Company law (In the UK)

Characteristics of a company
A company is regarded in law as being a separate legal person, with a separate legal personality. This means that
it has rights separate from its owners and managers to enter into contracts, employ people, own property and
conduct business. The creation and management of a company is governed by the Companies Act 1985 (CA 85)
and the Companies Act 1989.
By far the largest number of incorporated companies are incorporated with limited liability, being limited by
shares as defined by section 1(2)(a) CA 85. The potential financial liability of a member (in other words
shareholder) in such a company is limited to the amount, if any, remaining unpaid on the shares held by that
particular member. Such a company is known as a limited company and will have the word Limited at the end
of its name.
A company can be a private or a public company. A public company must have a minimum issued share capital of
50,000, as required by sections 11 and 118 CA 85.
A public company may offer its shares for sale to the public (s. 81 CA 85), whereas a private company must not.
A public company may also have its shares listed (and traded) on the Stock Exchange. Information on the current
values of such listed shares is publicly available and can be checked for instance in The Financial Times.

Exercise 1reading
COMPANY FORMATION
There are a number of legal requirements which must be complied with in order to incorporate
(in other words create) a company. In particular, the following documentation will normally be required.
Memorandum of Association
The Memorandum of Association (known as the articles of incorporation in the US) contains the following
information:

Name of the company

The companys objects and powers (meaning basically the sphere of activities and nature of the company)

The companys share capital

Articles of Association
The Articles of Association (the articles) are in effect a set of rules governing the conduct of the members of the
company and its officers. The officers of a company are its directors and company secretary. These rules
commonly relate to matters such as the conduct of shareholder and board meetings, any restriction on the
transferability of shares and the powers bestowed on the directors etc. (In the US the Articles of Association are
known as the bylaws.) Many companies use a standard form of articles known as Table A Articles.
Form 10

This is a standard form which must be completed with details of the intended officers of the company, as required
by s. 10(2) CA 85. Every incorporated company must have at least one director and one company secretary. (If
there is to be only one director then that individual cannot also be the company secretary.) Details of the
companys registered office (at which formal documents will usually be served upon the company) should also be
included in Form 10.
Form 12
This is another standard form which must be signed by a person applying for incorporation of the company to
certify that the legal requirements for registration have been complied with.
The person signing Form 12 (commonly known as the promoter of the company) can be one of the directors, the
company secretary or a solicitor engaged in the formation of the company.
Once completed, these company documents must then be sent to the Registrar of Companies (the registrar),
along with a fee. The registrar then registers the company and issues a Certificate of Incorporation. This is when
the company comes into existence. There are further legal requirements which the incorporated company must
then continue to comply with, such as having annual accounts prepared (s. 226 CA 85), a copy of which must be
filed annually at Companies House (s. 242 CA 85).