CS38010 Company Constitution Company Constitution

CS38010CS38010

Company ConstitutionCompany Constitution

So far……….So far………. OrganisationsOrganisations Commercial OrganisationsCommercial Organisations

– Sole TraderSole Trader– PartnershipPartnership– Limited CompanyLimited Company

IncorporationIncorporation– Independent BodyIndependent Body

Company ConstitutionCompany Constitution Share CapitalShare Capital

Company ConstitutionCompany Constitution

Directors responsibilitiesDirectors responsibilities

Share capitalShare capital Shareholders (Subscribers) own CompanyShareholders (Subscribers) own Company At start of CompanyAt start of Company

– Authorised share capitalAuthorised share capital Number & Nominal (par) ValueNumber & Nominal (par) Value Say 100 shares @ £1 Say 100 shares @ £1

Shareholders risk is share valueShareholders risk is share value– Partly PaidPartly Paid– Preference SharesPreference Shares

SharesShares On being Wound UpOn being Wound Up

– All debts must be paid before shareholdersAll debts must be paid before shareholders– All assets soldAll assets sold– If remainder then divided equally between If remainder then divided equally between

shareholdersshareholders– If debts > assets Shareholder lose sharesIf debts > assets Shareholder lose shares

BureaucracyBureaucracy Large Companies (PLCs)Large Companies (PLCs)

– Regulated by Companies Act and Regulated by Companies Act and Stock ExchangeStock Exchange

Small & Medium CompaniesSmall & Medium Companies– Regulated by Companies ActRegulated by Companies Act

Small CompanySmall Company Medium Sized Medium Sized CompanyCompany

TurnoverTurnover <=£2,000,000<=£2,000,000 <=£8,000,000<=£8,000,000

Balance SheetBalance Sheet <=£975,000<=£975,000 <=£3,000,000<=£3,000,000

Average Average EmployeesEmployees

<=50<=50 <=250<=250

Company ConstitutionCompany Constitution Memorandum of AssociationMemorandum of Association

– Controls External RelationsControls External Relations

Articles of AssociationArticles of Association– Control Internal RelationsControl Internal Relations

(Shareholders Agreement)(Shareholders Agreement)

Memorandum of AssociationMemorandum of Association Company NameCompany Name

– RestrictionsRestrictions Country of RegistrationCountry of Registration

– England & Wales, Wales, ScotlandEngland & Wales, Wales, Scotland Objects of CompanyObjects of Company

– Companies Act 1989 allow general commercial Companies Act 1989 allow general commercial companycompany

A Liability ClauseA Liability Clause– Liability of members is limitedLiability of members is limited

Authorised Share valueAuthorised Share value– Nominal Share Value and NumberNominal Share Value and Number

Articles of AssociationArticles of Association

Rules of Share capitalRules of Share capital Transfer of SharesTransfer of Shares Meetings of MembersMeetings of Members Rules Governing Directors’ AppointmentsRules Governing Directors’ Appointments Power of DirectorsPower of Directors Dividends and ReservesDividends and Reserves

Shareholders AgreementsShareholders Agreements Protect interests of minor shareholdersProtect interests of minor shareholders Article of AssociationArticle of Association

– Changed at General MeetingChanged at General Meeting– Needs 75% majorityNeeds 75% majority

Agreement Between ShareholdersAgreement Between Shareholders– All must signAll must sign– Can govern way voting is doneCan govern way voting is done

Directors & Company SecretaryDirectors & Company Secretary

Directors Elected by ShareholdersDirectors Elected by Shareholders– Act In best Interest of CompanyAct In best Interest of Company– HonestHonest– Declare InterestsDeclare Interests– Aware of Company’s Trading PositionAware of Company’s Trading Position– Exexutive & Non-Executive DirectorsExexutive & Non-Executive Directors

Company SecretaryCompany Secretary– Statutory Returns to Companies HouseStatutory Returns to Companies House– Could be DirectorCould be Director