minimum number of shareholders on incoporation of a company
one
when do directors have authority to issue shares?
- ltd with MAs
- only one class of share before and after issue
- can do so by board resolution
procedure if there is no automatic authority to allot shares
- OR is required or by provision in the company’s articles
if OR: must be filed at CH within 15 days
resolution needed to change memorandum of association (company formed pre 01/10/2009)
ORDINARY resolution
resolution needed to change articles of association (company formed post 01/10/2009)
SPECIAL resolution
when do statutory pre-emption rights apply
if the shares are issued WHOLLY for cash
- but check for special articles
resolution required to disapply pre-emption rights
SPECIAL resolution
return of allotments (form SH01)
must be sent to CH within 1 month of share issue
share transmission
- transfer of shares by operation of law
- PR/TIB may receive dividends but they do not become shareholders (they may apply to be registered as a member/sell in their capacity as PR/TIB)
example of share transmission
to PRs on death or a TIB
declaration of a dividend
- check profits are available
- check special articles
- directors make a recommendation to members in GM
- members vote by OR to pay themselves the amount as recommended by directors or less
MA3 (if adopted)
directors may approve by board resolution (example: authority to borrow or give security)
borrowing options available to a business
- loans (secured and unsecured)
- overdrafts
- revolving credit facilities
revolving credit facility
- hybrid between loan and overdraft
- the business can borrow up to a certain amount and may repay and re-borrow when needed
what is the highest form of security
mortgage (gives the lender an immediate right to possession)
the company dealing with assets without consent of the lender (re floating charges)
free to do so until crystallisation (when the floating charge ‘fixes’ on the assets in the particular class at the time)
what is a debenture
document which includes security in the form of a floating charge (or sometimes both fixed and floating)
who can grant a debenture
only a company or LLP
negative pledge clause in a debenture
prohibits the creation of later fixed charges without permission
priority of security (SUBJECT TO registration - otherwise void against the liquidator/adminsitrator/creditor)
- validly created charges of the same type -> the first in time will have priority
- validly created fixed charge/mortgage and a floating charge -> the FIXED charge/mortgage will take priority (even if granted later) UNLESS the document creating the floating charge contains a negative pledge clause; and the later fixed chargee has notice of this prohibition when it takes its charge
registration process of a charge
- form MR01
- certified copy of the charge document
- relevant fee
within 21 days of the creation of the charge
the company will also receive a certification of registration and must update its register of charges
failure to register a charge
void against a liquidator, administrator or any creditor (INCLUDING the lender)
the debt will be payable immediately but will be unsecured
remedies if a company/LLP defaults on repayment of the loan
the debenture holder may
* sue as a creditor
* petition for winding up
* utilise any powers in the debenture document (e.g. appointment of a receiver)
net profit
income - expenses
