Chapter 6: Consequences of Company formation

In some cases, the court lifts the corporate veil, for example to ignore the incorporated nature of a business altogether in those cases where it appears to be nothing but a sham. Are the courts likely to lift the corporate veil in the following situations?

-Where the creditors of a subsidiary company are unlikely to receive settlement of their debts even though the holding company is financially very secure?

-Where a company is registered in England and Wales but all its members, except one, belong to Neverland, a country with which England is at war?

• Yes

• No

• Yes

• No

-A company is always liable without limit for its own debts.

-Where a public limited company fails to obtain a trading certificate, a member-director may be personally liable as a result. This is one example of statute lifting the corporate veil.

• True

• False

• True

• False

Lani and Seamus are planning to set up a public company selling electrical goods at discounted rates. They ask for your advice on the following matters:

-Can it be an unlimited company?

-Can the company commence trading once it is incorporated, provided they obtain a trading certificate within the first 12 months following incorporation?

• Yes

• No

• Yes

• No

Ashley and George, the directors of Pending Ltd, a fantastically successful company with a high public profile, plan to re-register their company as a public limited company. They have never had a company secretary before because Ashley has always dealt with that side of things. The company has a share capital of £50,000.

-Do they need to appoint a company secretary?

-Do they need to increase the share capital of the company?

• Yes

• No

• Yes

• No

Which of the following statements is incorrect?

• A private company cannot offer its securities to the public.

• Only a private limited company can pass written resolutions.

• Public and private limited companies must have at least two directors.

• A private limited company does not need to hold an annual general meeting.

Richard is applying to register a new company called Original Ideas Ltd, which has a share capital of £100 (100 shares at £1 nominal value).

-As part of the application, does Richard need to submit a statement of guarantee?

-As part of the application, does Richard need to submit a statement of proposed company officers?

• Yes

• No

• Yes

• No

Within what time period following the end of the relevant accounting reference period must a public limited company file its accounts and reports?

• 
  Five months

• Six months

• Seven months

• Nine months

Which of the following statements is correct only in respect of a public limited company?

• The company may exclude rights of pre-emption

• The company may reduce its share capital subject to obtaining a special resolution and

  providing a directors’ declaration of solvency.

• Shares must be at least one quarter paid up on allotment.

• The company may redeem its shares out of its own share capital, subject to its articles of

  association

-When a company applies for registration, a copy of its proposed articles of association must be supplied to the Registrar of Companies.

-A certificate of incorporation is conclusive evidence that a company is registered in accordance with the Companies Act 2006.

• True

• False

• True

• True

Mags incorporates her sole trader business, King Kilts, which manufactures high quality tartan kilts, under the name King Kilts Ltd. She lent King Kilts Ltd £20,000 and owns 95% of its shares. She continued to insure the company’s assets, including the factory, in her own name, as she had always done before incorporation. On New Year’s Eve, the factory was destroyed by fire. Which of the following best describes the legal position?

• Mags can claim on the insurance because King Kilts Ltd is essentially no different from the

  original business.

• Mags can claim on the insurance because she has an insurable interest as a creditor of King Kilts

  Ltd.

• Mags can claim on the insurance because she has an insurable interest as a member of King Kilts

  Ltd.

• Mags cannot claim on the insurance because the insurance is not affected in the name of King Kilts Ltd and the company has the insurable interest.