Skip to document
Welcome to StudocuSign in to access the best study resources
Guest user
0followers
Upload
HomeMy LibraryAsk AI
  • You don't have any recent items yet.
My Library
  • You don't have any modules yet.
  • You don't have any books yet.
  • You don't have any Studylists yet.

4. Shareholders

Shareholders
Module

Business Law and Practice

999+ Documents
Students shared 2781 documents in this course
Academic year: 2020/2021
Listed booksPractical Business LawBusiness Law and Practice 2021/2022
Uploaded by:
Anonymous Student
This document has been uploaded by a student, just like you, who decided to remain anonymous.
University of Law

Recommended for you

Comments

Please sign in or register to post comments.

Students also viewed

Related documents

Preview text

Shareholders

Promoters

Individuals who set up the company are known as promoters before the company is established.  promoter undertakes to form a company and takes the necessary steps to do so ( Twycros v Grant 1877 2 CPD 469 ).  Fiduciary duty with company once it has been formed (e. not to make secret profit - buying property before company formed then selling it to company for profit).

If a promoter incurs expenses/liabilities on behalf of company before it is set up, then he enters into these pre-incorporation contracts at own risk and the liability of the contract is the promoter's alone ( S51 CA 2006 ).  the company when formed has no obligation under any contract purportedly made on its behalf before registration (because the company doesn't exist before completion).  If the company wants to enter into the contract after incorporation, enter into contract of novation (new contract) with seller of land, replacing pre-incorporation contract. If directors refuse to do this, the promoter will have to be liable and become owner (e. own the land themselves)

If the promoter is unwilling to take the risk:  negotiate a draft agreement on behalf of yet to be formed company, which the company will execute once formed.  enter into contract, but include a contractual provision ending personal liability for contract if newly formed company takes over contract on same terms ( S51 CA 2006 - allows this, promoter liable "subject to any agreement to the contrary".)

Shareholder requirements

To become shareholder of a private company limited by shares ( S112 CA 2006 ): (a) person must agree to become a shareholder of the company; AND (b) his name must be entered in the register of members

Methods of becoming a shareholder

Subscribers to Memorandum S112(1) CA 2006  Automatically become first shareholders of the company when registrar issues Certificate of incorporation.  Agreement to become shareholder deemed given.  Shareholder's name must be entered in register of members.

Buying newly issued shares from company S112(2) CA 2006

 Company issues new shares  Purchaser agrees to become shareholder by formally applying to company to buy new shares  Purchaser becomes shareholder when his name is entered in the register of members.

Buying shares from existing shareholders  Procedure called 'transfer of shares'  Transferee (purchaser) agrees to become shareholder by submitting share transfer (contract for sale of the shares) to the company  Becomes shareholder when his name is entered onto register.

Gift of shares  Existing shareholder gifts shares to another individual  Recipient becomes new shareholder.

Inheriting shares  On death of shareholder, his shares automatically vest in his personal representatives  PRs become shareholders if ultimate beneficiaries; or PRS transfer the shares on to the ultimate beneficiary who will become shareholder.  Beneficiary applies to be registered as new shareholder and becomes shareholder when name entered onto register of members.

Insolvency of shareholder  Where shareholder individual or company goes bankrupt, his property automatically vests in trustee in bankruptcy.  The trustee has limited rights of ownership as his involvement is only temporary, and will sell the shares to pay off the bankrupt's debts.  Purchaser applies to be registered as new shareholder and becomes shareholder when name entered onto register of members.

Register of Members

Why is it important?

Only on entry of a person's name in the register of members does a person become a shareholder in that company.

When should the name of a new shareholder be entered on the Register?

The name of the new shareholder should be entered: (a) as soon as is practical; and (b) in any event within 2 months after date of transfer is submitted to company ( s771(1) )

Where a shareholder acquires shares but is not yet on the register:  He is beneficially entitled to the shares but he is not the legal owner of them.  The original owner will still be treated by company as owner and will receive notice of shareholder meetings and be entitled to attend them and receive dividends if these are paid.

NB: Court can rectify register of members for unwanted omissions or entry, or for unnecessary delay in removing shareholders name. Can also order company to pay damages to a wrong person and settle any disputes regarding ownership S125.

Who must keep a register?

Every company must keep a register of persons who own shares in it ( S113(1) ) at: (a) company's registered office S114(1) ; or (b) its single alternative inspection location ( S1136)

What should it contain?

  1. each shareholder's name and address ( s113(2)(a))
  2. date of entry into register of each shareholder ( s113(2) (b))
  3. number of shares owned by each shareholder (s113(3))
  4. class of share (if more than one) (s113(3)(a)(ii))
  5. amount paid up on each share ( s113(3)(b))
  6. If shareholder leaves then date shareholder left must also be included on the registered ( s113(2)(c ).

If there is only one shareholder: The register must contain:

  1. statement that the company has only one member; and
  2. the date upon which this happened s123(1) and (2) ).

If company's membership increases from 1 to more than 1 The register must contain:

  1. statement that the company has ceased to have just one member; together with
  2. the date upon which the number of members was increased ( s123(4) and (5 )).

Inspection/copying of the register

It must be available for inspection to: (a) any shareholder free of charge; and (b) any other person on payment of a fee S116(1)

Procedure for inspection

  1. request must be made to company for inspection or copying in accordance with S116(4).
  2. company has 5 working days under S117(1) to comply or apply to court to disallow request and thus prevent inspection/copying.
  3. If company allows request, must make clear latest date on which amendments were made to register and that there were no further amendments made thereafter S120(1)

Consequences for failure to allow inspection or copying?

  1. The company and every officer in default will commit an offence under S118(1) for failure to allow inspection or copying of the register without a S117 court order.
  2. The person making the request commits an offence under S119(1) if he knowingly or recklessly makes a statement which is materially misleading.

Consequences if register contains wrong information?

It is a criminal offence to company/any officer in company, punishable by fine, if register of members does not contain correct information ( s113(7) and (8) ).

Was this document helpful?

4. Shareholders

Module: Business Law and Practice

999+ Documents
Students shared 2781 documents in this course

University: University of Law

Was this document helpful?
Shareholders
Promoters
Individuals who set up the company are
known as promoters before the company is
established.
promoter undertakes to form a
company and takes the necessary
steps to do so (Twycros v Grant 1877
2 CPD 469).
Fiduciary duty with company once it
has been formed (e.g. not to make
secret profit - buying property before
company formed then selling it to
company for profit).
If a promoter incurs expenses/liabilities on behalf of company before it is set
up, then he enters into these pre-incorporation contracts at own risk and the
liability of the contract is the promoter's alone (S51 CA 2006).
the company when formed has no obligation under any contract
purportedly made on its behalf before registration (because the
company doesn't exist before completion).
If the company wants to enter into the contract after incorporation, enter
into contract of novation (new contract) with seller of land, replacing
pre-incorporation contract. If directors refuse to do this, the promoter
will have to be liable and become owner (e.g. own the land themselves)
If the promoter is unwilling to take the risk:
negotiate a draft agreement on behalf of yet to be formed company, which the company will execute once formed.
enter into contract, but include a contractual provision ending personal liability for contract if newly formed company
takes over contract on same terms (S51 CA 2006 - allows this, promoter liable "subject to any agreement to the
contrary".)
Shareholder requirements
To become shareholder of a private company limited by shares (S112 CA 2006):
(a) person must agree to become a shareholder of the company; AND
(b) his name must be entered in the register of members
Methods of becoming a shareholder
Subscribers to Memorandum
S112(1) CA 2006
Automatically become first
shareholders of the company
when registrar issues
Certificate of incorporation .
Agreement to become
shareholder deemed given.
Shareholder's name must be
entered in register of
members.
Buying newly issued shares from company
S112(2) CA 2006
Company issues new shares
Purchaser agrees to become
shareholder by formally applying to
company to buy new shares
Purchaser becomes shareholder when
his name is entered in the register of
members.
Buying shares from existing
shareholders
Procedure called 'transfer of
shares'
Transferee (purchaser) agrees to
become shareholder by submitting
share transfer (contract for sale of
the shares) to the company
Becomes shareholder when his
name is entered onto register.
Gift of shares
Existing shareholder gifts
shares to another individual
Recipient becomes new
shareholder.
Inheriting shares
On death of shareholder, his shares
automatically vest in his personal
representatives
PRs become shareholders if ultimate
beneficiaries; or PRS transfer the shares
on to the ultimate beneficiary who will
become shareholder.
Beneficiary applies to be registered as
new shareholder and becomes
shareholder when name entered onto
register of members.
Insolvency of shareholder
Where shareholder individual or
company goes bankrupt, his
property automatically vests in
trustee in bankruptcy.
The trustee has limited rights of
ownership as his involvement is
only temporary, and will sell the
shares to pay off the bankrupt's
debts.
Purchaser applies to be registered
as new shareholder and becomes
shareholder when name entered
onto register of members.

Students also viewed

Related documents