Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
24 Cards in this Set
- Front
- Back
|
What are companies? |
‘A company is an artificial creation of statute law which has no soul tobe damned and no body to be kicked.’ (Attributed to Lord Thurlow, anEnglish judge, 1733-1806) Company is a collection of individuals who form for acommon object, usually trading for profit. In effect, a company is a group ofpeople combined together for a common commercial purpose. |
|
|
Form a Company |
The ability to form a company derives from statute and is governed by Irishcompany law legislation (CA 2014). A company therefore comes intoexistence when the procedures set down by the 2014 Act are followed andthe company is then registered with the Companies Registration Office(“CRO”). It is at that stage a company is born and becomes an entity with aseparate existence in law. In this way we say that the strict definition of acompany is that is an entity formed and registered in the CRO under the 2014Act. |
|
|
Theories of Company Law Entity theory |
A company is an artificial entity created to conduct business It is created by the authority of the state per ‘certificate of incorporation’which defines the company as a legal person. • It is treated as a separate legal person in its dealings with certainexceptions as set down by law. • As a legal person in its own right, it has power to conduct business inits own name. It can sue and be sued. It must pay taxes; etc. It is an artificial entity and can have no mind of its own. Therefore anatural person must exercise the will of the company (i.e. manage it);management is vested in the board of directors who, as the agent forthe company, can take binding decisions on its behalf. |
|
|
Concession theory |
• Dates back to the Roman Empire.• Predicated on the role of the State in creating companies: the privilegesof incorporation are a concession from the State, which, inconsequence, has authority to limit those privileges.• According to Callanan, this theory remains relevant because moderncompany law owes its existence to the State, and there remains somerelationship insofar as responsibility for company law remains firmlywith the Minister for Enterprise, Trade and Employment. |
|
|
Contract theory |
• The premise of this theory is that the constitutional documents of acompany are a contract between it and shareholders, and separatelytoo between the shareholders themselves.• The constitutional documents define the business activities of thecompany and how it may achieve them. They also set the rules foragents of the company (e.g. its directors).• Section 25 PA recognises this contractual relationship. Directors asagents for the company have the power to conclude contracts bindingthe company but subject to the principle of agency law that they mustact within the scope of the actual or apparent authority. |
|
|
Separate legal personality- in Summary |
In essence, a company and its members are separatepersons- the company has a legal personality that is distinct and separatefrom that of its members. This is a fundamental principle of company law. |
|
|
separate entity |
Entity, which has an independent andautonomous exercise, just like a natural person. Exists in law entirely separatefrom its owners. (The term member and shareholder, in mostcircumstances refer to the same thing!) While shareholders will own andcontrol the company- by holding a stake in it- they do not own or have anyinterest in the company’s assets. |
|
|
Limited liability |
Limited liability refersto the benefit that the liability of shareholders for the debts of the company islimited to the amount, which they invest. It is only the members’ liability to the company, whichis limited- the company itself remains liable for all the debts of the company. |
|
|
The ‘key players’ in a company Shareholders |
Shareholders are the owners and controllers of a company. They do not ownthe assets of the company, they run the company, this being the taskof directors. What they own is a share which gives them certain rights ofparticipation in the company including the power to appoint and remove thosewho run the company and the power to amend the constitutional documentsof the company. |
|
|
Directors/secretary |
These persons are responsible for the management and the administration ofthe company. (Later we look in particular at the duties of directors, a majorarea of company law.) |
|
|
Creditors |
Creditors are persons to whom the company is indebted. A company willoften have many creditors; and the order in which they are to be repaid is setdown by law. |
|
|
Auditors |
An auditor assesses and attests to the lawfulness, accuracy andcompleteness of accounts. Auditors must be independent and professionallyqualified. The Companies Acts impose quite stringent requirements inrespect of the foregoing and severe penalties for infringement of thoserequirements by the company, its officers and auditors.6. Types |
|
|
Types of companies |
Chartered corporations - created with consent of the Crown Statutory corporations - These are companies created by statute E.g. CIE Registered corporations - This is the most common type. |
|
|
Liability may be limited or unlimited: |
Companies limited by shares Companies limited by guarantee Unlimited companies Private company Public company |
|
|
limited by shares |
Companies formed for profit-making activity usually have shares, andprofits are divided among members on the basis of the size of theirshareholding. Equally the liability of members to contribute to the assetsof the company is limited to the amount unpaid on their shares. |
|
|
Companies limited by guarantee |
The liability of the members to contribute to the assets of a company in awinding up is limited to the amount specified in the guarantee. Charitablecompanies usually take this form because there is no sharing of profitsand therefore no need to divide the company into shares. |
|
|
Unlimited companies |
Unlimitedcompanies are very rare. On winding up, the members are liable tocontribute to the assets of the company the amount, which is needed topay the company’s debts. Therefore trading companies rarely take thisform. Usually (but it is not necessary) unlimited companies have sharecapital. It should be noted that such members do not have personal liability tocreditors and an unpaid creditor must still secure liquidation where aliquidator will pursue the members for the company debts. The advantages of unlimited companies are that they are exempted frommany disclosure requirements for financial information filed with the CROand can thus, keep their financial standing private; capital maintenancerules do not apply; and thus, it is far easier for the companies to returncontributed capital to members. Furthermore, they do not have to paystamp duty on registration. |
|
|
Private company |
Section 33 of the Principal Act (CA 1963) defined a private company as: (1) For the purposes of this Act, ‘ private company ’ means a companywhich has a share capital and which, by its articles— (a) restricts the right to transfer its shares, and (b) limits the number of its members to 99 or fewer persons, notincluding persons who are in the employment of the company andpersons who, having been formerly in the employment of the company,were, while in that employment, and have continued after thedetermination of that employment to be, members of the company, and (c) prohibits any invitation or offer to the public to subscribe for anyshares, debentures or other securities of the company. |
|
|
Public company |
A public company is not subject to the above restrictions. It is defined as one,which is not a private company- as per Part 17 of the CA 2014. § Membership of a public company is largely comprised of the investingpublic, and unlike private companies, the division between ownership andcontrol is clearly visible. A public company must have at least sevenmembers. Where public companies are registered with limited liability, theymust be described as ‘public limited companies’ or ‘plc’.§ A PLC is defined as company, which is limited by shares; states in itsmemorandum that it is public; and complies with the requirements of theAct as to registration. § A PLC may list its shares on the stock exchange. A PLC must have atleast 2 directors. Furthermore, it cannot dispense with the requirement tohave an AGM. |
|
|
Constitution of a PLC |
The constitution of a PLC must be in the form of a memorandum ofassociation and articles of association which together are referred to as a‘constitution.’ The memorandum of a PLC shall state (a) its name, (b) that it isa public limited company registered under Part 17 of the 2014 Act, (c) itsobjects, (d) that the liability of its members is limited, and (e) its authorisedshare capital. A PLC only has capacity to do any act or thing stated in theobjects set out in its memorandum. If an object is stated in the PLC’smemorandum, the capacity of the PLC extends to doing any act or thing thatappears to it to be requisite, advantageous or incidental to or facilitate theattainment of its objects. |
|
|
How to Incorporate |
Firstly, before a company can beregistered it must file documents with the Companies Registration Office(CRO). Registrar of Companies will register thecompany and issue a certificate of incorporation. This certificate evidencesthe company’s existence. It is like a birth certificate, stating the name of thecompany, the date on which it was incorporated and its registration number.(s.25 CA 2014). |
|
|
Effects of incorporation |
• From its date of incorporation the company exists with perpetualsuccession and can exercise all functions of an incorporated companyuntilit is wound up. • The company is subject to all statutory obligations • Separate liability/limited liability – as stated above, a company haslegal identity that is entirely separate and distinct from its owners.• Suing and being sued- as a company is a separate and distinct personit can sue and can be sued. It can enter into contracts pursuant towhich it can have rights and assume obligations. • Financing a company- a company when borrowing, can offer a certainform of security known as a floating charge over assets of thecompany, which allows the company to use those assets in theordinary course of business. |
|
|
Company v. Partnership |
(1) A company can be incorporated with limited liability. (2) A company is a legal entity distinct from its members. (3) The shares in a company are freely transferable. (4) A company is managed by Directors, not by Members. (5) The structure of a company facilitates the raising of capital |
|
|
Disadvantages of Incorporation |
• The cost and inconvenience, though not substantial, for a very smallbusiness might be prohibitive. • Formalities must be observed for a company to be incorporated. Noformalities need necessarily be observed for a partnership to becreated. • A company must make certain information available to the publicalthough certain allowances are made for small private companies inrelation to what must be disclosed. • Certain professions – accountants, solicitors – can only be carried onindividually or by partnership. This is provided by s.376, 1963 Act.There is a general prohibition on more than 20 members beingcontained in a partnership, though this limitation does not apply in thecase of the latter professions – s.13 Companies (Amendment) Act1982. In the case of barristers not even partnerships are allowed. |
