Company Law

Company Law

Current Company Law

The company is recognized in U.K law as having a “personality” which is separate from the person(s) who form the company and/or the directors and shareholders. The division of powers between board meetings (where, generally, directors' decisions are made) and general meetings (where generally, decisions of shareholders are made) is a fundamental aspect of U.K company law. It imposes on a company a degree of formality, which is absent from running a business by a sole trader or as a partnership any ultra vires action taken could be challenged, and any contract entered into could be set aside. However, it is now the case that acting “ultra vires” has no implications for the validity or enforceability of any contract entered into - in other words there are no implications for third parties, provided such third party has acted in good faith in dealing with the company.

What is possible is that any shareholder can challenge a proposed ultra vires act on the basis that the company does not have the capacity to enter into the transaction concerned, and may ask the court to grant an injunction restraining the proposed action. Note however that this can only be done before the company on the contract incurs any legal obligation. After that, an aggrieved shareholder's only remedy is to claim against the directors for breach of duty (see the document entitled “Directors. (Sandra, 1999 73)

In general, a company with a few thousand dollars in capital may incorporate under the same statutes as a company with millions of dollars in capital. However, larger companies with shares that are publicly issued and traded are subject to more stringent reporting and disclosure requirements than companies with shares held by just a few investors. In the latter situation, that of a private or closely held corporation, the corporate charter must restrict the number of shareholders to no more than 50, restrict the transfer of shares, and prohibit the public offering of shares, debentures, or other securities of the corporation.

With respect to specific incorporation procedures, the federal government and the provincial and territorial governments have their own codified corporation laws detailing how a corporation may be organized. Typically, the appropriate governmental agency (the director at the federal level) approves the name of the company and the charter or articles of incorporation signed by the incorporators. The articles of incorporation, together with the corporate bylaws, set forth the rules and regulations by which the corporation will be governed. Thereafter, a minimum amount of capital must be paid into the corporation, and shares are issued to the owners (that is, the shareholders) of the corporation. The incorporation process is not particularly complicated or time consuming, but the federal incorporation process tends to be lengthier. Typically, a certificate of incorporation can be issued within days of the submission of the prescribed application form and accompanying documents; further, a company can incorporate with a number name pending the completion of a name search and then change the ...