Company Law

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Company Law

• The Nature of Limited Companies
• Rosemary Craig BA LLB LLM PGCHEP

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Learning Objectives

• Identify the different types of company.
• To know the doctrine of incorporation.
• Identify the main differences between a company
  and a partnership.
• To know and be able to give examples of lifting
  off the veil of incorporation.

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Definition

• A company is
• An association of persons formed for the
  purposes of an undertaking or business carried on
  in the name of the association. May be classified
  as a chartered (formed by the grant of a charter
  from the Crown), statutory companies (formed
  under an Act of Parliament), registered companies
  (formed under the Companies Act), or as public
  companies limited by shares, or by guarantee, or
  unlimited.

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Types of Company

• S.1 Companies Act 1985 a company can be
  registered with or without limited liability.
• Limited liability companies
• Limited by shares shareholders are only
  liable for the amount unpaid of the share,
• Limited by guarantee where the members are
  liable to pay up to the amount that is laid down
  in the guarantee in the memorandum.
• Unlimited companies Members are liable for any of
  the companys debts.

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Public Companies

• Certificate of incorporation stating that the
  company has been registered as a public company
  must be issued.
• Identified as a public company by its name ending
  in Plc.
• Must have a minimum share capital of 50,000.
• Minimum of 2 members S. 24 Companies Act 1985.
• Limited liability.
• All provisions of the CA in relation to
  registration or re- registration of the company
  must be complied with.

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Private Companies

• A private company need not satisfy any special
  requirements.
• Membership is restricted to 50.
• It is prohibited from selling shares to the
  public.
• It is restricted on its right to transfer its
  shares.
• Some provisions of the Companies Act do not apply
  to private companies process of de-
  regulation.

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Other Classifications

• Single Member Private Limited Companies.
• Companies (Single Member Private Limited
  Companies) Regulations (Northern Ireland) 1992.
• Small and medium sized companies
• Ss. 246 249 Companies Act 1985 provide a number
  of exemptions from full accounting disclosure.
• Welsh companies.
• Overseas companies S. 744 Companies Act 1985.

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Essential Features of a Company

• Perpetual succession.
• Ownership of property.
• Limited liability.
• Separation of ownership and management.
• The company can sue and be sued.
• Transfer of ownership.

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Corporate Personality

• A company has no soul to be damned and no body to
  be kicked at. (Edward, First Barton of Thurlow).
• Saloman v Saloman Co. Ltd 1897 House of
  Lords firmly established the notion of separate
  legal personality of a limited company.
• The company is at law a different person
  altogether from the subscribers to the Memorandum
  and, although it may be that after incorporation
  the business is precisely the same as it was
  before, and the persons are managers, and the
  same hands receive the profits, the company is
  not in law the agent of the subscribers or
  trustee for them. ( Lord MacNaghten).

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Effects of the Doctrine of Incorporation

• Macaura v Northern Assurance Co Ltd 1925 The
  House of Lords held that only the company could
  have an insurable interest in the property.
• Lee v Lees Air Farming Ltd 1961 The New
  Zealand Privy Council held that both Lee and the
  company were separable legal persons, therefore
  his wife was able to claim from the Workmans
  Compensation Fund.

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Lifting the Veil Statutory Examples

• The veil of incorporation is the distinction
  between a company and its members.
• Minimum number of members S. 24.
• Company name S. 349. Penrose v Martyr 1858.
• Trading certificate S. 117
• Group accounts Ss. 227 9
• Fraudulent trading S. 213 IA 1986.
• Wrongful trading S. 214 IA 1986.

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Judicial Intervention Lifting the Veil

• Nationality Daimler v Continental Tyre Rubber
  Co 1916.
• Company liability crime tort.
• Tesco Supermarkets v Nattrass 1972 Re OLL
  Ltd 1997 Meridian Global Funds Management Asia
  Ltd v Securities Commission 1995
• Mere façade. Gilford Motor Co Ltd v Horne 1933
  Jones v Lipman 1962 Re Bugle Press Ltd 1961.
• Evasion of liabilities. Creasey v Breachwood
  Motors Ltd 1992 Re H Others 1996.
• Evasion of taxation Unit Construction Co Ltd v
  Bullock 1960.

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Group Situations

• Veil is often lifted where the parent company and
  a subsidiary are treated as one entity if they
  carry on the same business. This principle is not
  consistently applied.
• Smith, Stone Knight Ltd v Birmingham
  Corporation 1939.
• DHN Food Distributors v London Borough of Tower
  Hamlets 1976.
• Woolfson v Strathclyde Regional Council 1978.
• Adams v Cape Industries 1990 This reinforces
  the basic principle of Salomon that a company is
  a distinct legal entity.

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Advantages Disadvantages of Incorporation

• Company
• Written constitution
• own property
• contract in its own name
• sue/ be sued
• transfer shares
• no maximum number of members
• limited liability
• create floating charges subject to statutory
  rules
• formal liquidation.

• Partnership
• Written agreement not necessary
• partners own property
• liable for contracts if sued
• transfer not allowed maximum number of partners
  is 20
• partners entitled to share in management
  unrestricted borrowing powers
• disclosure not necessary.

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• The End
• I hope you have enjoyed this lecture
• Any questions?