be drown among
private companies.between small and medium companies. This distinction provides
for lower formalitites. The diffirence between small and medium companies it
determined by sharesholds (seuils); Such as turnover, employee average and
total assets.
There is another distinction to be
drawn within private companies. The company
maybe limited or unlimited. If the company is limited , it maybe limited
in 2 way:
+ Limited by shares
+ Limited by garanties
- What does limited by shares
mean?
à It
means that the liability of each member to contribute to the capital is limited
to the nominal value of the shares that he or she has agreed to take up.
à
Limited by guarantee
…
Cours 22/01/05
…
This company do not have share
capital and the members decide in the articles of association what their
liability will be the member in this case have no liability ubless and until
the company goes into liquidation. When this happenes those who are members at
the time is requied if necessary to contribute towards the payment of the
company’s debts and liabilities. If those who are members at the time of
liquidation can’t meet these obligation or the debts exceed what they are
liable to contribute then the liquidater ( fiscal administateur) may have
access to those who were members during the year prior (before) to the liquidation.
One in corporated as a garantie and company there is not possibility to
converting into a company limited by shares.
Unlimited company
An unlimited company is company in
which the member’s liability is unlimited. Unlimited company must be always a
private company. As public company is limited by shares. The personal liability
of this type of company is the reason why not many existe. Unlimited company
maybe formed either with or without a share capital. A share company maybe used
for exemple where the company is trading and maleing profits since the share is
a basis for distributing this profit.
- How does unlimited liability work?
à Where
there is a share capital and the company goes into liquidation if the nominal
value paid by members is not enough to pay off the company’s debts then the
members contribute rateably ( an proarate) i.e.prorata the nominal ( value they
own in the company)
Where there is no share capital,
members are equatly liable for the company’s debts and liabilities. Unlimited
companies enjoy privacy in regard to financial affaires. Once they do not need
to deliver copies of their annual accounts to the registrar (greff)
|
Private
Companies
- No definition other than default
- Only one member
- No minimum Capital
-
End with “ltd”
Shares
maybe not traded on a public market
|
Public
Companies
- Defined by statutes
- At least 2 members
- Minimum £ 50 000
- “plc” public limited company
- Shares maybe traded on a public
market
|
How is a company created?
What are the consequences of this
creation?
a)
Promotion
b)
Incorporation:
- UK companies.
- Overseas companies.
c)
The
effects of incorporation.
d)
Post
incorporation procedures ____ Re – registration.
Intro:
The company created by regr.
The other steps that lead to the
creation of the company include two mains steps: The steps of the promotion and
the incorporation.
1.
Promotion
The promotion of a company consite in taleing by the necessary
steps:
-
To
incorporate the company by registration under the companies Act 1985.
-
To see
that the company has a share or loan capital
-
To acquire
the business or property which the company is formed to controle.
The promotion is carries out by a promoter (a founder, associé
fondateur)
No definition of the promoter is given by the companies Act
The promoter
à Case law definition:
A promoter is the person who
undertakes to forme a company with reference to a given project and to set it
going (créer pour faire tourner)
The promoter is also the person
who takes the necessary steps to a complish this purpose.
(Promoter is the word linleed to
business)
The promoter enter into contract
on behalt (au nom de) of a company and may therefore be personaly liable. Under
this contracts which are called Pre’ incorporation contract.
However, the contracts Act 1999
enables the company to sue (to being an action to juctice) or be sue upon a
pre- incorporation contract.
The Act makes it clear that the
company which is given Rights under a pre-incorporation contract does not have
to be in existance when the contract is made. A promoter may overcome the
difficulties he’s facing in relation to pre-incorporation contract in the
following way:
- He
may incorporate the company before he makes contract in which case the problems
relating to pre-incorporation do not apply.
- He can settle a draft agreementt
(i.e. he can prepare a contract) with the other
party so that when the company and on the term of the draft. In this
case, the public is that the parties are not bound by the contract other than
morally.
- The
promoter may make the contract himself and assign the benefit of the contract
to the company after it is incorporated. However, English law prohibits
assignments of the burden of the contract. And the promoter therefore remains
personally liable for the assignement to the company. The big issue regarding
promotion is therefore the liability of the promoter.
2.
Incorporation
The case of UK companies.
Incorporation implies application
for registration which is made by deliver certain documents with the registrar
of company. The main register is in different cases. The constitution of
registered company consiste of two documents which are the memorandom of
Association and the Article of Association.
Memorandom of Association:
It certains the most important
provision setting out the sort of activities which the company can carry on.
It’s of interest to outsides who deal not with the company. It must certains
provisions setting out the following info.
_ The name of the company ending
with initial plc. Or ltd.
_ The Company’s Act 85 provides
the name of the company must notably appear legibly outside the registered
office and all places of business.
On all business letters (papiers
en tete), on all notifications, and official publications. The name of the
company must appear on all chèques, on all invoices signed or issued by the
company. Business letters must also show the place of registration, the
registered number & the registered office address. Note that for the
purpose the company’s Act emails are treated as letters.
In case of a public company, the
memorandum must include the statement that “the company is to be a public
company”
Cours 01 Mars 2005
Wether the registered office is
situated in England and Wales. The residence is fixed where the company’s
center of control and managements is. The place of the residence of a company
is important in connect with the company’s liability to pay taxe in the UK. The
registered office is the company’s offical address. It provides a place where
legal documents notices and others communication can be surved. The objects
clause is a clause which lists the things that the company can do. In the
company inters into a transaction which is not included in the clause, the
transaction will be regarded as entered into beyond power. The object clause
may be freely amended by a speacial resolution voted by the shareholders. The
stament of the liability of the members is limited by shares or by garantie.
The amount of the share capital (if
any) with which the company proposes to be registered. And its division into
shares of a fixed amount.
The amount of capital stated in
this clause is known as the nominal or authorised capital.
Of course this requirement does
not apply to an unlimited company.
Remember that the minimum share
capital for a public company is 50.000 £. The minimum nominal capital always at
least 50.000£.
Just as well as you can change the
object clause, the memorandom of association may be amended by special
resolution voted by the shareholders.
The second document is required
for incorporation is the artical of association.
The artical of association
regulates the rights of the members of the company between themself and
determine the manner in which the business of the company shall be conducted.
There are other documents be
required to incorporate a company:
_ Stalutory declaration: it is a
declaration made to officially assert that the formation process has been carry
out in a compliance with the 1985 Act requirement.
_ The address of the registered
office and the statement of directive and secreteriat: all companies are
required to fill on register the notice of the address of the registered
office.
A statement of the first director
and secretary showing their names, their residents address, their nationalities,
their business occupation, other director ships. They hold or have hold during
the passed 5 years.
* The case of overseas companies
A company which is formed in a
country outside Great Britain may carry on business in GB without being incorporated
under the UK legislation relating to companies. However if the copany
established a place of business in BG, it must within one month file with the
registrar the following informations:
+ A certified copy of the
instruments defining the constitution of the company and a certified
translation of not in English.
“Instrument” is a general woed to
qualified the constitution document of a company.
+ A list of directors and
secretary
The name and address of at least
one person resident in GB and authorised to accept service of notice on behalf
of the company.
The date on which the company’s
place of business in GB was established.
* The effects of incorporation
_ Separate legal personality : Six consequences
-
The X is
an association of its members and a person separate from its members.
-
The
company can make contracts
-
The
company can sue or be sued
-
The
company can own property ( building,...)
-
The
company continues in existance dispite change of membership.
-
The
shareholders can delegate management to directors.
The issue of the incorporation
certificate incorporate the members as a legal person and limits their
liability if the memorandom requires so. The certificate of incorporation is
conclusive evidence that all requirements of the 1985 Act have been complied
with.
After issuance of the certificate
of incorporation, it’s not possible to challenge the validity of the company’s
incorporation despite occurance of any irregularity.
Note however that the certificate
of incorporation is not conclusive evidence that all the objects of the company
are legal.
How is a company managed?
How does a company do business?
I/ The article of association
_ Content
_ Alteration
_ Legal effect of memorandum and
articles of association.
II/ Directors and management in
general
_ Appointment and duty of
directors
_ Division of powers – directors
and members
_ Chairman and executive directors
_ The secretary
III/ Transaction with third
parties.
IV/ Corporate liability
Intro: The article of association
As already mentioned the incorporation
of a company require the existance of a memorandum of association ( which
regulates the company’s relation with the external world) and the article of
association, often describle as a constitution of the company which deal with
international regulation of the company
and determines the way in which the business of the company shall be conducted.
A/ Content:
The article deal with such matters
as:
_ Appointment and power of
directors
_ General meetings and notices of
meetings
_ Transfer of shares
_ Dividends
A company may have its own
articles or adopt table A articles
à
Standard articles provided by status.
However even where a company (private
or public) has its own articles table A will still apply except were expressly
excluded or modified and by implication in the company’s special articles.
Ex: Certain transactions of a
subsidiary require the approval of the shareholders of the subsidiary by
ordinary result or the consent of a nominated director who is a representitive
of the holding company.
Of cause the article must be
signed by each member who subscribe to the memorandum
A company may after its articles
by:
_ Speacial resolution in a general
meeting
_ Or alternatively by an agreement
given by all members in the form of a unanimous written resolution. A copy of
the resolution together with as well as a printed copy
B/ Lifting the veil
The notion that a company is
recognised as a person separate from its members is call the veil of
incorporation. This will particularly apply in as much as the company and not its
members are liable in contract.
However in some circumstances both
case law and statutory law have lifted the veil so as to reflect the reality of
whom effectively controls and owns the company.
Lifting the veil leads to hold all
or some of the members of the company liable despite the fact that the contract
has been entered into by the company itself.
Example of how the veil has been
lifted
+ Lift of the veil by case law.
The court has an occasion lifted the veil inapprociation to allow a group of
companies to be regarded as one since in reality they are not independent
either in human or in commercial terms.
Example of veil lifted by status
+ Fradulent and wrong trading
+ Reduction of the number of
members of a public company
1/ Conversion of companies from
private to public
A private company may be
re-registered as a public company if it has not previously been registered as
an unlimited company and if:
_ The members pass a speacial
resolution which alters the company’s memorandum and article of assciation so
that they fit the statutory requirements of a public company.
_ The requirements as regard
sharecapital are met
What is the requirements in term
of share capital ? ( To have a capital at least 50.000 £ )
_ An application for the change is
made to the register on a form ( formulaire ) signed by a director or a
secretary of the company. If the register is satisfied with the application for
subject to registration and provided there is no existance of a court order
reducing the company’s share capital below the authorised minimum capital, the
register will issue a certificate of incorporation stating that the company is
a public company.
2/ Conversion of companies from
public to private
Such conversion is generaly
possible. There is one interesting case of compulsory conversion from public to
private.
It’s case where a court orders the
reduction of the share capital below 50.000 £. In this case, the company must
re-register as a private company.
3/ Conversion of private limited
to private unlimited:
A limited company by share or by
guarante may be re-registered as an unlimited company. However no public
company may aplly to be re-registering as an unlimited company because a public
company can never be unlimited.
If the company is private, all
members must consent to conversion in writting. Once the register issues a new
certificate of incorporation there is no conversion back to limited company.
Note that a company is excluded
from re-registration as unlimited if it has re-registed as limited.
Limited ® Unlimited ® (No back
to) ® Limited
Unlimited ® Limited ® (No back
to) ® Unlimited
Limited company have the duties to
fill their accounts with the registrar and this prohibition (of conversion)
existes in order to avoid selective filling of accounts.
4/ Conversion of private unlimited
to private limited.
The effect of conversion on the
liability of the members is as follows:
_ Those who become members after
conversion are liable only to the extent of capital unpaid on their shares.
_ Those who were members at the
date of conversion and are still members at the time of winding up are fully
liable for debts and liabilities in curred before conversion.
_ Those who are members at the
date of conversion but have transfered their shares after conversion and before
winding up are liable for the debts and liabilities incurred before conversion
up to 3 years after conversion.
_ The revised articles must be
filled with the register within 15 days of the date of the resolution. There is
restriction to the right of the members to alter the article of association.
_ The article shall not be altered
so has to include an illegal clause.
Such alteration would be invalid.
_ The provisions of the memorandum
always superse ( = of superior legal effec ® elles prévalent sur ) those of the artilce of association. An
alteration to include a clause which contravenes ( to go against ) a provision in the memorandum is of no
effect.
_ The power to alter the artilce
must be exercised in good faith.
_ The alteration must not deprived
members of rights given to them by the Court. Thus if the Court has, by order,
made an alteration in the articles in order to assist minority shareholders to
overcome acts of unfair préjudice by the majority that article cannot be
altered without the approval of the Court.
Ex: The minorities are victimes of
unfair prejudice.
Statutory restrictions:
_ A member is not bound by a
change which require him to take more shares or in anyway increase his
liability if he has not consented to
such change in writting. This restriction aims at preventing the company from
compulsorily raising capital when it cannot raise the capital from members
voluntarily.
_ Any alteration must be modified
to the registrar within 15 days of the alteration.
In general, the Court has a
jurisdiction to regard a alteration as invalid unless it’s made for the benefit
of the capital as a whole.
B) The legal effect of memorandum
and article of Association.
The memorandum and articles bind
the capital and its members by contract. The results of this statutory contract
are as follow:
_ The memorandum and articles
constitute a contract between the company and each member. Thus, each member in
his capacity is bound to the company by the provisions in the article.
_ The memorandum and the article
are also by reason of case law a contract between members themself. Thus, one
member can sue another if the other fails to observe a provision in the
memorandum or articles. There is no need to call upon the company to sue.
The right given by the memorandum
& articles to a member in capacity other than that of member (lawer and
director) can be enforced against the company. The memorandum and articles are
not a contract with outsiders.
II/ Directors &
Managers.
The manafements of a company is
usually entrusted to a small group of persons called directors who are
supported in the main by the company secretary and the company accountant. Also
the persons managing the company are usually collect directors, after names are
sometimes used such as managers, governners or committee of management. A
director is therefore considered by status as anyone occupying the role of
director regardless of his title in the company independent.
A person may even be sonsidered as
a director despite his/her absence of liltle in the company. This person is
called shadow-director (person giving directions to the effective directors of
the company). This excludes all persons giving advice in their professional
capacity such as lawer or accountance.
A)
Appointment
of directors.
... of directors on a board of directors. At least two for a Public
Company and one for a Private Company. Directors may be appointed in the
following ways.
By being named in the article. This is sometime used of the
appointment of the company’s first diretor.
_ By the subscribers to the memorandum. This is also sometime used
for the appointment of a company’s first director as an alternative to the
procedure laid down in the article.
_ By an ordinary resolution of the members in general meeting. In
public companies each director must be apointed by a separated resolution in
order to avoid election of an unpopular member among other popular members.
_ By the board of directors in two cases.
+ To
fill casual vacancies this may occur on resignation, disqualification, removal
or death.
+ To
appoint additionnal director up to a given maximum which maybe set out on the
companies articles any excess being void of no effect.
Persons who cannot be appointed:
_ Age limit: maximum 70 years old unless otherwise provided in the
articles.
_ Bankruptcy
_ Persons disqualified by Court orders
_ Article of Association: a person may no be a company sile director
and the company secretary at the same time.
This means that a single member
company must have two officers eventhough it may only have one member.
Upon appointment the articles may
require the directors to take up a certain number of shares as a share
qualification. This share must be obtained within two months after the
appointment or such sorter time as maybe fixed by the articles. The idea is
that directors are to manage the company’s affaires on behalf of the other
shareholder and should therefore have a stake in the company.
B)
Division
of powers and duties of directors.
Between directors and members
How to despacth the power ?
The board’s power can subject to
the provision of the Company Act 1985, condition that you comply with be as
board or as narrow as desired.
The power reserved to the members of the Company by the Company Act
85 is mainly:
_ The power to
alter the articles
_ The power to
alter share capitals
_ The power to
appoint auditors = commissaires = statutory auditors and remove directors.
_ The power to put
the company into liquidat.
What do members do if they are disatisfied with the wey company is
run by directors ? Members shall:
_ Overwrite
decision of the board by ordinary meeting or written resolution where the power
is concurrent (i.e: granted to both directors and members which is the case,
for example, for the fixing of the remuniration of the managing directors.
_ After the
memorandum by special resolution to take away the company capacity to continue
the activity concerned.
_ After the company
articles by speacial resolution so has to cut down the director powers.
_ Refuse to re-elect
directors whose actions their desapproves.
C)
Duties
_ Fiduciary duties of directors.
It means that the director must account for any personal profit he may make of
in course of his dealing with the company’s properly.
_ Duties of skill and care. The
director also owns a duty of care to the company not to act negligently in
managing the company’s affairs. The duties that of a “resdable” man look after
his own affair, howecer, if the concerned director is an expert in a certain
field the objective of duty of care is often higher.
_ Duty to empoyees:
The
director shall act for the benefit of the company, i.e fot the benefit of
shareholders but also for the benefit of employees.
_ Duty to shareholders:
The
director do not own in general any contradual or fiduciary to members of their
company. However, directors may become agents of the members of a particular
transactions. They may also be a duty to shareholders in general to the advice
if any given by directors to shareholders.
_ Duties to creditors and others outsiders
Again there is no contractual or
fiduciary duty to creditors or outsiders which mean that a director is not
liable if the company brace its contract.
+ The chairman and executive
director
The chairman of the
boards presides or chairman in general meeting.
The
chairman is usually regarded as a non-excutive director who is not employed at
a salary but is concerned with running the board and representing the company.
Does the chairman
have to be a director ?
It’s
not compulsory but table A provides that a managing director must also be a
director as mcuh as the chairman of board.
Who is the
secretary ?
Under section 2.8.3 of the Act
every company must have a secretary and it’s reminded that a sale director may
not be a secretary at the same time. It’s usual for a secretary to be appointed
by the directors who fix his term of office and the conditions under which he
is to hold the office. This power is however limited to contract concerning the
administrative operation of the company. The secretary owns a fiducialy duty to
the company which is similar to that of a director. He must in no circumstance
make secret profit or take secret benefit from his office.
The company accountant.
The company accountant is an officer of the company. He owns a contractual duty to the
company to prepare to accounts properly.
+Transaction with third-parties.
As already seen each company has a
memorandum of Association in cluding an object clause i.e. A clause stating the
sope of the activity of the company. Any activity outside this statement of
objective is said to be ultra vires. Common law originally provided that any
decision taken ultra vires was void. The ultra vires rule has been under
controlers for a long time. The difficulty arises because the company is owned
by its members themselves who conduct the company’s business.
Chapter V: How does the company fonction and evolve
I/ Meetings & Resolutions
A)
Shareholders
meeting.
A
company is compelled by law to hold certain general meetings of shareholders
i.e annual meetings and in exceptionnal cases extraordinary meetings.
1/ General meetings.
a)
Annual
general meetings.
Every
company must hold a general meeting in addition to any other meeting which the
company holds during that year. The company must specify the meeting as such in
the notices calling it. Not more than 15 months must expire between an annual
meeting and the next one. Unlike in France
b)
Extraordiray
general meetings.
These
meetings are called when the directors converne i.e there is no annual obligation.
The
company secretary or other executive bodies have no power call extraordinary
meetings unless the board of directos ratifies such act. Members may also call
general meetings if the reach a certain percentage of the capital.
2/ Notice of meetings.
Regulations
relating to notice of meetings are usually laid down in the company’s articles
which must therefore be referred to, although sec 3-6-9 of the act must not be overlooked. Sec 3-6-9 provides that the
notice may no be sorter than:
_ 21
days notice in writing for AGM or meetings to pass a speacial resolution (
appointment of directors)
_ 14 days notice in writing for
other meetings.
·
Note: The
above provision apply where the company do not provide for anything.
Any meeting call on a shorter notice than the one provided by Sec° 3-6-9 shall be consedered as
validely called if:
_ In the case of an AGM, all members entitled to attend and vote at
the AGM agree.
_ In the case of any other
meetings, it is agreed by a majority in number of the member have a right to
attend and vote at the meeting, such majority representing not less than 95% of
the nominal value of the shares, or 95% of the voting rights if the company has
no share capital.
3) Procedures at meetings
The concept of “quorum” relates to
the minimum number of persons suitably qualified who must be present at a
meeting in other to validely pass the different resolutions.
( Quorum à ¼ à 25% des actions
Majorité = 50 + 1 à 51% des personnes)
Les deux
conditions doivent être respectées
If the article do not laid down,
the quorum required for the general meeting, Sec° 3-7-0 provide that two members personaly present
shall be a quorum for both public and private companies. The articles may
provide than presence in proxy is enough. The effect of absence of quorum is
that the meeting is null and void. The articles are to be looked up in order to
know whether the quorum is required through out the meeting or only at the
beginning. One should however consider that the quarum is only required at the
beginning of the meeting.
4/ Voting
Voting is usually made by show of
hands, only unless the article provides the contrarely. Proxies are never taken
into account in votes by show of hands. It’s usually on contrevercial issues to
hash for a poll which take into account all proxies and enables voters to vote
according to their number of shares.
* Note:
The articles should never exclude the night to demand a poll at a general
meeting on any question other than the election of the chairman or the
adjournment of the meeting.
5/ Minuts
Under Sect 3-8-2 of 95 Act, every company must keep
minuts of all procedings of general and directors meeting and enter the minut
book.
B)
Board
meetings.
The power of the directors must be
exercised collectively and not individualy. A meeting of the board can be
called by any director, unless the article otherwise provide. Notice of a board
meeting must be given to all directors and the time must be reasonable
depending on the circumstance. The effect of failure to give proper notice is uncertain,
ut it is a better view to consider that it does not render resolutions passed
at the meeting void. The quarum is normaly fixed by the articles and table. A
provide that the minimum quarum is two, unless the company has only one
director in which case the quarum is one. As regard personal interest; table A
provides as follow
A director shall not vote at a
meeting of directors on any resolution concerning a matter in which he has,
directly or indirectly, an interest or duty which is material and which may
conflict with the interest of the company. Is interest or duty, if they fall
within one or several of the following cases may be treated as exception.
II/ Capital in general
ANSWER
I Definition
1/ Definition
of share
Ordinary shares that do not carry
voting rights. They tend to be cheaper than ordinary shares and few still
exist.
In finance a share is an unit of
account for various financial instruments including stocks, mutual funds,
limited partnerships, and REIT's. In British English, the usage of the word
share alone to refer solely to stocks is so common that it almost replaces the
word stock itself.
2/ Definition of a corporation
The most common form of business
organization, and one which is chartered by a state and given many legal rights
as an entity separate from its owners. This form of business is characterized
by the limited liability
of its owners, the issuance of shares of easily transferable stock, and
existence as a going concern.
The process of becoming a corporation, call incorporation, gives the company
separate legal standing from its owners and protects those owners from being
personally liable in the event that the company is sued (a condition known as
limited liability). Incorporation also provides companies with a more flexible
way to manage their ownership structure.
3/ Definition
of a debenture
A bond issued by a company, paying a
fixed rate of interest and usually secured on an asset.
II What are the main differences between public and private
companies ??
|
Private
Companies
- No definition other than default
- At least only one member
- No minimum Capital
- End with “ltd”
Shares
maybe not traded on a public market
|
Public
Companies
- Defined by statutes
- At least 2 members
- Minimum capital £ 50 000
- “plc” public limited company
- Shares maybe traded on a public
market
|
III What distinguishes the memorandum of association from the
articles of association ?? What are the common legal effects of the memorandum
and the articles of association ??
The legal effect of memorandum and
article of Association.
The memorandum and articles bind
the capital and its members by contract. The results of this statutory contract
are as follow:
_ The memorandum and articles
constitute a contract between the company and each member. Thus, each member in
his capacity is bound to the company by the provisions in the article.
_ The memorandum and the article
are also by reason of case law a contract between members themselves. Thus, one
member can sue another if the other fails to observe a provision in the
memorandum or articles. There is no need to call upon the company to sue.
The right
given by the memorandum & articles to a member in capacity other than that
of member (lawyer and director) can be enforced against the company. The
memorandum and articles are not a contract with outsiders.
IV Name three of the five duties of directors
_ Fiduciary duties of
directors: It means that the director must account for any personal profit
he may make of in course of his dealing with the company’s properly.
_ Duties of skill and care:
The director also owns a duty of care to the company not to act negligently in
managing the company’s affairs. The duty that of a “resdable” man looks after
his own affair, however, if the concerned director is an expert in a certain
field the objective of duty of care is often higher.
_ Duty to employees: The
director shall act for the benefit of the company, i.e. for the benefit of
shareholders but also for the benefit of employees.
_ Duty to shareholders: The
director does not own in general any contractual or fiduciary to members of
their company. However, directors may become agents of the members of
particular transactions. They may also be a duty to shareholders in general to
the advice if any given by directors to shareholders.
_ Duties to creditors and
others outsiders: Again there is no contractual or fiduciary duty to
creditors or outsiders which mean that a director is not liable if the company
brace its contract.
V Write all you know about an ultra vires decision
As
already seen each company has a memorandum of Association including an object
clause i.e. A clause stating the sope of the activity of the company. Any
activity outside this statement of objective is said to be ultra vires. Common
law originally provided that any decision taken ultra vires was void. The ultra
vires rule has been under controllers for a long time. The difficulty arises
because the company is owned by its members themselves who conduct the
company’s business
VI What does the express “lifting
the corporate veil” mean ??
The
notion that a company is recognized as a person separate from its members is
called the veil of incorporation. This will particularly apply in as much as
the company and not its members are liable in contract.
However in some circumstances both
case law and statutory law have lifted the veil so as to reflect the reality of
whom effectively controls and owns the company.
Lifting the veil leads to hold all
or some of the members of the company liable despite the fact that the contract
has been entered into by the company itself.
Example of how the veil has been
lifted
+ Lift of the veil by case law.
The court has an occasion lifted the veil in appreciation to allow a group of
companies to be regarded as one since in reality they are not independent
either in human or in commercial terms.
Example of veil lifted by status
+ Fraudulent and wrong trading
+
Reduction of the number of members in a public company
