Company Law Basics

Company as a Business Medium

• Companies are separate legal entities meaning a shareholder is not liable for company debts, unless they are unpaid for their shares.
• Directors are not personally liable for company debts unless they have traded wrongfully.
• Directors may be personally liable for breaches of their director's duties, which can result in a court ordering a director to contribute to the company's assets.
• The memorandum of association must be submitted when registering a company.
• Companies may choose to adopt the model rules, otherwise articles of association must be submitted with the application for registering a company.
• Company assets are owned by the company itself.

Company Decision Making

• A general company meeting can be held no sooner than 22 days after directors email notice to all shareholders.
• A short notice meeting can be held on shorter notice if a majority in number of members, holding at least 90% of the shares, consent.

Substantial Property Transactions (SPT)

• An SPT involves a director, or someone connected to a director, buying or selling a property of substantial value (greater than £100,000 or greater than £5,000 and greater than 10% of company's net asset value) to or from the company in their personal capacity.
• A company can change its registered name through a special resolution or other methods outlined in its articles of association.
• A company can change its articles via a special resolution.

Conduct of Company Employee

• Conduct of a company employee may be ultra vires, but this conduct will still bind the company if the other party acted in good faith.

Appointing a Director

• A new director can be appointed by an ordinary resolution of the shareholders or by a board resolution.
• When a director is appointed, the relevant form AP01 must be sent to the Registrar of Companies within 14 days of the appointment

Director's Personal Interests

• A director with a personal interest in a transaction cannot be part of the quorum or vote on the transaction, even after declaring their interest.
• This rule can be disapplied by amending the Model Articles.

Partnerships

• If there is no partnership agreement, profits are shared equally among partners.
• Partners can agree to override the default provisions under the Partnership Act 1890.
• Partners pay income tax evenly on their total partnership income profits even if their share of capital and/or income is unequal.
• A partner will not generally be liable for debts incurred after their retirement unless they fail to give appropriate notice or knowingly hold themselves out as a partner after retirement.
• Partners are generally liable for debts and liabilities incurred after their retirement unless they have given appropriate notice as per the Partnership Act 1890.
• A partner who fails to give appropriate notice will remain liable even after their retirement.
• For a partnership to be bound by a transaction carried out by a partner, an objective test and subjective test must be met.
• The partner will still be liable for the debt if the objective and subjective tests are not met.

This quiz covers essential concepts of company law, focusing on the role of companies as separate legal entities and the implications for shareholders and directors. Understand the registration process, decision-making in meetings, and the liabilities incurred by directors. Test your knowledge on the key principles governing company operations.