3 - Incorporation

• Whaley Bridge Co Printing Co v Green (1880) - “the term promotor is a term not of law, but of business, usefully summing up in a single word a number of business operations familiar to the commercial world by which a company is generally brought into existence”
• The law provides that Promotors owe a fiduciary duty to the unformed company - this is to combat any attempt by Promotors to improperly benefit themselves.
• S 51(1) - 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
• A company can become bound by a pre-incorporation contract by:

  1.      The contract could provide that upon incorporation, the promotor will cease to be liable if the company enters into a contract with the third party under the same terms;

  2.      Novation – the company, the promotor and the third party could enter into an agreement which provides that the pre-incorporation contract will be discharged and a new agreement entered into.
• The three methods of incorporating an unregistered company are:

  1.      Royal Charter – e.g. BBC, Bank of England;

  2.      Act of Parliament – e.g. the Olympic Delivery Authority; and

  3.      Delegation of Authority to Incorporate – e.g. the FCA can bring open-ended investment companies into existence.
• Section 9(1) Incorporation Documents

  The promotors must suppler the following registration documents to Companies House to incorporate a company:

  ·        The memorandum of association

  ·        The application for registration and accompanying documentation

  ·        The statement of compliance
• The memorandum must state that the subscribers:

  • wish to form a company under the CA 2006;

  • agree to become members of the company; and

  • in the case of a company that is to have a share capital, to take at least one share each (CA 2006, s. 8(1)).
• Form IN01 is the standard registration form for incorporation of a company.
• The application form required promotors to provide certain basic information on the company including:

  •         Whether the company will be private or public;

  •         Whether the liability of the members will be limited or unlimited; and

  •         If liability limited, whether limited by shares or guarantee.
• The following prohibitions / limitations apply to proposed company names:

  •         Cannot be offensive, in the opinion of the Secretary of State, or if the use of the name would constitute an offense

  •         Cannot have the same name as an existing company or too similar

  •         Names should not infringe on intellectual property rights

  •        Limitations on using the names of companies that have done into insolvent liquidation.
• Following incorporation, a company may change its name by passing a special resolution or by some other means provided for in the articles.
• The Statement of Compliance states that the requirements of CA2006 as to registration have been complied with.
• It is a criminal offense for a public company to commence business or exercise borrowing powers until it has been issued with a trading certificate.
• The consequences of a company having corporate personality are:

  •        Ownership of Assets

  •        Contractual Capacity

  •        The Company’s Business – it its own, not that of directors

  •        Commencing and defending legal proceedings

  •        Nationality, domicile and residence

  •        Perpetual succession

  •        ‘Human Rights’ – e.g. peaceful enjoyment of possessions
• The Company’s Corporate Personality could be disregarded under common law under the following circumstances:

  ·        The company was being used to perpetrate fraud

  ·        Where a relationship of agency existed (e.g. parent and subsidiary)
• The Concealment Principle is the interposition of a company or perhaps several companies so as to conceal the identity of the real actors will not deter the courts from identifying them, assuming that their identity is legally relevant. This does not involve piercing the veil, looking behind the company to discover the facts.
• The Evasion Principle is where a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The Court may pierce the veil for this purpose.
• A Tort is a wrongful act or an infringement of a right (other than under contract) leading to legal liability
• Strict liability civil wrongs and criminal offences have no mental element and so all that need be established is that the prohibited act or omission was engaged in.