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Core Module: BLP Paper A
Company Law - Private Limited Companies Topic One: Formation of companies
ONE: Corporate Personality
1. A company has a 'separate legal personality':
1. It has rights and obligations distinct from those of its owners (i.e. shareholders) Salomon v Salomon : "veil of incorporation" - courts only look behind the veil in cases of fraud or deliberate breach of trust.
2. It can own property (the company owns the business assets)
3. It is liable for debts
4. Can sue / be sued - contracts are conducted / defended in the company's name.
5. Perpetual succession - the company continues to exist until it is formally wound up. It does not end with a change of ownership.
6. Transferability of ownership - shares can be bought and sold
7. Owners have limited liability: limited to the agreed price of member's share. This includes any amount that is unpaid on shares.
8. Separation of ownership (shareholders / 'members') and control (directors)
9. It can raise money by borrowing (debt and equity finance)
10. It can create "floating" charges over the company's assets
2. Power in the company Directors
Day to day matters
Attend Board meetings
Decisions by majority
One director =
Pass resolutions on matters reserved to them in company's articles or by Companies Act
Attend General meetings
Vote by show of hand or poll vote
Ordinary resolution = 50%+
Special resolution = 75%+
3. Advantages and disadvantages of incorporation: Advantages Disadvantages a) Limited Liability a) Formalities and expense of b) Tax? - can be +ve / -ve compliance c) Status b) Publicity - no privacy. Accounts and d) Ability to raise money other company documents have to e) Change participants be published f) Permanence - perpetual succession
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