Advantages of Company with Limited Liability for Shareholders
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Questions and Answers

What can erode the protection of limited liability for a company's shareholders?

  • Separate legal entity status
  • Principal legislation
  • Corporate veil
  • Personal guarantees (correct)
  • In the context of a company, who are considered as 'officers'?

  • People who run the company
  • Agents
  • Shareholders
  • Directors (correct)
  • Under what circumstances can the 'corporate veil' be lifted, leading to personal liability for directors and shareholders?

  • Day-to-day acts by agents
  • Separate legal entity status
  • Usage of personal guarantees
  • Non-compliance with the CA06 and other legislation (correct)
  • What is the significance of the term 'limited liability' for a company's shareholders?

    <p>No contribution needed beyond initial share capital</p> Signup and view all the answers

    Who carries out the day-to-day acts on behalf of a company?

    <p>Agents</p> Signup and view all the answers

    What are the 3 documents required to 'form' a company according to s9 CA06?

    <p>Form IN01, Memorandum of Association, Articles of Association</p> Signup and view all the answers

    What is the purpose of the Form IN01 when 'forming' a company?

    <p>To appoint the first directors and secretary</p> Signup and view all the answers

    What is the significance of having Articles of Association for a company?

    <p>They regulate the internal relationship within the company</p> Signup and view all the answers

    When submitting Form IN01, who must sign to show their consent to act?

    <p>The first directors and the first secretary</p> Signup and view all the answers

    What are some checks required when naming a company as mentioned in the text?

    <p>Ensuring there are no similar trademarks that could be breached</p> Signup and view all the answers

    Study Notes

    Why Choose a Company?

    • A company provides limited liability protection to the business owner (shareholder), limiting their liability to the amount of their share capital.
    • However, personal guarantees may be required, which can erode this protection.
    • A company is a legal entity in its own right, separate from its owners (shareholders) and officers (directors).
    • Officers (directors) have protection, but can be made liable in certain circumstances.

    Humans behind the Company

    • The company needs humans (agents) to carry out its acts, such as directors and secretary.
    • The acts of the agent may be curtailed/restricted by the company's objects or the agent's own authority.

    Authority of Directors

    • Directors have actual or apparent authority to bind the company.
    • Normal agency rules apply to the acts of directors in terms of their ability to bind the company.

    Documents Required to Form a Company

    • 3 documents are required to form a company:
      • Form IN01 (Application to Register)
      • Memorandum of Association (signed by initial shareholders)
      • Articles of Association (or default Model Articles)

    Memorandum of Association

    • Must be signed by at least one subscriber (initial shareholder).
    • Contains limited clauses, including company name, liability, and details of initial subscribers.

    Articles of Association

    • Regulate the internal relationship between the company and its members.
    • Typically rely on Model Articles, which can be modified.
    • Must be signed by subscribers, dated, and witnessed.

    Form IN01

    • A "fill in the boxes" exercise.
    • Details proposed company name, type, registered office, and first directors and secretary.

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    Description

    Learn about the benefits of choosing a company structure where the business owner (shareholder) is safeguarded by limited liability. Understand how the shareholder's liability is capped at the amount of their share capital, preventing them from having to contribute more to settle the company's debts. Explore the risks associated with personal guarantees that can potentially diminish this protection.

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