FE-1 Company Law cheat sheet

Separate legal personality: a company incorporated under the Companies Act is a body corporate distinct from its members, officers and promoters; it owns property, contracts and sues in its own name, and liability of members is limited to any amount unpaid on their shares (or the guarantee).

Piercing the corporate veil is exceptional: courts look behind the company only where the corporate form is used as a device or façade to evade a legal obligation or to conceal true facts, or where statute expressly imposes liability on directors or shareholders.

Classification rule: public vs private turns on whether the company's constitution restricts share transfer, limits member numbers, and prohibits public offers of securities; a public company must have a company secretary and at least the statutory minimum directors, a private company need not.

Promoter duties: a promoter stands in a fiduciary relation to the company and must disclose any profit made from promotion; failure to disclose entitles the company to rescind the contract or recover the undisclosed profit.

Pre-incorporation contracts: a contract purportedly made for a company before incorporation binds the person who made it personally, and the company cannot ratify it after incorporation; a new contract of novation is required to shift liability.

Ultra vires and capacity: acts outside the objects are historically void, but under modern statutes a third party dealing in good faith may enforce the transaction against the company; directors remain liable to the company for unauthorized acts.

Capital maintenance: a company may not return capital to members except by permitted dividend, authorized reduction of capital, redemption or purchase of its own shares out of distributable profits or a fresh issue, or a duly sanctioned scheme.

Dividend decision rule: dividends may be paid only out of profits available for distribution (accumulated realized profits less accumulated realized losses), and never out of capital; the declaration must comply with the articles and the directors' recommendation.

Director duties framework: act within powers, promote the success of the company for members as a whole, exercise independent judgment, exercise reasonable care, skill and diligence, avoid conflicts, not accept benefits from third parties, and declare interests in proposed transactions.

Share transfer rule: shares are transferable in the manner provided by the articles; a private company may restrict transfer (pre-emption, board approval), and a transfer of unlisted shares requires an instrument of transfer executed by transferor and transferee.

Allotment authority: directors may allot shares only if authorized by the articles or by an ordinary resolution, and existing members normally hold pre-emption rights over new equity securities unless disapplied by special resolution or the articles.

Company meeting quorum and notice: annual general meetings require statutory notice (commonly 21 clear days), other meetings shorter notice; quorum is fixed by the articles or statute, and business is void if the meeting is improperly convened.

Written resolutions: private companies may pass most resolutions in writing without a meeting, but removal of a director or auditor before term and certain other matters cannot be done by written resolution.

Majority rule (rule in Foss v Harbottle) with exceptions: fraud on the minority, acts requiring a special majority, and breaches of personal rights allow a member to bring a derivative or personal action.

Winding-up priority: secured creditors are paid from their security, then preferential debts (employees' wages, taxes as prescribed), then unsecured creditors, then members; liquidation expenses rank first in the statutory waterfall.

Wrongful trading and fraudulent trading: directors who continued to trade when insolvent liquidation was inevitable may be ordered to contribute to assets; fraudulent trading carries personal liability without limit and possible criminal sanction.

Company constitution hierarchy: the memorandum (name, objects, liability, capital) binds the company and members to each other; the articles are the internal rulebook, and where a statutory provision and the articles conflict, statute prevails.

Directors' conflicts and loans: a director must declare the nature and extent of any interest in a proposed or existing transaction, and loans to directors require member approval unless a statutory exception applies.

Incorporation documents: registration requires the memorandum, articles (or model articles adoption), a statement of capital and initial shareholdings, statement of proposed officers, and a statement of compliance; the registrar issues a certificate of incorporation that is conclusive evidence of formation.

Corporate name rules: the name must not be the same as an existing registered name, must not be offensive or misleading, and use of sensitive words (bank, royal, charity) requires approval; a company must display its registered name at its registered office and on business correspondence.

Registered office and records: a company must have a registered office in its jurisdiction, keep a register of members, register of directors and secretaries, and minutes of general meetings, and must allow member inspection on statutory terms.

Directors' appointment and removal: directors are appointed under the articles or by ordinary resolution; members may remove a director by ordinary resolution at a general meeting on special notice, notwithstanding any agreement, but removal does not affect contractual claims.

Company secretary: public companies must have a qualified secretary; private companies may dispense with one, and the secretary's authority is limited to administrative and ministerial acts unless expressly authorized.

Annual return and accounts: companies must file annual accounts and a confirmation/annual return within statutory deadlines; failure to file is an offence by the company and every defaulting officer.

Auditor rules: appointment is by members at the accounts meeting or by the directors before the first meeting; auditors may be removed by ordinary resolution with special notice, and their statutory rights to information and to attend meetings cannot be excluded.

Majority thresholds: ordinary resolution requires a simple majority of votes cast; special resolution requires not less than 75% of votes cast; class rights variation requires the consent or sanction prescribed by statute and the articles.

Liability of members: in a company limited by shares, a member's liability is limited to the amount unpaid on their shares; in a company limited by guarantee, to the amount guaranteed; in an unlimited company, members bear unlimited liability for the company's debts.