droit des affaires en anglais - freemanhhiep.free.fr/cours/droit des affaires en anglais.doc ·...

Droit des Affaires en Anglais _ Licence AGE Paris XII

Droit des Affaires en Anglais1/ Why study corporate law ?2/ What is corporate law ?3/ What is a company ?4/ What are the diffirence sorts of company ?5/ How is a company created ?6/ How is a company managed ?7/ How does the company do business ?8/ How does the company fonction ?9/ How does the company ... ?10/ What are company flotations-bebentures ? ( garanties )11/ The charges in a company

Merges and acquisitions Companies failures ( How does a company die ? )

1/ Corporations are the actors of the world economie. Choosing the right legal ferm is the first criticial step for a company to be set up.

Corporate law is the law of corporation.Corporate law is a succession or ... of persons having at law an existance, rights and

duties.These rights and duties are distinct from the existance. The rights and duties of the

persons who are from time to time members.(Sharesholders : They have an existance, rights directly linked to the company).In all jurisdiction ( legal system or competance) business corporation have a

fondamentaly similar set of legal caracteristics which include the similar legal caracteristics.1. Legal personalityAs an economic entity, a firm is a single contracting party that coordinate the activities of

suppliers and of consumers of products and services.Corporate law provides for this purpose the creation of a legal person, of a legal

constracting party distinct from the various individuals who own or manage the firm.This care element ( élément central ) of separate personality is called seperate patrimony.What does the concept of seperate patrimony incur ?It incurs two things :_ The abilities for the firm to own assets that are distinct form the property of others

persons: such as the firm investors._ The ability for the firm to be free to use and sell this assets but also to pledge them to

creditors.A strong legal personality when combined with limited liability ( responsabilité) isolates

the value of the firm from the personal financial affairs of a firm. Shareholders/owners sufficiently to permit the firms share to be traded freely.

2. Limited liabilityThe principal of limited liability is that creditors are limited to making claims against

assets that are the properly of the firm itself. The creditors have no further claims against the persons asset of the firm shareholders. The limited liability principal reserve shareholders individual assets exclusively for this personal creditors.

Legal personality and limited liability together set up a secured regime whereby shareholders personal assets are pledged as security to his personal creditors.

1


3. Concept of transferable of shares.Transferability of shares enables for firms to condect business uninteruptably as the

identity of its owners changes. Fully transferable shares do not necessarely mean freely tradable shakes. Shares may be fully transferable but tradable on public market with restrictions.

4. Delegate management under a “board”Delegation permits the centralization of management necessary to coordinate productive

activity. The authority in corporation is commonly vested in a board of directors or similar committee organ that is periodicly elected exclusively or primarily by the firm shareholders.

The board is formaly distinct from shareholders. The board thereby provides a check by controling shareholders. This check is either toward other shareholders or toward other parties who deal with the firm such as creditors or employees.

5. Investor ownershipOwnership means two keys elementThe right to controle the firm and the right to receive the firm’s net earnings. This right is

proportional to the amount of capital contributed to the firm. Corporation sale: make consiste in only one member at a time holding a perpetual office. Corporation aggregate: A number of people are so associated that in law they form a single person.Ex: The registe companyThe corporation aggregate maybe divided by the method of they creation.Ex: The charted companies are formed by grant of a charter by the Crown. These companies are used to incorporate professional bodies such as the institute of Chartered Accountance in England & Wales (Experts Comptable).

The statutory company Case law (Jurisprudence) Statutory law comes from satutes states Gathen Acts of Parliament.They are companies formed by a special Act of Parliament. These companies are used for

republic utilities such as gas, electricity, water and railway.6. Registered companies99% in the English economic area there are companies which are formed under the

companies Acts 1985 or under previous Acts. In any cases, registered companies are governed by the companies Act 1985 and by the relevant case law. The companies Act 1985 has been amended many times including all amendments.

Among registered companies there is another distinction: Public Companies

Public Companies:Shares of public companies are tradable on a public market (stock exchange)Two persons minimum are required to form a public company. The name of the public

company must systematically ends with the initials. The authorised capital of a public company is at least £ 50,000. The certificate of incorporation is the conclusive evidence that the Acts have been compliced with and the company is indeed a public company.

Section S 117 certificate:_ It’s a section of the Acts 1985S117 of the Acts 1985 is to be obtained by the S 117 is only granted if the companies

share capital is at least £ 50,000 and if not less than a quarter of the nominal value of each issued share and the whole of any premium has been received by the company in cash or otherwise.

Nominal value: Share capital: 10001000 shares of £ 1 nominal value

2


Investor increase the capital by 500 sharesValue per share = £ 30 Premium (prime d’imission): Usually companies are formed as private companies and then go public at a later satege.

Private CompaniesPrivate Companies concerne smaller business. It is a company which is not public. It is

much more flexible than public company.One person only is required to set up a private company (It’s the case of the European

Directive 1992).A private company which is formed by two persons or more may convert to a single

member company by simple transfer of all shares in one hand. There is a distinction to be drown among private companies.between small and medium companies. This distinction provides for lower formalitites. The diffirence between small and medium companies it determined by sharesholds (seuils); Such as turnover, employee average and total assets.

There is another distinction to be drawn within private companies. The company maybe limited or unlimited. If the company is limited , it maybe limited in 2 way:

+ Limited by shares+ Limited by garanties- What does limited by shares mean? It means that the liability of each member to contribute to the capital is limited to the

nominal value of the shares that he or she has agreed to take up. Limited by guarantee…

Cours 22/01/05…This company do not have share capital and the members decide in the articles of

association what their liability will be the member in this case have no liability ubless and until the company goes into liquidation. When this happenes those who are members at the time is requied if necessary to contribute towards the payment of the company’s debts and liabilities. If those who are members at the time of liquidation can’t meet these obligation or the debts exceed what they are liable to contribute then the liquidater ( fiscal administateur) may have access to those who were members during the year prior (before) to the liquidation. One in corporated as a garantie and company there is not possibility to converting into a company limited by shares.

Unlimited companyAn unlimited company is company in which the member’s liability is unlimited.

Unlimited company must be always a private company. As public company is limited by shares. The personal liability of this type of company is the reason why not many existe. Unlimited company maybe formed either with or without a share capital. A share company maybe used for exemple where the company is trading and maleing profits since the share is a basis for distributing this profit.

- How does unlimited liability work? Where there is a share capital and the company goes into liquidation if the nominal

value paid by members is not enough to pay off the company’s debts then the members contribute rateably ( an proarate) i.e.prorata the nominal ( value they own in the company)

3


Where there is no share capital, members are equatly liable for the company’s debts and liabilities. Unlimited companies enjoy privacy in regard to financial affaires. Once they do not need to deliver copies of their annual accounts to the registrar (greff)

Private Companies - No definition other than default - Only one member - No minimum Capital - End with “ltd”Shares maybe not traded on a public market

Public Companies - Defined by statutes - At least 2 members - Minimum £ 50 000 - “plc” public limited company - Shares maybe traded on a public market

How is a company created?What are the consequences of this creation?

a) Promotionb) Incorporation: - UK companies.

- Overseas companies. c) The effects of incorporation.d) Post incorporation procedures ____ Re – registration.

Intro:The company created by regr.The other steps that lead to the creation of the company include two mains steps: The

steps of the promotion and the incorporation.

1. PromotionThe promotion of a company consite in taleing by the necessary steps:- To incorporate the company by registration under the companies Act 1985.- To see that the company has a share or loan capital- To acquire the business or property which the company is formed to controle.The promotion is carries out by a promoter (a founder, associé fondateur)No definition of the promoter is given by the companies Act The promoter Case law definition:A promoter is the person who undertakes to forme a company with reference to a given

project and to set it going (créer pour faire tourner)The promoter is also the person who takes the necessary steps to a complish this purpose.(Promoter is the word linleed to business)The promoter enter into contract on behalt (au nom de) of a company and may therefore

be personaly liable. Under this contracts which are called Pre’ incorporation contract.However, the contracts Act 1999 enables the company to sue (to being an action to

juctice) or be sue upon a pre- incorporation contract.The Act makes it clear that the company which is given Rights under a pre-incorporation

contract does not have to be in existance when the contract is made. A promoter may overcome the difficulties he’s facing in relation to pre-incorporation contract in the following way:

- He may incorporate the company before he makes contract in which case the problems relating to pre-incorporation do not apply.

4


- He can settle a draft agreementt (i.e. he can prepare a contract) with the other party so that when the company and on the term of the draft. In this case, the public is that the parties are not bound by the contract other than morally.

- The promoter may make the contract himself and assign the benefit of the contract to the company after it is incorporated. However, English law prohibits assignments of the burden of the contract. And the promoter therefore remains personally liable for the assignement to the company. The big issue regarding promotion is therefore the liability of the promoter.

2. IncorporationThe case of UK companies.Incorporation implies application for registration which is made by deliver certain

documents with the registrar of company. The main register is in different cases. The constitution of registered company consiste of two documents which are the memorandom of Association and the Article of Association.

Memorandom of Association:It certains the most important provision setting out the sort of activities which the

company can carry on. It’s of interest to outsides who deal not with the company. It must certains provisions setting out the following info.

_ The name of the company ending with initial plc. Or ltd._ The Company’s Act 85 provides the name of the company must notably appear legibly

outside the registered office and all places of business.On all business letters (papiers en tete), on all notifications, and official publications. The

name of the company must appear on all chèques, on all invoices signed or issued by the company. Business letters must also show the place of registration, the registered number & the registered office address. Note that for the purpose the company’s Act emails are treated as letters.

In case of a public company, the memorandum must include the statement that “the company is to be a public company”

Cours 01 Mars 2005Wether the registered office is situated in England and Wales. The residence is fixed

where the company’s center of control and managements is. The place of the residence of a company is important in connect with the company’s liability to pay taxe in the UK. The registered office is the company’s offical address. It provides a place where legal documents notices and others communication can be surved. The objects clause is a clause which lists the things that the company can do. In the company inters into a transaction which is not included in the clause, the transaction will be regarded as entered into beyond power. The object clause may be freely amended by a speacial resolution voted by the shareholders. The stament of the liability of the members is limited by shares or by garantie.

The amount of the share capital (if any) with which the company proposes to be registered. And its division into shares of a fixed amount.

The amount of capital stated in this clause is known as the nominal or authorised capital.Of course this requirement does not apply to an unlimited company.Remember that the minimum share capital for a public company is 50.000 £. The

minimum nominal capital always at least 50.000£.Just as well as you can change the object clause, the memorandom of association may be

amended by special resolution voted by the shareholders.The second document is required for incorporation is the artical of association.

5


The artical of association regulates the rights of the members of the company between themself and determine the manner in which the business of the company shall be conducted.

There are other documents be required to incorporate a company:_ Stalutory declaration: it is a declaration made to officially assert that the formation

process has been carry out in a compliance with the 1985 Act requirement._ The address of the registered office and the statement of directive and secreteriat: all

companies are required to fill on register the notice of the address of the registered office.A statement of the first director and secretary showing their names, their residents

address, their nationalities, their business occupation, other director ships. They hold or have hold during the passed 5 years.

* The case of overseas companiesA company which is formed in a country outside Great Britain may carry on business in

GB without being incorporated under the UK legislation relating to companies. However if the copany established a place of business in BG, it must within one month file with the registrar the following informations:

+ A certified copy of the instruments defining the constitution of the company and a certified translation of not in English.

“Instrument” is a general woed to qualified the constitution document of a company.+ A list of directors and secretaryThe name and address of at least one person resident in GB and authorised to accept

service of notice on behalf of the company.The date on which the company’s place of business in GB was established.* The effects of incorporation_ Separate legal personality : Six consequences- The X is an association of its members and a person separate from its members.- The company can make contracts- The company can sue or be sued- The company can own property ( building,...)- The company continues in existance dispite change of membership.- The shareholders can delegate management to directors.The issue of the incorporation certificate incorporate the members as a legal person and

limits their liability if the memorandom requires so. The certificate of incorporation is conclusive evidence that all requirements of the 1985 Act have been complied with.

After issuance of the certificate of incorporation, it’s not possible to challenge the validity of the company’s incorporation despite occurance of any irregularity.

Note however that the certificate of incorporation is not conclusive evidence that all the objects of the company are legal.

How is a company managed?How does a company do business?I/ The article of association_ Content_ Alteration_ Legal effect of memorandum and articles of association.II/ Directors and management in general_ Appointment and duty of directors_ Division of powers – directors and members_ Chairman and executive directors_ The secretary

6


III/ Transaction with third parties.IV/ Corporate liability

Intro: The article of associationAs already mentioned the incorporation of a company require the existance of a

memorandum of association ( which regulates the company’s relation with the external world) and the article of association, often describle as a constitution of the company which deal with international regulation of the company and determines the way in which the business of the company shall be conducted.

A/ Content:The article deal with such matters as:_ Appointment and power of directors_ General meetings and notices of meetings_ Transfer of shares_ DividendsA company may have its own articles or adopt table A articles Standard articles provided by status.However even where a company (private or public) has its own articles table A will still

apply except were expressly excluded or modified and by implication in the company’s special articles.

Ex: Certain transactions of a subsidiary require the approval of the shareholders of the subsidiary by ordinary result or the consent of a nominated director who is a representitive of the holding company.

Of cause the article must be signed by each member who subscribe to the memorandumA company may after its articles by:_ Speacial resolution in a general meeting_ Or alternatively by an agreement given by all members in the form of a unanimous

written resolution. A copy of the resolution together with as well as a printed copy

B/ Lifting the veilThe notion that a company is recognised as a person separate from its members is call the

veil of incorporation. This will particularly apply in as much as the company and not its members are liable in contract.

However in some circumstances both case law and statutory law have lifted the veil so as to reflect the reality of whom effectively controls and owns the company.

Lifting the veil leads to hold all or some of the members of the company liable despite the fact that the contract has been entered into by the company itself.

Example of how the veil has been lifted+ Lift of the veil by case law. The court has an occasion lifted the veil inapprociation to

allow a group of companies to be regarded as one since in reality they are not independent either in human or in commercial terms.

Example of veil lifted by status+ Fradulent and wrong trading+ Reduction of the number of members of a public company

1/ Conversion of companies from private to publicA private company may be re-registered as a public company if it has not previously been

registered as an unlimited company and if:

7


_ The members pass a speacial resolution which alters the company’s memorandum and article of assciation so that they fit the statutory requirements of a public company.

_ The requirements as regard sharecapital are metWhat is the requirements in term of share capital ? ( To have a capital at least 50.000 £ )_ An application for the change is made to the register on a form ( formulaire ) signed by

a director or a secretary of the company. If the register is satisfied with the application for subject to registration and provided there is no existance of a court order reducing the company’s share capital below the authorised minimum capital, the register will issue a certificate of incorporation stating that the company is a public company.

2/ Conversion of companies from public to private Such conversion is generaly possible. There is one interesting case of compulsory

conversion from public to private.It’s case where a court orders the reduction of the share capital below 50.000 £. In this

case, the company must re-register as a private company. 3/ Conversion of private limited to private unlimited:A limited company by share or by guarante may be re-registered as an unlimited

company. However no public company may aplly to be re-registering as an unlimited company because a public company can never be unlimited.

If the company is private, all members must consent to conversion in writting. Once the register issues a new certificate of incorporation there is no conversion back to limited company.

Note that a company is excluded from re-registration as unlimited if it has re-registed as limited.

Limited Unlimited (No back to) LimitedUnlimited Limited (No back to) Unlimited

Limited company have the duties to fill their accounts with the registrar and this prohibition (of conversion) existes in order to avoid selective filling of accounts.

4/ Conversion of private unlimited to private limited.The effect of conversion on the liability of the members is as follows:_ Those who become members after conversion are liable only to the extent of capital

unpaid on their shares._ Those who were members at the date of conversion and are still members at the time of

winding up are fully liable for debts and liabilities in curred before conversion._ Those who are members at the date of conversion but have transfered their shares after

conversion and before winding up are liable for the debts and liabilities incurred before conversion up to 3 years after conversion.

_ The revised articles must be filled with the register within 15 days of the date of the resolution. There is restriction to the right of the members to alter the article of association.

_ The article shall not be altered so has to include an illegal clause.Such alteration would be invalid._ The provisions of the memorandum always superse ( = of superior legal effec elles

prévalent sur ) those of the artilce of association. An alteration to include a clause which contravenes ( to go against ) a provision in the memorandum is of no effect.

_ The power to alter the artilce must be exercised in good faith._ The alteration must not deprived members of rights given to them by the Court. Thus if

the Court has, by order, made an alteration in the articles in order to assist minority shareholders

8


to overcome acts of unfair préjudice by the majority that article cannot be altered without the approval of the Court.

Ex: The minorities are victimes of unfair prejudice.Statutory restrictions:_ A member is not bound by a change which require him to take more shares or in

anyway increase his liability if he has not consented to such change in writting. This restriction aims at preventing the company from compulsorily raising capital when it cannot raise the capital from members voluntarily.

_ Any alteration must be modified to the registrar within 15 days of the alteration.In general, the Court has a jurisdiction to regard a alteration as invalid unless it’s made

for the benefit of the capital as a whole.

B) The legal effect of memorandum and article of Association.The memorandum and articles bind the capital and its members by contract. The results

of this statutory contract are as follow: _ The memorandum and articles constitute a contract between the company and each

member. Thus, each member in his capacity is bound to the company by the provisions in the article.

_ The memorandum and the article are also by reason of case law a contract between members themself. Thus, one member can sue another if the other fails to observe a provision in the memorandum or articles. There is no need to call upon the company to sue.

The right given by the memorandum & articles to a member in capacity other than that of member (lawer and director) can be enforced against the company. The memorandum and articles are not a contract with outsiders.

II/ Directors & Managers.The manafements of a company is usually entrusted to a small group of persons called

directors who are supported in the main by the company secretary and the company accountant. Also the persons managing the company are usually collect directors, after names are sometimes used such as managers, governners or committee of management. A director is therefore considered by status as anyone occupying the role of director regardless of his title in the company independent.

A person may even be sonsidered as a director despite his/her absence of liltle in the company. This person is called shadow-director (person giving directions to the effective directors of the company). This excludes all persons giving advice in their professional capacity such as lawer or accountance.

A) Appointment of directors.... of directors on a board of directors. At least two for a Public Company and one for a Private Company. Directors may be appointed in the following ways.By being named in the article. This is sometime used of the appointment of the company’s first diretor._ By the subscribers to the memorandum. This is also sometime used for the appointment of a company’s first director as an alternative to the procedure laid down in the article._ By an ordinary resolution of the members in general meeting. In public companies each director must be apointed by a separated resolution in order to avoid election of an unpopular member among other popular members._ By the board of directors in two cases.

9


+ To fill casual vacancies this may occur on resignation, disqualification, removal or death.

+ To appoint additionnal director up to a given maximum which maybe set out on the companies articles any excess being void of no effect.

Persons who cannot be appointed:_ Age limit: maximum 70 years old unless otherwise provided in the articles._ Bankruptcy_ Persons disqualified by Court orders_ Article of Association: a person may no be a company sile director and the company secretary at the same time.This means that a single member company must have two officers eventhough it may

only have one member.Upon appointment the articles may require the directors to take up a certain number of

shares as a share qualification. This share must be obtained within two months after the appointment or such sorter time as maybe fixed by the articles. The idea is that directors are to manage the company’s affaires on behalf of the other shareholder and should therefore have a stake in the company.

B) Division of powers and duties of directors.Between directors and membersHow to despacth the power ?The board’s power can subject to the provision of the Company Act 1985, condition that

you comply with be as board or as narrow as desired.The power reserved to the members of the Company by the Company Act 85 is mainly:

_ The power to alter the articles _ The power to alter share capitals_ The power to appoint auditors = commissaires = statutory auditors and remove

directors._ The power to put the company into liquidat.

What do members do if they are disatisfied with the wey company is run by directors ? Members shall:

_ Overwrite decision of the board by ordinary meeting or written resolution where the power is concurrent (i.e: granted to both directors and members which is the case, for example, for the fixing of the remuniration of the managing directors.

_ After the memorandum by special resolution to take away the company capacity to continue the activity concerned.

_ After the company articles by speacial resolution so has to cut down the director powers.

_ Refuse to re-elect directors whose actions their desapproves.

C) Duties_ Fiduciary duties of directors. It means that the director must account for any personal

profit he may make of in course of his dealing with the company’s properly._ Duties of skill and care. The director also owns a duty of care to the company not to act

negligently in managing the company’s affairs. The duties that of a “resdable” man look after his own affair, howecer, if the concerned director is an expert in a certain field the objective of duty of care is often higher.

_ Duty to empoyees:

10


The director shall act for the benefit of the company, i.e fot the benefit of shareholders but also for the benefit of employees.

_ Duty to shareholders:The director do not own in general any contradual or fiduciary to members of

their company. However, directors may become agents of the members of a particular transactions. They may also be a duty to shareholders in general to the advice if any given by directors to shareholders.

_ Duties to creditors and others outsidersAgain there is no contractual or fiduciary duty to creditors or outsiders which

mean that a director is not liable if the company brace its contract.

+ The chairman and executive directorThe chairman of the boards presides or chairman in general meeting.The chairman is usually regarded as a non-excutive director who is not employed

at a salary but is concerned with running the board and representing the company.Does the chairman have to be a director ?It’s not compulsory but table A provides that a managing director must also be a

director as mcuh as the chairman of board.Who is the secretary ?

Under section 2.8.3 of the Act every company must have a secretary and it’s reminded that a sale director may not be a secretary at the same time. It’s usual for a secretary to be appointed by the directors who fix his term of office and the conditions under which he is to hold the office. This power is however limited to contract concerning the administrative operation of the company. The secretary owns a fiducialy duty to the company which is similar to that of a director. He must in no circumstance make secret profit or take secret benefit from his office.

The company accountant.The company accountant is an officer of the company. He owns a contractual duty to the company to prepare to accounts properly.

+Transaction with third-parties.As already seen each company has a memorandum of Association in cluding an object

clause i.e. A clause stating the sope of the activity of the company. Any activity outside this statement of objective is said to be ultra vires. Common law originally provided that any decision taken ultra vires was void. The ultra vires rule has been under controlers for a long time. The difficulty arises because the company is owned by its members themselves who conduct the company’s business.

Chapter V: How does the company fonction and evolve

I/ Meetings & ResolutionsA) Shareholders meeting.

A company is compelled by law to hold certain general meetings of shareholders i.e annual meetings and in exceptionnal cases extraordinary meetings.

1/ General meetings.a) Annual general meetings.Every company must hold a general meeting in addition to any other meeting which

the company holds during that year. The company must specify the meeting as such in the notices calling it. Not more than 15 months must expire between an annual meeting and the next

11


one. Unlike in France, where not more than 12 months must expire. The meeting is a safeguard for shareholders in as much as it provides them with an opportunity to question ( to challenge) the directors on the accounts and reports which are presented to the annual meeting.

b) Extraordiray general meetings.These meetings are called when the directors converne i.e there is no annual obligation.The company secretary or other executive bodies have no power call extraordinary

meetings unless the board of directos ratifies such act. Members may also call general meetings if the reach a certain percentage of the capital.

2/ Notice of meetings.Regulations relating to notice of meetings are usually laid down in the company’s articles

which must therefore be referred to, although sec 3-6-9 of the act must not be overlooked. Sec 3-6-9 provides that the notice may no be sorter than:

_ 21 days notice in writing for AGM or meetings to pass a speacial resolution ( appointment of directors)

_ 14 days notice in writing for other meetings. Note: The above provision apply where the company do not provide for anything.

Any meeting call on a shorter notice than the one provided by Sec° 3-6-9 shall be consedered as validely called if:_ In the case of an AGM, all members entitled to attend and vote at the AGM agree._ In the case of any other meetings, it is agreed by a majority in number of the member

have a right to attend and vote at the meeting, such majority representing not less than 95% of the nominal value of the shares, or 95% of the voting rights if the company has no share capital.

3) Procedures at meetingsThe concept of “quorum” relates to the minimum number of persons suitably qualified

who must be present at a meeting in other to validely pass the different resolutions. ( Quorum ¼ 25% des actions Majorité = 50 + 1 51% des personnes)Les deux conditions doivent être respectéesIf the article do not laid down, the quorum required for the general meeting, Sec° 3-7-0

provide that two members personaly present shall be a quorum for both public and private companies. The articles may provide than presence in proxy is enough. The effect of absence of quorum is that the meeting is null and void. The articles are to be looked up in order to know whether the quorum is required through out the meeting or only at the beginning. One should however consider that the quarum is only required at the beginning of the meeting.

4/ VotingVoting is usually made by show of hands, only unless the article provides the contrarely.

Proxies are never taken into account in votes by show of hands. It’s usually on contrevercial issues to hash for a poll which take into account all proxies and enables voters to vote according to their number of shares. * Note: The articles should never exclude the night to demand a poll at a general meeting on any question other than the election of the chairman or the adjournment of the meeting.

5/ MinutsUnder Sect 3-8-2 of 95 Act, every company must keep minuts of all procedings of

general and directors meeting and enter the minut book.B) Board meetings.The power of the directors must be exercised collectively and not individualy. A meeting

of the board can be called by any director, unless the article otherwise provide. Notice of a board meeting must be given to all directors and the time must be reasonable depending on the circumstance. The effect of failure to give proper notice is uncertain, ut it is a better view to

12


consider that it does not render resolutions passed at the meeting void. The quarum is normaly fixed by the articles and table. A provide that the minimum quarum is two, unless the company has only one director in which case the quarum is one. As regard personal interest; table A provides as follow

A director shall not vote at a meeting of directors on any resolution concerning a matter in which he has, directly or indirectly, an interest or duty which is material and which may conflict with the interest of the company. Is interest or duty, if they fall within one or several of the following cases may be treated as exception.

II/ Capital in general

13


ANSWER

I Definition1/ Definition of share

Ordinary shares that do not carry voting rights. They tend to be cheaper than ordinary shares and few still exist.

In finance a share is an unit of account for various financial instruments including stocks, mutual funds, limited partnerships, and REIT's. In British English, the usage of the word share alone to refer solely to stocks is so common that it almost replaces the word stock itself.

2/ Definition of a corporationThe most common form of business organization, and one which is chartered by a state

and given many legal rights as an entity separate from its owners. This form of business is characterized by the limited liability of its owners, the issuance of shares of easily transferable stock, and existence as a going concern . The process of becoming a corporation, call incorporation, gives the company separate legal standing from its owners and protects those owners from being personally liable in the event that the company is sued (a condition known as limited liability). Incorporation also provides companies with a more flexible way to manage their ownership structure.3/ Definition of a debenture

A bond issued by a company, paying a fixed rate of interest and usually secured on an asset.

II What are the main differences between public and private companies ??Private Companies - No definition other than default - At least only one member - No minimum Capital - End with “ltd”Shares maybe not traded on a public market

Public Companies - Defined by statutes - At least 2 members - Minimum capital £ 50 000 - “plc” public limited company - Shares maybe traded on a public market

III What distinguishes the memorandum of association from the articles of association ?? What are the common legal effects of the memorandum and the articles of association ??

The legal effect of memorandum and article of Association.The memorandum and articles bind the capital and its members by contract. The results

of this statutory contract are as follow: _ The memorandum and articles constitute a contract between the company and each

member. Thus, each member in his capacity is bound to the company by the provisions in the article.

_ The memorandum and the article are also by reason of case law a contract between members themselves. Thus, one member can sue another if the other fails to observe a provision in the memorandum or articles. There is no need to call upon the company to sue.The right given by the memorandum & articles to a member in capacity other than that of member (lawyer and director) can be enforced against the company. The memorandum and articles are not a contract with outsiders.

14

http://www.advfn.com/money-words_term_2189_going_concern.html

http://www.advfn.com/money-words_term_4725_stock.html

http://www.advfn.com/money-words_term_2816_limited_liability.html


IV Name three of the five duties of directors_ Fiduciary duties of directors: It means that the director must account for any personal

profit he may make of in course of his dealing with the company’s properly._ Duties of skill and care: The director also owns a duty of care to the company not to act

negligently in managing the company’s affairs. The duty that of a “resdable” man looks after his own affair, however, if the concerned director is an expert in a certain field the objective of duty of care is often higher.

_ Duty to employees: The director shall act for the benefit of the company, i.e. for the benefit of shareholders but also for the benefit of employees.

_ Duty to shareholders: The director does not own in general any contractual or fiduciary to members of their company. However, directors may become agents of the members of particular transactions. They may also be a duty to shareholders in general to the advice if any given by directors to shareholders.

_ Duties to creditors and others outsiders: Again there is no contractual or fiduciary duty to creditors or outsiders which mean that a director is not liable if the company brace its contract.

V Write all you know about an ultra vires decisionAs already seen each company has a memorandum of Association including an object

clause i.e. A clause stating the sope of the activity of the company. Any activity outside this statement of objective is said to be ultra vires. Common law originally provided that any decision taken ultra vires was void. The ultra vires rule has been under controllers for a long time. The difficulty arises because the company is owned by its members themselves who conduct the company’s business

VI What does the express “lifting the corporate veil” mean ??The notion that a company is recognized as a person separate from its members is called

the veil of incorporation. This will particularly apply in as much as the company and not its members are liable in contract.

However in some circumstances both case law and statutory law have lifted the veil so as to reflect the reality of whom effectively controls and owns the company.

Lifting the veil leads to hold all or some of the members of the company liable despite the fact that the contract has been entered into by the company itself.

Example of how the veil has been lifted+ Lift of the veil by case law. The court has an occasion lifted the veil in appreciation to

allow a group of companies to be regarded as one since in reality they are not independent either in human or in commercial terms.

Example of veil lifted by status+ Fraudulent and wrong trading+ Reduction of the number of members in a public company

15

droit des affaires en anglais - freemanhhiep.free.fr/cours/droit des affaires en anglais.doc ·...

Documents