Business Law
Lecture 3
Forming a company
Introduction to Incorporation
• Commonest trading structure
• Different to sole traders and partnerships
• Body corporate
Incorporation by Registration
• The registration process involves sending to
the Registrar of Companies, Companies
House, Cardiff :• Memorandum of Association
• Application for registration
• Statement of compliance
• Appropriate fee
What’s in the Memorandum of
Association?
• Under the CA’06 just a signed statement that
the promoters wish to form a company and to
take at least 1 share each in the company
What’s in the application for
registration?
• Company’s proposed name
• Whether the company's registered office is in
England + Wales Scotland or Northern Ireland
• Whether liability of members of the company
is to be limited by shares
• Whether the company is to be private or
public
• Details of the capital and initial shareholding
What’s in the statement of
compliance?
• A declaration the relevant statutory provisions
of the CA’06 including business names have
been complied with
How much is the fee?
•
•
£20 electronically
£40 by paper
Then what ?
1. If the Registrar is satisfied with the documentation he
will register the company and issue a certificate of
incorporation.
2. A certificate of incorporation signifies the company
has been created and the date on the certificate is
conclusive evidence of valid incorporation
3. From the date of registration the company has all of
the powers and obligations of a registered company
including a corporate personality
Off the Shelf Companies
–These are already registered and can
be altered as necessary
–Not bespoke
–Costly but saves time and effort
Types of Registered Companies
• Under the CA’06 companies are divided in to
•
•
•
•
Public
Private
Limited
Unlimited
We will ONLY be looking at a private limited
company
ie will have the suffix ltd/limited/LTD
Promoters
• Individuals who wish to create a company
who submit the registration documents to the
Registrar of Companies to create the
company and are the first shareholders
• From the date of registration the promoters
become the company’s directors subject to a
range of statutory duties – see later lecture
Pre incorporation contracts
• These are contracts which the promoters of
the company make before the company is
incorporated, on the assumption the company
will assume responsibility for the contract
• What happpens if there is a breach of that
contract?
S.51 CA’06
“A contract that purports to be made by or
on behalf of a company at a time when the
company has not been formed has effect,
subject to any agreement to the contrary, as
one made with the person purporting to act
for the company or as agent for it, and he is
personally liable on the contract accordingly”
Braymist v Wise Finance Co Ltd [2002]
Promoter personally liable for pre-incorporation contracts
AND
Promoter can personally enforce a pre-incorporation contract
The good points about incorporation
1. A company has its own personality and is a separate
legal person.
2. A company’s members have limited liability.
3. A company can outlive shareholders.
4. A company can own property and enter into
contracts.
5. A company can borrow money.
The bad points about incorporation
1. A company must comply with many statutory
regulations.
2. Certain company documents are public ones for all
to see.
3. A company can be sued just like a human being can
for breach of contract or negligence.
4. A company can commit certain crimes like a human
being