ABIBLO LAW - COMPANY (8)
Companies limited by guarantee.
Companies carry on a not for profit activity is considered appropriate to fall under company limited by guarantee rather than company limited by shares ( which is suitable for profit making company).
Companies Act 2006 not allowed a company to be created where the members are free from any liability but besides limiting the contribution to the amount payable by shares, the companies Act allowed the companies to agree in the event of liquidation they will if required subscribed an agreed amount.
The limited guarantee company is useful for charitable and quasi charitable companies such as college or schools.
Limited liability is less risky and more convenient than a trust.
Division of the undertaking into shares is not important since no sharing of profit contemplated.
ABIBLO LAW - COMPANY (7)
Abiblo Law - Company (7)
Not for profit companies main aim is focusing more on charitable activities under the legal sense ( not for profit companies are subjected to the companies legislation and charitable legislation) or directing towards public interest and in another scenario promoting non profitable private interest. A common example is the tenants to a block of flats who funded the company through service charges to see and to care as well as maintaining the common parts of the block simply to the level so that the company can discharge it obligation. Therefore the company unable to meet such as significant profit.
ABIBLO LAW - COMPANY (6)
Abiblo Law - Company (6)
The statement that company law is a law relating to the association formed with intention to carry business for gain is inaccurate.
There is no requirement provided by the Companies Act 2006 that the registered company should be limited to such purpose.
Company may not be for profit in a way where there are provisions in the constitution of the company which inhibit the profits distribution in the form of dividend or in winding up to the member of the company.
In certain aspect, it may not being run for profit, although from time to time it may do so and distributes the profit to the members.
ABIBLO LAW - COMPANY (5)
The Limited Liability Partnership Act 2000 is not to be confused with Limited Partnership Act 1907.
The limited Partnership is a true partnership governed by the common law of partnership and the Partnership Act 1890.
These special features of Limited Partnership include some but not all of the partners have limited liability and are prohibited from managing the business. They also unable to bind the partnership as against the outsider.
Certain information about limited partnership also need to be filed with the Registrar of the Companies.
Limited Partnership has to indicate in their name from 1 October 2009 the title LP or Limited Partnership. The existence of sleeping partner was justified under the 1907 Act who turned out to be someone who contributing the assets to the partnership and wishes to become a member of the partnership in order to protect his / her investment while waiting for the appropriate return of his / her investment with no tendency to be involved in the running of the business.
In 2015, there are 33000 limited Partnership.
ABIBLO LAW - COMPANY (4)
Abiblo Law - Company (4)
If a small number of persons wanted to start a business and each of them wanted to run it, the distinction between directors and shareholders in Company law may become a nuisance as they could be the same person.
Another issue focuses on the internal machinery based on Company Law which may appear troublesome in cases of small business.
As a result, a hybrid legal vehicle will be formed based on the Limited Liability Partnership Act 2000.
Hybrid legal vehicle consists of the combination of the company and the partnership. Although a hybrid , limited liability partnership is closer to the characteristic of the company than to partnership.
Limited liability partnership which is popular in terms of professional business conduct will maintain the separate corporate personality and limited liability nature.
The limited liability partnership is governed by the principle of Company Law rather than partnership law except in two circumstances :
-the taxation rules where the members are taxed as if they were partners.
-the abandon of the separation between the members and the directors in term of internal decision making. Members are partners who have the same freedom as in partnership when it comes to the internal decision making process.
ABIBLO LAW - COMPANY (3)
Abiblo Law - Company (3)
The mid victorian legislation was conducted in such ideas where the differences between companies and partnership is based on the fact that in partnership it is useful to conduct small business / with small number of people while company is considered for large business.
The number of partner in partnership capped by statute.
Incorporation was compulsory for larger number of people associate for business purpose.
s716 (1) Companies Act 1985 is re enacting a provision introduced by the Joint Stock Companies Act 1844 ( which set the limits at 25 or more ) provided that an association of 20 or more person formed for carrying on a business for gain must formed a company.
Limited Liability Act 1855 indicated that the companies will need at least 25 members in the operation of limited liability companies.
The Joint Stock Companies Act 1856 reduced the number to 7 for companies.
The decision of House of Lord at the end of the 19th century in Salomon v Salomon allowed incorporation with a single member in the company while the other six are nominees for the seventh.
The decision preceded the adoption of EC Directive 89 / 667 for nearly a century which requires a private company to be formed with single member. This extend to Public Companies.
As for maximum limit of partnership, this was also eliminated over the past 2 decades.
The Companies Act contain no similarity as in s716 Companies Act 1985.
The eventual collapse of the Victorian segregation of two business form mean that they are equally adapted to different size of the business.
Where a large and fluctuating number of members involved, the company appears to be at advantage in term of organisational form.
This occurs due to the fact that the company consists of two distinct components which include management of the company which is vested on the board of directors and members of the company ( shareholders ).
ABIBLO LAW - COMPANY (2)
Abiblo Law - Company (2)
English Law considers 2 types of organisations in the form of companies or partnership to those who wish to form an association, in order to carry on business.
Company will focus on company law.
Partnership will focus on partnership law which is codified on Partnership Act 1890. Focus on the law of agency. Each partners in a partnership became agents to one another.
This will lead to the framework of an association of a small body of person having confidence and trust in each other.
Company will totally focus on complicated form of association where there is large fluctuating membership with more elaborate organisation which will confer corporate personality.
This will constitute a distinct legal person subject to legal rights and legal duties separated from its member.
This company will be incorporated under general Act of Parliament. ( Companies Act 2006 )
ABIBLO LAW - COMPANY (1)
Abiblo Law - Company (1)
The word company has no strict legal meaning.
Many features of company law focus on the companies created by registration under Companies Act 2006.
There are 3 million companies in the United kingdom formed / registered under the Companies Act 2006.
What is a company ?
It is an association of a people of common objectives.
The reasons may be various ( from marriage to protection against elements as complicated as the objects of political party).
However, commonly company is associated with economic purpose to carry a business for gain.
However, company may not always focus on business association only due to the fact that -
-companies are not the only legal vehicles people used in order to perform business activity.
-companies incorporated under Companies Act may be useful for carrying not for profit business.
Learn the issue of law regulating the operation of the company.