The Anatomy of Corporate Law - Assignment Example

As enumerated in the Hallsburys Laws of England the word company con s an association of individuals formed for some common purpose. Such an association may be incorporated or it may be unincorporated. An incorporated company is a legal entity separate and distinct from the individual members of the company, whereas the unincorporated company has no such separate existence and it is not in law distinguishable from its members. A promoter is not a trustee or agent of the company but holds a fiduciary position with respect to the company, which he promotes from time to time when he first becomes a promoter until he ceases to be a promoter thereof. A promoter cannot therefore, retain any profit made out of a transaction to which the company is a party without full disclosure. A company on incorporation is a legal entity or person distinct from its members and its property is not the property of the members. The national and domicile of the company is determined by its place of registration. A company incorporated in the U.K will normally have British Nationality as well as English or Scottish Domicile. In general, residence depends upon the place where central control and management of the company is located. The activity of the proposed company will be to supply, hire or sell video films of all types. The address of the registered office of this company will be 'The Corner Shop', Monks Road, Luton. LU 52 MX. The name of the solicitor to the company is Mr Andrew Jeremy Brown of Brown and Brown, George Street, Luton. The promoters and subscribers to the memorandum of association are: 1. Mr Charles Davis of 24 Willow Way, Luton, occupation accountant. Director of Bone Foods Ltd. Luton. British Nationality. 2. Mr David Elder of 76 Monks Road, Luton, occupation sales representative. British Nationality. 3. Mrs Janet Elder of 76 Monks Road, Luton, occupation secretary (Wife of Mr Elder). The proposed nominal value of the share capital is 45,000/-. Each share is to have a value of 50 pence. All shares carry one vote. The first directors will be Mr Davis and Mr Elder. The secretary will be Mrs Elder. The shares are payable without premium. The name of this company will be M/s Pegasus Video Suppliers, Private Limited. A company registered under the companies act 1948, is not entitled to carry on business in such a way or under such a name, as to represent that its business is the business of any other company or firm or person and the absence of fraud is immaterial Incorporation / registration of a company. A corporation or a limited company which is incorporated has a corporate existence apart from the members constituting the same. A corporation has been defined as a collection of individuals united into one body under a special denomination having perpetual succession under an artificial form and vested by the policy of law with the capacity of acting in several respects as an individual. In particular, a corporation should have the capability of taking and granting properties, of contracting obligations and of suing and being sued in the course of transacting its business. The ideas inherent in the definition of a corporation are: 1. It should have continuous identity. 2. It is intangible. 3. It is an entity distinct from its constituent members. Contents of the Articles of Association. The articles of association set out rules for the internal management of the company. Great care must be taken in drafting the Articles of Association. The Articles of a company may be altered by a special resolution. Where Articles of Association are not registered, or if the Articles are registered in so far as they do not exclude or modify the regulation in Table A , those regulations so far as applicable are the regulations of the company in the same manner and to the same extent as if they were contained in duly registered articles. If the company intends to issue shares or stock warrants, special authority for that purpose can and must be given by the articles. The articles may authorize the issue of redeemable preferential shares and may also authorize the company to increase its capital, to consolidate its shares into shares of larger amount, or convert paid up shares into stock and to reconvert stock into paid up shares, to subdivide its shares into shares of smaller amounts, and to cancel shares not taken or agreed to be taken, also to reduce its capital share premium account and capital redemption reserve fund. The articles may also authorize the company to alter its memorandum to impose unlimited liability on its directors or its managers or any managing director. The specimen of the Articles of Association is to be found in the office of The Registrar of Companies. The solicitor may refer to this document in The Registrar of Companies. Memorandum of Association. The name of the company will be M/s Pegasus Video Suppliers, Private Limited. The registered office of the company is to be at the following address 'The corner shop', Monks Road, Luton. Lu 52 MX. The activity of the proposed company will be to supply, hire or sell video films of all types. The liability of the members is limited. The amount of share capital with which the company is to be registered is 45,000/- and will be divided into 90,000 shares of 50 pence each. The shareholding will be as follows: 1. Mr. Charles Davies one share. 2. Mr. David Elder one share. 3. Mrs. Janet Elder one share. The minimum and maximum number of directors can be changed in the future; this is to be incorporated in the Articles of Association. Board of Directors. Mr Charles Davis of 24 Willow Way, Luton, occupation accountant. Director of Bone Foods Ltd. Luton. British Nationality. Mr David Elder of 76 Monks Road, Luton, occupation sales representative. British Nationality. Company Secretary. Mrs Janet Elder of 76 Monks Road, Luton, occupation secretary (wife of Mr Elder). British nationality. The first clause of this memorandum of association is required to state the name of the proposed company. A company being a legal entity must have a name to establish its identity, the name of the corporation is a symbol of its existence. The second clause of the memorandum of association must specify place where the registered office of the company is to be situated. The third and final clause must state the objects for which the company is to be established. This clause must be further subdivided into - main objects to be pursued by the company, objects incidental or ancillary to the attainment of the main objects of the company and other objects to be specified in the sub clauses, which have not been defined in the main objects of the company. Mode of forming an incorporated company:- If the object of a company is illegal, such a company cannot be registered. Subscriber to memorandum The subscription to a memorandum of association means not merely signing every one of its pages but also the signing of names in token of having entered into an agreement, both as signatories forming themselves into a company and also in their undertaking to take the number of shares indicated against their names. Requirement with respect to memorandum:- Purpose of objects clause The objects clause informs members of the use to which the company's money can be put, and to third parties who deal with it, the extent of company's powers and activities Method of stating objects There should be clarity in the statement of objects. The statement must not be too vague, too general or too wide, for in that case it will defeat its very purpose and its objective. Interpretation/construction of object clause The memorandum of association must be read fairly and reasonably. General words of memorandum are not to be construed widely, but should be taken in conjunction with the dominant or main object. Intent of the framers of the memorandum must be gathered from the language in which they have chosen to express it. Objects incidental or ancillary to attainment of main objects The acts incidental or naturally conductive to the main object are those, which have a reasonably proximate connection with the object. The memorandum does not constitute a contract between company and a third party. A Corporation is not to be registered with an undesirable name. Name, which is identical or too nearly resembles with name of already registered company. If the name of a company gives such misleading indication of its activities as to cause harm to the public, it should not be registered. Every company whether limited by shares or by guarantee, or unlimited must in the memorandum of association, state the name of the company. If the company is limited by shares or guarantee it must have the word 'limited' as the last word of its name unless authorized by licence of the department of trade and industry to dispense with the inclusion of that word in its name. 1. Suitable name for the proposed company will be M/s Pegasus Video Suppliers, Private Limited. 2. Restrictions in law upon choice of the company name will be determined by the following conditions, under the companies act, no company is to be registered in a name, which in the opinion of the department of Trade and Industry is undesirable. In addition, there are the following further statutory restrictions on the choice of the name. A company may not carry on business with a name containing the words 'Red Cross', 'Geneva Cross', 'Red Crescent' or 'Red Lion and Sun' without the authority of the defence council, nor with a name containing the words 'Common Good' without the consent of the charity commissioner nor a name closely resembling the name of an association incorporated by Royal Charter, which has its name protected by order in council, without the authority of the association, nor the name containing the word 'Anzac' or any word closely resembling the word without the authority of the secretary. In all these cases, the registrar will refuse to register a company unless the relevant authority is produced. The share holders of the company may chose any name that they please. If a company carries on business under a business name which does not consist of its corporate name without any addition, it must be registered under the regulation of business names act 1916. Under the regulation of business names act, 1916 the registrar may refuse to register a business name which contains the word 'British' or any other word which is in his opinion likely to lead to the belief that the business is under British ownership or control if such belief would be misleading. This power to refuse registration of a business name has been extended to any name, which in the registrar's opinion is undesirable. This can be verified by consulting the list of names available at the Companies House having information centres at Cardiff, London and Edinburgh. 3. To register a company the following documents have to be filed along with an application to the Registrar of Companies: I. Memorandum of Association. This document sets out: The company's name, where the registered office of the company is situated (in England, Wales or Scotland); and what it will do (its objects). The object of a company may simply be to carry on business as a general commercial company. The company's memorandum delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature. II. Articles of Association. This document sets out the rules for the running of the company's internal affairs. III. Form 10 gives details of the first director(s), secretary and the intended address of the registered office. As well as their names and addresses, the company's directors must give their date of birth, occupation and details of other directorships they have held within the last five years. Each officer appointed and each subscriber (or his or her agent) must sign and date the form. IV. Form 12 is a statutory declaration of compliance with all the legal requirements relating to the incorporation of a company. It must be signed by a solicitor who is forming the company, or by one of the people named as a director or company secretary on Form 10. It must be signed in the presence of a commissioner for oaths, a notary public, a justice of the peace or a solicitor. 4. a. Three examples of matters that articles of association may contain are: I. The number of members with which the company proposes to be registered must be specified. II. The articles of association must contain the power to alter the memorandum in order to impose unlimited liability upon its directors, managers or any managing director. III. The articles of association may authorize the issue of redeemable of preference shares and authorize the company to increase its capital. 4. b. A specimen of the articles of association may be found in the office of the registrar of companies, to which the solicitor is to be referred. 5. All the promoters and subscribers are desirous of participating in the day-to-day management of the company, as this is to be the principal source of their income. Since, the subscribers are also the shareholders in the company and as their services are to be rendered towards the company, they are to obtain salaries as well as they are to share in the profits that the company makes. On the other hand, the promoters will obtain remuneration for the services rendered by them. 6. It is possible to ensure that the articles, which specify the maximum and minimum number of directors, cannot be changed later, either by some provision in the articles themselves or by some arrangement outside these articles of association. 7. The forms, which have to be completed in order to incorporate the company, are: I. Form A, Form B, Form C, Form D, Form E, Form F. Sources. 1. Hallsbury's Laws of England. 2. Palmer. Company Law. 3. Buckley on the company's acts. 4. Geoffrey Morse. Charles Worth's Company Law. 5. Reinier Kraakman, Paul Davies, Henry Hansmann, Gerard Hertig, Klaus J Hopt, Hideki Kanda, Edward B Rock. The Anatomy of Corporate Law. A Comparative and Functional Approach. 6. Janet Dine. The Governance of Corporate Groups. 7. M J Ryall , Philip Sadler. Strategic Management. 8. Christine Parker. The Open Corporation: Effective Self-Regulation and Democracy. 9. Adrian Cadbury. Corporate Governance and Chairmanship: A Personal View. 10. M.C.Oliver. Cases in Company Law. Read More