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Comprehensive Business Law and Practice notes for the LPC with BPP University. I managed to get an 87 in BLP final exam with these notes. I made sure that these notes cover extensively, everything you need to pas the exam, including exam technique and sample questions. You could do well on the BLP ...
Allotment of shares and 549 - 570
disapplication of pre-
emption rights
Share buy-backs 658, 684 - 723
, SETTING UP A COMPANY
INCORPORATION OF A COMPANY FROM SCRATCH (ss. 7-16)
Send to the registrar at Companies House:
1) Application form (IN01);
2) Articles of association (s. 9(5)(b));
a) If no special articles are attached, the Model Articles ("MA") will apply
automatically (ss. 18(2) & 20(1));
b) If the company wishes to "entrench" any of its articles, making them harder to
amend, they must notify the registrar and submit a statement of compliance (ss.
22-24);
3) Fee;
a) Electronic filing — £12 (or £30 for same-day registration)
b) Paper filing — £40 (or £100 for same-day registration)
According to s. 9, the application form (IN01) must contain:
1: Name of company and company's registered office.
2: List of initial directors and their addresses.
3: Memorandum of association, stating (per s. 8):
a) That the subscribers wish to form a company;
b) That they agree to each take at least one share; and
c) The name of the subscribers, their signatures and the date.
4: Section 10 statement of capital, setting out the:
a) Total number of shares being taken out by the subscribers (s. 10(2)(a))
b) Aggregate nominal value of the shares (s. 10(2)(b))
c) Total number of shares in each class and the rights attaching to those shares
(e.g. 11 owners of preference shares may not be entitled to vote) (s. 10(2)(c))
d) The amount to be paid up on each share (s. 10(2)(d))
e) Details of all of the above (a-d) for each individual subscriber (s. 10(4)).
5: Section 13 statement of compliance.
The company must nominate a registered office for service of documents (s. 86 CA).
,ARTICLES OF ASSOCIATION (SGS 6)
The company must have articles of association (s. 18), which must be registered with CH.
A company may either choose to have:
MODEL ARTICLES The MA will apply automatically unless the company expressly
(unamended) includes (unamended) amended articles (s. 20);
A company may choose to alter particular articles (see below).
AMENDED MODEL Where the CA is silent, changes may be made to the MA. It is
ARTICLES only necessary to expressly include articles that differ from the
MA (s. 26(2)); or
ENTIRELY TAILOR- A company may choose to have entirely tailor-made articles,
MADE ARTICLES though this is relatively rare.
COMMON AMENDMENTS TO THE MA
• Removing the chairman's casting vote;
• Increasing the quorum for board meetings above;
• Removing the prohibition on directors voting on matters in which they have an interest;
• Allowing a company to change its name by something other than an SR, such as by a
board resolution (ss. 77(1)(b) & 79);Making the directors' duties more or less onerous;
• Reviewing the directors' authority to allot shares; and
• Reviewing the shareholders' statutory pre-emption rights.
The articles can only be amended by SR (s. 21). Where the MA are amended using s.
21, a copy of the amended articles must be filed with CH within 15 days (s. 26). Only
certain amendments to the AAs will work — apply the legality and commerciality tests:
• AAs are not enforceable if they conflict with the CA.
• If the CA is silent on an issue, the AAs take precedence.
1) LEGALITY TEST • ASK: does the CA refer specifically to the issue at hand i.e.
mention a specific procedure for how a matter should be
dealt with?
EXAMPLES OF COMMON AMENDMENTS AND THE LEGALITY TEST :
Adjusting the notice period of a BM - This passes the legality test – CA 06 is silent as to
the notice period for BM so there is no issue with compatibility.
Removing the chair-persons casting vote - This passes the legality test – CA 06 is silent
as to the notice period for BM so there is no issue with compatibility.
Preventing the board collectively from spending a certain amount of money without
express shareholder approval - This passes the legality test – CA 06 is silent as to the
notice period for BM so there is no issue with compatibility.
, Preventing an individual director from spending more than a certain amount of
money without express unanimous board approval - This passes the legality test – CA
06 is silent as to the notice period for BM so there is no issue with compatibility.
Providing for the directors to change the name of the company - This passes the
legality test – It falls within the scope of s. 77(1)(b) so it is valid and compatible with CA. If
the Company ever acts upon this Article, it must also take steps to comply with s. 79.
To allow the articles to be amended by the directors - This fails the legality test – s.
21(1) prescribes a SR to amend articles of association. This amendment is therefore
incompatible with CA.
Requiring unanimity (100%) from the shareholders to remove a director - This fails the
legality test - this differs from s. 168(1), which states that a director may be removed by
OR (more than 50%). This amendment is therefore incompatible with CA.
Preventing the use of written resolutions by shareholders stating instead that all
shareholders resolutions must be passed at shareholders’ meetings - This fails the
legality test - The relevant section is s. 300, which states that any article preventing the
use of written resolutions is void. This amendment is therefore incompatible with CA.
Does the proposed article amendment suit the company —
will it be commercially effective?
What are the potential drawbacks of including the articles ?
Is there an alternative way to achieve the same effect?
2) COMMERCIALITY
TEST CONSIDER: Is the proposed article better for a big or a small
company? What will the effect of the article be in the short
and long term?
• For example: how many directors are there? If there are an
even number, then they will need a casting vote or other
mechanism for resolving deadlock.
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