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Company law fundamentals
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Created by
Chloe Duncan
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Cards (59)
What is the primary focus of company law?
Regulation of
companies' powers
and
liabilities
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What are the main relationships regulated by company law?
Company and its
managers
(
board of directors
)
Company and its
owners
(members/
shareholders
)
Owners and managers
Protection of
creditors
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What defines a company?
A
legal entity
formed for business purposes
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What do members of a company contribute?
Capital
, skills, knowledge, and expertise
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What document is issued upon a company's registration?
Certificate of incorporation
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What does Section 16 of the Companies Act 2006 state?
A company is a
body corporate
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What is the most common type of company?
Company
incorporated under the
Companies Act
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What is the liability of members in an unlimited company?
Liable without limit for
debts
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What is a Community Interest Company (CIC)?
A company for
social enterprises
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How are limited liability companies categorized?
By
shares
or
guarantee
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What distinguishes a private limited company from a public limited company?
Private cannot offer
shares
to the public
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What is required for a public limited company according to CA 2006, s 271?
Must appoint a
company secretary
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What is the minimum number of directors for a public limited company?
At least two
directors
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What must a public company's name include?
Must end with "
public limited company
" or
plc
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What are the effects of registration for a company?
Creates a separate
legal persona
Ensures
perpetual succession
Limits liability of
members
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What does separate legal persona mean for a company?
Company can enter
contracts
and own
property
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Which case established the principle of separate legal persona?
Salomon v Salomon & Co Ltd
(
1897
)
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What was the outcome of Salomon v Salomon?
Mr Salomon not
liable
for company debts
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What does the term 'corporate veil' refer to?
Separation between
company
and its
members
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What was the ruling in Lee v Lee Air Farming Ltd?
Mr Lee could be an
employee
of the company
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What was the outcome of Macaura v Northern Life Assurance?
Macaura could not claim on the
insurance
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What is the "proper plaintiff" principle from Foss v Harbottle?
Only the
company
can sue for wrongs done to it
Minority shareholders
cannot initiate actions
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What does perpetual succession mean for a company?
Company exists independently of its
members
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What is the limitation of liability for shareholders?
Liability limited to
unpaid share capital
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What protects members from a company's debts?
Limited liability
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Who has standing to sue if a company is wronged by its directors?
The
company
itself
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What does perpetual succession mean for a company?
The company continues regardless of
membership
changes
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What is the liability of shareholders if a company fails?
Limited to
unpaid
share capital
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How does limited liability protect company members?
It shields
personal assets
from
company debts
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What is the worst-case scenario for shareholders in a limited company?
Loss of their
investment
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What is the fundamental principle of company law that a company is a distinct legal person?
Separate legal persona
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What is the consequence of a company being a separate legal entity?
It erects a barrier between the managers and owners of a company and the company itself, referred to as the "
corporate veil
"
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What is the term used to describe when the courts look through the company to the identity of the shareholders and office bearers?
Lifting
(or piercing) the
corporate veil
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Why is it rare for the corporate veil to be lifted?
Because the fundamental principle of company law is that a company is a
distinct legal person
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Under what two main circumstances can the corporate veil be lifted?
Statute or b) Decisions of the court
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What is an example of a statute that allows the corporate veil to be lifted?
Company Directors Disqualification Act 1986, s15
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What is the purpose of the Companies Act 2006, s 399 that requires accounts to be prepared by a group of related companies?
It
recognizes
the common link between the companies in the group
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What are the three main common law grounds for lifting the corporate veil?
Trading with the enemy
, b)
Fraud/Evasion
, c) Concealment
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What was the key issue in the Daimler Co Ltd v Continental Tyre and Rubber Co (GB) Ltd (1916) case?
Whether paying a debt to Continental, a UK company with German shareholders, would amount to trading with the enemy during
World War I
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What was the outcome of the Gilford Motor Company Ltd v Horne (1933) case?
The company was restrained from competing with Gilford Motor Company as it was set up by the former employee to evade his restrictive covenant
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