Company Law

1. Companies v Partnerships

Companies Partnerships
Limited Limited Unlimited s.5
Liability But can be limited under Ltd P’Ship
Act of 2000. But at least 1 is
unlimited.
Property In its name For partners individually or jointly
Litigation In it own name All partners become party to the
Cost? action
Perpetual The change is immaterial It shall affect the contracts and
Succession business if a partner leaves.
Borrowing Effective floating charge Although personally liable
Tax -------depends on the tax system as in a company he would pay twice-----
Transferability Free in PLC, restricted in Ltd. This would bring the p’ship to an end

Advantages of Incorporation
1. Perpetual Succession
2. Limited Liability
3. Contractual Liability for all in its name
4. Ownership of Property not affected by membership change
5. Finance by floating charge

Disadvantages
1. Incorporation cost
2. Public inspection of accounts
3. Administrative expenses on statutory requirements are high

MA and AA and Ultra Vires

Summery of the important points relating to MA & AA

In registering a company one must submit the documents and pay the fee. In order to
register the Company must file MA, AA, Declaration of Compliance, Intended
situation of the Registered Office, List of persons who are to be Directors and
Secretary and their Consent. Except for a Public Company others can commence
business after obtaining the Certificate of Incorporation (s107). In order to obtain a
Trading Certificate the Public Limited Company must produce a Prospectus witch
says that the minimum subscription was collected and that Directors have paid and
applied and allotted shares which is atleast equal to the Public ownership. (or a
statement in lieu of Prospectus). The contracts made by PLC before Trading
Certificate but after incorporation is only provisional and not binding. The
restrictions on the name of the Company are stated in s.3 and s.19. Companies can
omit the word “limited”, if they are not for profit object and if dividends are not paid
but used in furtherance of their objective with a licence (s.21). Registers such as those
of members, directors and secretaries, charges, of director’s shareholding, of
debentures and Duplicate Branch register must be kept in the Registered Office.

Both are public documents (together with Special Resolutions) and both bind the
company and its members (s.22)

Ultra Vires

Purpose
1. Protect investors- so that they would not invest in a Gold mining company and
end up being owners of a fried fish shop.
2. Protect the creditors- in assessing the financial risk

Why is it less important in P’ships ? the partners are personally liable to the
creditors and the partners can only change the objects with unanimous consent.

The Changes proposed to the new companies act with regard to AA and MA

The new draft companies act has recommended to do away with a MA. Therefore the
issue of ultra vires and the need of complying to a strict objects clause does not arise.

They have also proposed to improve the efficiency of registration process by creating
the ability to transfer registration documents electronically.