FE-1 Company Law key terms

The principle that a registered company is a legal person distinct from its shareholders, directors, and officers, so it owns property, contracts, and sues or is sued in its own name.

The protection that generally caps a shareholder's financial exposure at the amount unpaid on their shares or the amount they agreed to contribute, shielding personal assets from company debts.

A court's exceptional disregard of separate legal personality, holding shareholders personally liable, typically where the company is used as a mere façade or sham to evade existing obligations.

A person who takes the initiative to form a company and arrange its capital and initial contracts before incorporation, owing fiduciary-style duties of disclosure and no secret profit to the company.

An agreement purportedly made on behalf of a company before it exists; it does not bind the company, and the person who acted may be personally liable unless the company later ratifies after incorporation.

The constitutional document that formally records a company's formation, including its name, registered office, objects where required, and the subscribers' agreement to take shares.

The company's internal rulebook governing decision-making, share transfers, directors' powers, and meetings; it operates as a contract between the company and its members.

A provision stating the purposes and business activities a company is authorised to pursue; modern regimes often abolish or deem it broad, but exceeding it may still raise ultra vires issues.

Literally beyond the powers: an act outside the legal capacity of the company or the authority conferred on its officers, which may be unenforceable or void against the company.

The doctrine that public registration of constitutional and other filed documents means third parties are deemed to know their contents, whether or not they actually inspected the register.

The protection for outsiders who deal with a company in good faith, allowing them to assume that internal procedures were properly followed and that those appearing to act had authority.

Authority that a third party reasonably believes an officer or agent possesses because of the company's representations or the person's position, even if actual authority is absent.

The total amount shareholders have subscribed or paid for shares, divided into nominal and premium components, representing permanent equity funding rather than debt.

A distribution of profits made to shareholders, usually in proportion to their holdings, which is lawful only if made out of distributable reserves and in compliance with statutory capital rules.

The body collectively responsible for managing or supervising the company, exercising powers conferred by statute and the articles, and acting by majority resolution at properly convened meetings.

The statutory and equitable obligations owed by directors to the company, including acting in good faith, for proper purposes, with care and skill, and avoiding conflicts of interest.

A standard of review under which courts defer to directors' informed, good-faith business decisions made with no conflict of interest, absent fraud, illegality, or gross negligence.

A situation where a director's personal, financial, or other interest may influence company decisions; it generally requires disclosure to the board and may require abstention or member approval.

A transaction between the company and a director, senior officer, controlling shareholder, or their associates, often subject to disclosure, independent approval, or fairness requirements.

A claim brought by a shareholder on the company's behalf against wrongdoers such as directors, typically requiring leave of court and notice, when the company itself fails to sue.

A member holding less than a controlling stake, whose interests are protected by statutory remedies, pre-emption rights, and procedural safeguards against oppression or unfair prejudice.

A statutory route allowing a member to complain that company affairs have been conducted in a manner unfairly prejudicial to their interests, with the court empowered to order relief, including a buyout.

A court-ordered liquidation available where it is fair and equitable to do so, often used by minority members when the company's substratum or mutual trust has broken down.

A shareholder decision passed at a general meeting by a supermajority, commonly at least two-thirds or three-quarters of votes cast, required for major changes such as amending the articles.

A shareholder decision requiring a simple majority of votes cast at a properly convened general meeting, used for routine matters such as appointing directors or approving dividends.

A meeting of the members at which shareholder decisions are taken, convened with proper notice, quorum, and information so that members can exercise their voting rights.

A person appointed by a member to attend and vote at a general meeting on their behalf, or the written instrument of appointment, subject to the company's constitution and statutory rules.

The minimum number of members or directors who must be present for a meeting to validly transact business, as fixed by statute or the company's constitution.

A member's right to be offered new shares in proportion to their existing holding before the company issues them to outsiders, preserving relative ownership and voting power.

Rights attached to a particular class of shares, such as preferential dividends or voting privileges, which generally cannot be varied without the consent of that class.

The process of liquidating a company: realising assets, paying creditors, and distributing any surplus to members, after which the company is dissolved and ceases to exist.

The officer appointed to take control of a company in liquidation, investigate its affairs, collect and realise assets, adjudicate claims, and distribute proceeds in statutory priority order.

Carrying on business with intent to defraud creditors or for a fraudulent purpose; those knowingly party to it may face personal liability and criminal sanctions in a liquidation.

Continuing to trade when a director knew or ought to have concluded that insolvent liquidation was inevitable, exposing directors to personal contribution orders for the resulting losses.

The statutory record of shareholders, showing names, addresses, holdings, and amounts paid, which is prima facie evidence of title and is generally open to public inspection.

An officer responsible for statutory records, filings, and meeting administration, whose authority to bind the company may be apparent where they act within the usual scope of that office.

An independent professional appointed by members to examine the company's financial statements and report whether they present a true and fair view in accordance with applicable standards.