Understanding Company Law: Formation & Types

• Company law governs the formation, operation, and dissolution of companies
• It establishes the rights and obligations of those involved with the company, including shareholders, directors, and creditors

Formation of a Company

• Registration begins by registering the company with the relevant authority, such as Companies House in the UK
• Memorandum of Association is a legal document that outlines the company's external powers and the scope within which it can operate
• Articles of Association specifies the regulations for a company's internal management

Types of Companies

• Private Limited Company (Ltd): Shares aren't offered to the general public
• Public Limited Company (PLC): Can offer shares to the public through stock exchanges

Legal Personality

• A company is a separate legal entity distinct from its shareholders and directors
• It can own property, enter into contracts, sue, and be sued in its own name

Limited Liability

• In companies with limited liability, the shareholders' personal assets are protected from the company's debts
• Liability is limited to the amount of capital they've invested in the company

Corporate Governance

• Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled
• It involves balancing the interests of a company's many stakeholders

Directors' Duties

• Directors have a fiduciary duty to act in the best interests of the company
• This includes duties of care, skill, and diligence
• Directors must avoid conflicts of interest

Shareholders' Rights

• Shareholders have certain rights, including the right to vote on major decisions
• They can receive dividends if the company is profitable
• Shareholders can also bring legal actions against directors for breaches of duty

Capital and Shares

• Share Capital represents the funds raised by a company through the issue of shares
• Shares are units of ownership in a company, entitling the holder to certain rights

Company Meetings

• Annual General Meeting (AGM) is a yearly meeting where shareholders can raise issues with the board of directors
• Extraordinary General Meeting (EGM) is held for urgent matters that can't wait until the next AGM

Dividends

• A distribution of a company's profits to its shareholders
• Dividends are typically paid in cash

Corporate Social Responsibility (CSR)

• CSR involves a company's commitment to operating in an ethical and sustainable manner
• This includes considering the impact of its actions on stakeholders

Insolvency and Winding Up

• Insolvency occurs when a company cannot pay its debts when they are due
• Winding Up is the process of liquidating a company's assets, paying off its debts, and distributing any remaining assets to shareholders

Corporate Offences

• Companies and their directors can be liable for criminal offences, such as fraud
• Regulatory bodies can impose fines and other penalties for non-compliance with company law

Mergers and Acquisitions (M&A)

• Mergers are the combination of two or more companies into one
• Acquisitions are when one company takes control of another

Regulation

• Company law is generally regulated by government agencies, such as Companies House
• These agencies ensure compliance with legal requirements and investigate breaches of the law