Law for Business in Toys4U - Case Study Example

Introduction Companies Act 2006 allows the formation of a private limited company with just one Director however that Director needs to be a naturalperson.1 As such in order to form a company, it is not necessary to have more than one Director however, in our given case study, there are three Directors and as such there is also an indication of conflict between the Directors regarding the change of name of the organization. Article 77 of the Companies Act deal with the process of changes in the name of the organization and set out the procedural requirements for this. The Business Names Act 1985 also controls the names of the businesses and certain other aspects of the naming the business and provides powers to the Secretary of State to control the names. As such law does not freely allow any name to be given to the business and govern as to how the name shall be changed and what are the procedures for changing the name of a company. In this case study, there is apparently a conflict of interest between the Directors on naming the company however; law provides a treatment for change in the name of the firm. This report will therefore discuss as to what options are available to Don and Francesca, two Directors of the firm, regarding the change in the name of the firm and what legal obstacles they may encounter during the process. Change of Name- Procedures and Legal Obstacles According to Section 77 of the Companies Act 2006, a company can change its name by adapting following two procedures: a) By passing an Special Resolution b) By following the procedures set out in the articles of association of the company. The above two conditions therefore indicate as to how a firm can effectively change its name however, in this situation, the change of name can take place by passing an Special Resolution. Under the Law, a special resolution is a resolution which can only be passed with 75% majority2 whereas an ordinary resolution can be passed with a simple majority i.e. by gaining 51% votes. If a vote is split between 50% and 50% , the articles of the company may provide further explanation to it by providing a chair to the company to cast the vote.(Dransfield,2003). It is also worthy to understand that in order to pass the Special Resolution, a prior 21 days notice is necessary and the Toys4U Ltd has to give a written notice to the Authorities specifically mentioning that it intends to pass the Special Resolution. Considering the above facts and procedures outlined above, the change of the name of the company can be changed from Toys4U Ltd to Toys4everyone Ltd; first step that is necessary is the passing of the Written Special Resolution with prior notice to the Companies House. 3 Once the notice has been served in advances i.e. 21 days before the meeting, the firm can now proceed to held the meeting or generally circulate the written resolution to the members for their voting and if it is passed/signed by 75% of the members, it will be considered as a special resolution and same will be passed and the name of the company will be change. Further, section 77 of the Companies Act 2006 further indicates that the name of the company can be changed under the conditions outlined in the Articles of Association of the Company. Under section 79 of the Companies Act 2006, a Company can also change its name under the means provided by the Articles of Association of the Company. Thus if Articles of the Company allow the change of name and outline the conditions under which it can change the name, it can do so without passing the special resolution and following the procedure outlined in the section 77 as well as section 78 of the Companies Act. When Articles of the firm allow the change of name, Company must indicate to the Registrar indicating the name has been changed according to the means provided under the Articles of Association of the Company.4 It is also important to note that if articles of association of the Company indicate that the change of name cannot take place without the written and explicit approval of all the Directors of the firms than in that case, it will probably be not possible for the Directors to change the name of the Toys4U Ltd because Articles restrict the Company to change its name. Thus Company has to change the articles of Association of the firm first before it can proceed to change the name of the firm to the new name. Further Changes required Once the above changes are made, the next step involved is the change of the different documents such as Memorandum and Articles of Association of the firm. The new name shall be incorporate into the memorandum and articles of association of the firm and on other official documents of the company.5 The change of name will also be effective only when the new certificate of incorporation is issued by the Registrar6. The new name will therefore be effective after the new certificate is issued and firm can only then start to mention its new name along with its old name for some period of time before it can finally change the name to the new one. Conclusion The change of name will take place after the company passes a special resolution with majority of 75% voting rights. In this case, two directors effectively form the 75% majority and can change the name of the company under the Section 77. However, if the articles of Association provide an alternative method, firm has to follow that process and if articles restrict the change of name, it must first change the articles before it can proceed to change the name. References Dransfield, R (2003). Business Law Made Easy. Illustrated. ed. London: Nelson Thornes. Read More