CS Executive Company Law key terms

The legal principle that a registered company is a person separate from its members and promoters, able to own property, contract, sue and be sued in its own name, with perpetual succession and limited liability for shareholders.

The rule that once a company is validly incorporated, the law treats it as independent of its subscribers, so a controlling shareholder cannot be identified with the company even where he holds nearly all the shares.

The judicial or statutory disregard of separate legal personality, allowing courts or regulators to look at the real persons behind a company, typically for fraud, sham transactions, tax evasion or statutory liability provisions.

The characteristic of a company that its existence continues uninterrupted despite the death, insolvency, insanity or exit of members, until it is lawfully wound up or struck off the register.

The conclusive official document issued by the Registrar confirming that a company has been registered and exists as a body corporate from the date stated on it, subject only to challenge by the regulator itself.

The company's foundational charter that states its name, registered office state, objects, liability of members, authorised share capital and the subscribers' declaration, and defines the scope of its permitted activities.

The internal rulebook of a company governing its management, board composition, meetings, voting, share transfers and other administrative matters, subordinate to the memorandum and to statute.

The model set of articles prescribed in the companies legislation, which applies automatically to a company limited by shares to the extent that its own registered articles are silent on a matter.

A clause in the articles or memorandum that makes a specified rule harder to alter, requiring a stricter procedure or majority than the normal special resolution before that provision can be amended.

The rule that acts beyond the powers conferred on a company by its memorandum or by statute are void and cannot bind the company, though modern law restricts its application to protect outsiders dealing in good faith.

The protection for outsiders that they may assume internal procedures of a company have been properly followed, so an irregularity behind the scenes does not invalidate a transaction unless the outsider knew or suspected it.

The legal fiction that anyone dealing with a company is deemed to know its registered public documents, such as the memorandum and articles, because they are available for inspection at the registry.

A person who undertakes the formation of a company, arranges its capital, property and directors, and stands in a fiduciary relation to the company, owing disclosure of any profit made from promotion.

An agreement made on behalf of a company before its incorporation; it does not bind the company, and the promoter or agent is generally personally liable unless the company later adopts it by novation.

The subsequent adoption or approval of an act, contract or decision by the proper authority, such as a board or members, which then treats the act as authorised from the outset.

The maximum amount of share capital stated in the memorandum that a company is permitted to issue to members, also called nominal or registered capital, which may be increased only by the prescribed procedure.

The portion of authorised capital actually allotted to shareholders through the issue of shares, representing the face value of all shares in existence at a given time.

The amount of the issue price of shares that shareholders have actually paid to the company, whether on application, allotment or calls, excluding unpaid calls and calls in arrears.

The formal conferral by the board of a right to a specified number of shares on an applicant, which creates membership and must comply with statutory limits, approvals and minimum subscription conditions.

A demand by the board for payment of all or part of the unpaid amount on shares, valid only when made under the articles, by board resolution, with proper notice and uniform treatment of holders of the same class.

The cancellation of a shareholder's shares for failure to pay calls, exercised strictly in accordance with the articles, which extinguishes the member's interest but leaves liability for amounts already due.

A written acknowledgement of debt issued by a company, usually creating or evidencing a charge on its assets, and typically transferable, carrying interest and repayment terms but no voting rights at general meetings.

A person appointed to safeguard the interests of debenture holders, hold the security on their behalf, monitor covenants and convene meetings of holders when the company defaults or seeks consent to variations.

A statutory reserve created out of profits by companies issuing redeemable debentures, earmarked to ensure funds are available for redemption and generally not available for distribution as dividend.

A person whose name is entered in the register of members as the holder of shares, or who has subscribed to the memorandum, thereby acquiring rights to vote, receive dividends and receive information.

The statutory record kept at the registered office or prescribed place listing members' names, addresses, shareholdings, amounts paid and dates of entry, which is prima facie evidence of membership.

The natural person who ultimately owns or controls shares or voting rights, or on whose behalf a transaction is made, distinct from the registered holder and subject to separate disclosure requirements.

The correction of the register of members by the company, or by order of a court or tribunal on application by an aggrieved person, where a name has been wrongly entered or omitted.

A person appointed to the board who collectively directs, manages and supervises the company's affairs, owing duties of care, good faith, independence and avoidance of conflicts, and liable for statutory compliance.

A non-executive director declared free of material pecuniary relationships with the company, its promoters or management, appointed to bring objective judgement and to chair key committees such as audit.

The obligation of directors and promoters to act in good faith in the company's best interests, avoid undisclosed conflicts of interest, refrain from secret profits and exercise powers for proper purposes only.

A formal decision taken by the directors at a duly convened board meeting, or by circulation where permitted, recorded in minutes and required for many corporate acts such as allotment, calls and borrowing.

A contract or arrangement between a company and a director, promoter, key managerial person or their relative or associate, which requires disclosure, audit committee approval and sometimes member approval.

A board committee, chaired by an independent director and composed mainly of independent directors, that oversees financial reporting, internal controls, auditor appointment and related party transactions.

The yearly meeting of members that every company must hold within the prescribed period, at which ordinary business such as adoption of accounts, declaration of dividend and appointment of auditors is transacted.

Any general meeting of members other than the annual general meeting, convened by the board or on requisition of members to deal with urgent business that cannot wait until the next annual meeting.

A decision of members passed by a simple majority of votes cast in person or by proxy at a general meeting where a quorum is present, sufficient for most routine company business.

A members' decision requiring a higher majority, typically three times the votes against as votes in favour, with proper notice stating the intention to pass it as a special resolution.

A statutory method of obtaining members' approval without a physical meeting, by sending a notice and ballot form by post or electronic means, used for specified resolutions such as certain related party matters.

A distribution of profits by a company to its shareholders, declared by the board and approved where required by members, payable only out of profits or prescribed reserves and never out of capital.

A dividend declared by the board between two annual general meetings, based on interim accounts and expected profitability, which may be revised or withheld if the financial position deteriorates.

Accumulated profits available for distribution that are not earmarked in any statutory reserve or otherwise restricted, forming the pool from which dividends and certain capital reductions may be funded.

A separate bank account into which a company must transfer declared dividends not claimed within the prescribed period, and from which further unclaimed amounts move to the investor protection fund.

An independent chartered accountant or firm appointed by members at the annual general meeting to examine the accounts, report on their truth and fairness and certify compliance with statutory requirements.

An independent examination by a practising company secretary of a company's compliance with corporate, securities and other applicable laws, reported to the board and annexed to the directors' report.

A security interest created by a company over its assets or undertaking in favour of a lender or debenture holder, which must be registered with the Registrar within the prescribed period to be enforceable.

The filing of particulars of a charge with the Registrar within the statutory period, giving public notice and priority; late registration attracts additional fees and unregistered charges may be void against liquidators and creditors.

Money received by a company from the public or members as a loan or advance, other than in the ordinary course of banking or specified exempt categories, governed by strict acceptance, repayment and disclosure rules.

A loan or guarantee given by one company to another, permitted subject to limits on layers of investment and, beyond prescribed thresholds, prior approval by special resolution of the lending company's members.

A court- or tribunal-supervised scheme between a company and its members or creditors to restructure debt, capital or operations, requiring approval of a majority in number and three-fourths in value of those voting.

The merger of two or more companies into one, or the absorption of one by another, effected through a sanctioned scheme, with transfer of undertaking, vesting of assets and liabilities and issue of shares to members.

The process of settling a company's affairs, realising assets, paying creditors and distributing any surplus to members, ending in dissolution and removal of the company's name from the register.

The person appointed to take control of a company in winding up, collect its assets, adjudicate claims, distribute proceeds and report to the tribunal or creditors on the conduct of affairs.