company

A company is an incorporated legal entity with its own separate legal personality which is distinct from its directors and members. Companies are most often formed as a trading enterprise to earn a profit. Companies may be formed for some charitable or educational purpose, or other not for profit purpose.

Companies are most often formed by the authority vested in the Registrar of Companies (trading as Companies House) pursuant to the Companies Acts, but also may also be formed by special Act of Parliament or by Royal Charter.

Types of Companies

There are different types of companies, and they are:

1. private company limited by shares;
2. private company limited by guarantee;
3. private unlimited company;
4. public company.

Public companies are always limited by shares and may be unlisted or listed. 'Listed' is a reference to a listing on a stock exchange, for instance the London Stock Exchange or Alternative Investment Market (AIM).

The 'Limited' is a reference to limited liability, in that the liability of the members in a company limited by shares is limited to the nominal value of the shares owned in the company; in the case of a company limited by guarantee, the amount of the guarantee.

Control of Companies

Companies are controlled in different ways by the members and its directors. In a company limited by shares, the members are also called shareholders. The members are the owners of the company, and the directors are responsible for the management of the company. Each group exercises their respective powers by passing resolutions.

Types of Resolutions

The types of resolutions are:

1. ordinary resolution: an ordinary resolution is passed by a simple majority of members attending a members meeting and entitled to vote, that is more than 50% of those members;
2. Special resolutions requires a majority of 75% of votes to be passed;
3. Resolutions set up in the constitution of the company requiring a different percentage of the members or a class of the members.

In the event that the articles of association of a company do not specify the type of resolution required to passed, the Companies Act deems the required resolution to be an ordinary resolution.

Voting on resolutions usually takes place in general meetings of the company, such as the annual general meeting. However, procedures exist whereby the directors of the company issue a written resolution which can be sent to the members, signed (if the member approves) and sent back to the company. In this way, the need to attend a general meeting of shareholders can be avoided.

Management of Companies

The day-to-day management of a company is generally speaking reserved for the directors. The board of directors exercise their power in meetings of directors, known as board meetings. The directors vote on resolutions proposed for meetings and when passed, a minute of the resolution is recorded in the statutory books of the company. Each director has a single vote. Provided that the articles of the company provide for it, the chairman has a casting vote in the event that the directors attending the meeting vote evenly for and against the resolution.

Certain matters are reserved for the members to decide in general meetings, such as (1) altering the share structure of the company; (2) alteration of the articles of association and memorandum of association (the company does not need to have a memorandum), and (3) deciding to voluntarily wind up the company.

The directors are required to take notice of and act on resolutions of the members, however the directors are not required to do anything unlawful or would cause them to be in breach of their duties to the company.

Use of the Company Name

The company name (which includes the suffix 'Limited', 'Ltd', 'public limited company', or 'Plc' as the case may be) must appear on emails, letters, notices, publications, cheques, orders, parcels, invoices, receipts, and other paperwork of the company. As well as this, the address of the registered office and its place of registration must also be shown, as well as the company number. 

Corporate Veil

The corporate veil protects directors, shareholders and persons doing business on behalf of companies from personal liability. Where individuals conduct themselves in a manner which justifies personal limited, third parties are able to lift the corporate veil to recover loss and damages suffered as a result of unlawful conduct from individuals responsible.

Termination of Existence of a Company

Companies that are no longer in use may be voluntarily struck off the Register of Companies, or placed into voluntary liquidation. The difference is that when a company is struck off the register, the assets of the company are bona vacantia, as opposed to voluntary liquidation, where the proceeds of the assets are distributed to the shareholders.