The Incorporate Procedure Lecture 2.pdf

The Incorporate Procedure The Incorporation Process in Mauritius Section 22 of the Companies Act 2001: Right to apply for incorporation Any person may, subject to the other provisions of this Act, apply for incorporation of a company under this Act. Application for incorporation Section 23 of t...

The Incorporate Procedure The Incorporation Process in Mauritius Section 22 of the Companies Act 2001: Right to apply for incorporation Any person may, subject to the other provisions of this Act, apply for incorporation of a company under this Act. Application for incorporation Section 23 of the Companies Act 2001: (1)An application shall be sent to the Registrar, and shall be - (a) in the prescribed form; (b) signed by each applicant; (C) accompanied by - (i)a document in a form approved by the Registrar, signed by every person named as a director or secretary, containing his consent to be a director or secretary; (ii)a certificate that the person is not disqualified from being appointed or holding office as a director or secretary of a company; (iii)in the case of a company having a share capital, a document in a form approved by the Registrar, signed by every person named as a shareholder, or by an agent of that person authorised in writing, containing that person’s consent to being a shareholder and to taking the class and number of shares specified in the document and stating the consideration to be provided by that shareholder for the issue of those shares; (iv)in the case of a company limited by guarantee, a document signed by each person named as a member, or by an agent of that person authorised in writing, containing the matters set out in subsection (3); (v)where the document has been signed by an agent, the instrument authorising the agent to sign it; (vi)a notice reserving a name for the proposed company if any; and (vii)where the proposed company is to have a constitution, a document certified by at least one applicant that the document is the company's constitution. Section 23 (2) of the Companies Act 2001 (2)The application shall state - (a)the full name and address of each applicant; (b)the present full name, any former name and the usual residential address of every director and of any secretary of the proposed company; (c)particulars of any business occupation and directorships of any public company or subsidiary of a public company held by each director; (d)the full name and residential address of every shareholder of the proposed company, and the number of shares to be issued to every shareholder and the amount to be paid or other consideration to be provided by that shareholder for the issue of those same shares; (e) whether the company is a limited company or an unlimited company; (f) in the case of a private company, that the company is a private company; (g) the registered office of the proposed company; (ga) such other information as may be required; Amended by B.F(M.P)A 2006 (h) in the case of a one person company, the full name and residential address and occupation of the person nominated by the proposed director to be the secretary of the company; and (i) a declaration made by the applicant that the information provided in the application is true and correct. Section 23 (3) of the Companies Act 2001 (3) A document submitted under subsection (1)(c)(iv) shall contain the consent of the person referred to thereunder to be a member and shall state a specified amount up to which the member undertakes to contribute to the assets of the company, in the event of its being wound up while that person is a member, or within one year after ceasing to be a member, for payment of the debts and liabilities of the company contracted before that person ceases to be a member, and of the costs, charges and expenses of the winding up, and for the adjustments of the rights among themselves of the other members who are similarly required to contribute. Section 23 (4) of the Companies Act 2001 (4) Where a person is a director of one or more subsidiaries of the same holding company, and of the holding company it shall be sufficient for the purposes of subsection (2)(c) to state that the person is the holder of one or more directorships in that group of companies and the group may be described by the name of the holding company with addition of the word “Group”. Incorporation of a Company Section 24 of the Companies Act 2001: Incorporation Where the Registrar is satisfied that the application for incorporation of a company complies with this Act, the Registrar shall upon payment of the prescribed fee - (a) enter the particulars of the company on the register; (b) assign a unique number to the company as its company number; and (c) issue – (i) a certificate of incorporation electronically; or (ii) upon request and on payment of the appropriate fee, a signed copy of the certificate of incorporation Certificate of incorporation Section 25 of the Companies Act 2001: Certificate of incorporation A certificate of incorporation of a company issued under section 24 is conclusive evidence that - (a)all the requirements of this Act as to incorporation have been complied with; and (b)on and from the date of incorporation stated in the certificate, the company is incorporated under this Act. 26. Separate legal personality A company incorporated under this Act shall be a body corporate with the name by which it is registered and continues in existence until it is removed from the register of companies. Company Constitution The Rule: Section 39 of the Companies Act 2001: No requirement for company to have constitution Any company may, but does not need to have a constitution. Significance of the Constitution Section 40 of the Companies Act 2001: Effect of Act on company having constitution (1)Where a company has a constitution, the rights, powers, duties, and obligations of the company, the Board, each director, and each shareholder of the company shall be those set out in this Act except to the extent that they are restricted, limited or modified by the constitution of the company in accordance with this Act. (2)Subject to subsection (3), the form of constitution of a private company shall be in the form set out in the Second Schedule. (3)A private company may exclude or modify the provisions of its constitution to the extent permitted by the Second Schedule. Significance of not having a Constitution Section 41 of the Compaies Act 2001: Effect of Act on company not having constitution Where a company does not have a constitution, the rights, powers, duties, and obligations of the company, the Board, each director, and each shareholder of the company shall be those set out in this Act. Form and Content of the Constitution Section 42 of the Companies Act 2001: (1)For the purposes of this Act, the constitution of a company shall - (a)in the case of a company incorporated under Part III, be, a document certified by the applicant for registration of the company as the company's constitution; (b)in the case of a private company incorporated under Part III, be, subject to section 40, the constitution set out in the Second Schedule; (c) in the case of an existing company, be the memorandum and articles of association as originally registered or as altered in accordance with the Companies Act 1984 or the Companies Act 1913 provided that any statement of objects in the memorandum shall, from the commencement of this Act, have the effect stated in section 28; (d) be a document that is adopted by the company as its constitution under section 44; (e) be a document referred to in section 45; or (f) be a document referred to in any of the preceding paragraphs as altered by the company under section 44 or varied by the Court under section 178. (2) Subject to section 27(3), the constitution of a company may contain - (a) matters contemplated by this Act for inclusion in the constitution of a company; and (b) such other matters as the company wishes to include in its constitution. (3) Notwithstanding any other enactment, the constitution of a company and any amendment to the constitution shall be certified by a law practitioner and need not be embodied in a notarial deed. New form of constitution Section 45 of the Companies Act 2001: (1)A company may deliver to the Registrar a single document that incorporates the provisions of a document referred to in section 42(1)(f) together with any amendments. (2)The Registrar may, where he considers that by reason of the number of amendments to a company's constitution it would be desirable for the constitution to be contained in a single document, by notice in writing, require a company to deliver to the Registrar a single document that incorporates the provisions of a document referred to in section 42(1)(f), together with any amendments. Memorandum of Association (England) Definition: MoA defines the essential components of the structure of the company Regulates the relationship between the company and outsiders Clauses (England) Name Clause Public Company Clause Registered Office Clause Objects Clause Liability Clause Capital Clause Articles of Association (England) Definition: AoA is the code of internal regulations applicable to the company and its members in their dealings with each other Table A is a model or standard set of articles laid down in the Companies Act Effect of constitution Section 43 of the Companies Act 2001: (1)The constitution of a company shall be void to the extent that it contravenes, or is inconsistent with, this Act. (2)Subject to this Act, the constitution of a company shall have the effect of a contract - (a) as between the company and each member or shareholder; and (b) as between the members or shareholders themselves. (3) All money payable by any member to the company under the constitution shall be a debt due from him to the company. Corporate Capacity: Objects Clause (England) Objects Clause sets out the capacity of the company If the company does something which is not authorised by the objects clause it will act ultra vires (beyond its powers) Ref Ashbury Railway Carriage v Riche 1875 Ashbury Railway Carriage Co v Riche (1875) HL decision concluded that the objects clause laid down the extent of the Company’s contractual capacity and that any contract entered into outside the objects was ultra vires and thus void. (What is the effect of a void contract?) Further contract could not be ratified by the shareholders, even if voting unanimously. The Company had objects to make, sell and hire railway carriages. Company entered into contract to build a railway in Belgium. Contract was approved by shareholders at general meeting but the Company later repudiated the contract on grounds that it was ultra vires. The contention was upheld and the Company was not held liable in damages to other party to the agreement. HL view was that rule existed for the protection of shareholders both present and future and the persons who might become creditors. Ultra Vires / Company Objects Objects clause: Sets out aims and purposes of the company. Content: Historically envisaged a short crisp statement as to what the Company was set up to do. This however became lengthy and fairly complex. It was designed to cover as many purposes as possible so that the company's activities would not be caught by ultra vires rule. Re German Date Coffee Co 1882 The objects of the company were specific in that it was to make coffee from dates using a German patent. The patent was never granted and coffee was made with a Swedish patent. the company was solvent and the majority of shareholders wanted it to continue. However two shareholders petitioned for a winding up on the grounds that its objects had failed. HELD: The substratum had failed as it was impossible to carry out the objects for which the company was formed. Legal Effect of the Articles of Association (England) Sec 14 of the CA 85 provides that the AoA form a contract between company and members, and members between themselves, even if they do not sign the articles. They are contractually binding and the individual articles are terms of the contract Ref: Hickman v Kent or Romney Marsh Sheepbreeders Association 1920 Ref: Eley v Positive Government Security Life Assurance 1876 Testing the statutory contract Eley v. Positive Government Life Security Assurance Co (1876) 1ExD 88: The articles of the company provided as follows:‘Mr William Eley, of 27, New Broad Street in the City of London, shall be the Solicitor to the company, and shall transact all the legal business of the company, including parliamentary business, for the usual and accustomed fees and charges, and shall not be removed from this office except for misconduct’. Eley v. Positive Government Life Security Assurance Co (1876) 1ExD 88 The articles had been drafted by Eley himself when preparations were being made for the registration of the company. Doubtless taking the view that a company with such excellent legal advice was well worth investing in, he subsequently bought some shares in the company. The company then started to instruct another solicitor and Eley brought an action for breach of contract. The action was dismissed at first instance and this was confirmed by the Court of Appeal. Eley v. Positive Government Life Security Assurance Co (1876) 1ExD 88 Lord Cairns LC held: ‘Articles of association, as is well known, follow the memorandum, which states the objects of the company, while the articles state the arrangement between the members. They are an agreement inter socios, and in that view, if the introductory words are applied to [the article], it becomes a covenant between the parties to it that they will employ the plaintiff. Now, so far as that is concerned, it is res inter alios acta, the plaintiff is no party to it. No doubt he thought that by inserting it he was making his employment safe as against the company; but his relying on that view of the law does not alter the legal effect of the articles. The article is either a stipulation which would bind the members, or else a mandate to the directors. In either case it is a matter between the directors and the shareholders, and not between them and the plaintiff’. Eley v. Positive Government Life Security Assurance Co (1876) 1ExD 88 In other words, Eley lost his case because he had sued in the wrong capacity: as solicitor to the company rather than as a shareholder. Indeed the judgments never addressed the specific point that Eley was a shareholder in the company and was, as such, entitled to enforce the article by virtue of his being a member. Hickman v. Kent or Romney Marsh Sheep-Breeders’ Association 1 Ch 881 Astbury J: ‘no right merely purporting to be given by an article to a person, whether a member or not, in a capacity other than that of a member, as, for instance, as solicitor, promoter, director, can be enforced against the company’. Hickman v. Kent or Romney Marsh Sheep-Breeders’ Association 1 Ch 881 In other words, a member can enforce an article which gives him a right in his capacity as a member, for example the right to receive a specified dividend, the right to vote or the right to receive a return of capital on a winding up, but that he cannot enforce a right given to him in any other capacity. Adoption, alteration and revocation of constitution Section 44 of the Companies Act 2001: (1)The shareholders or members of a company may, where the company does not have a constitution, by special resolution, adopt a constitution for the company. (2)Subject to subsection (3) and sections 67, 80 and 114, the shareholders of a company may, by special resolution, alter or revoke the constitution of the company. (3)An existing company which has, under section 42(1)(c) retained its memorandum of association and articles of association as its constitution, shall not alter any of the provisions in its existing memorandum of association or articles of association unless it replaces its memorandum of association and its articles of association by a single document into which it consolidates its constitution. (4)The company may apply to the Registrar for dispensation from the requirement of subsection (3) and where the Registrar is satisfied that undue hardship would be caused to the company by requiring compliance with subsection (3) and that it is necessary that the alteration be made promptly, the Registrar may grant the dispensation on such terms and conditions as the Registrar thinks fit. (5) Within 14 days of the adoption of a constitution by a company, or the alteration or revocation of the constitution of a company, as the case may be, the Board shall cause a notice in a form approved by the Registrar to be delivered to the Registrar for registration. Alteration of the AoA (England) Procedure: Special Resolution (75% Majority) Limitations: No conflict with MoA No conflict with CA Not illegal No alteration of class rights Not overriding of a court decision For the benefit of the Company Ref Greenhalgh v Ardene Cinemas 1950 Greenhalgh v Aderne Cinemas Ltd 1951 The articles stated that shares could not be transferred to a non member as long as any other member was prepared to purchase them. Articles were changed to allow the free transfer of shares to non members, as long as an ordinary resolution was passed approving the transfer. HELD : Such an alteration was valid as it was to the general good of the company.