SGS 1 - Introduction to Client 1 • Learning outcomes: • 1) Identify key constitutional differences between public and private companies through analysis and interpretation of statutory provisions • 2) Apply knowledge of main advantages and disadvantages of the following types of business media: Partnerships, LLPs and Limited Companies Comparison of different business media: Key Feature Partnership Limited Liability Partnership Company Limited by Shares Primary governing statute • Partnership Act 1890 • Limited Liability Partnerships Act 2000 (‘LLPA’) • Limited Liability Partnership Regulations 2001 (‘the Regs’) • Companies Act 2006 • Companies Act 2006 (‘CA’) • Insolvency Act 1986 • Company Directors Disqualification Act 1986 Liability of investors • Partners have joint and several liability • Liability limited: individual members not personally liable over and above anything agreed in their LLP agreement • Liability limited: members only liable to pay any amount unpaid on their shares - s3(2) CA 2006 Legal status • Partners together constitute the partnership • Partnership has no separate legal personality • Separate legal entity • Separate legal entity lOMoARcPSD|12263423 Downloaded by Anna Maina (annamurugijoe@gmail.com) Persons who need to be involved in setting up the business • Minimum 2 persons • Minimum of 2 persons • If business carries on for over 6 months after the LLP is down to 1 member, that member becomes severally liable for debts incurred after that 6 month grace period (limited liability benefit is lost) • Minimum 1 person - s7 CA 2006 lOMoARcPSD|12263423 Downloaded by Anna Maina (annamurugijoe@gmail.com) Key Feature Partnership Limited Liability Partnership Company Limited by Shares Documents required and expenses due on or before start-up • None necessary - although highly recommended to have partnership agreement drawn up by lawyers • Incorporation document required • Registration fee • LLP does not require memorandum and articles of association - however highly recommended to draw up limited liability partnership agreement • Printing of LLP stationery • Incorporation documentation plus articles of association • Recommended that lawyers draft articles to suit particular needs of company • Registration fee • Printing of company stationery Publicity and disclosure • No disclosure required • Disclosure to Registrar of: • 1) Registered office - ss. 2(c) and (d) LLPA • 2) Accounts - Reg 3 of the Regs • 3) Details of members - s2(e) LLPA • 4) Identity and details of ‘designated members’ (i.e. members with key admin responsibilities) - s2(f) LLPA • Disclosure to Registrar of: • 1) Registered office - ss. 9 (5) and 855 CA 2006 • 2) Accounts - s441 CA 2006 • 3) Information on directors, members and capital - ss. 854-856A CA 2006 • 4) Certain resolution of the members - s29 CA 2006 • 5) Charges over the company’s assets - s859A CA 2006 • 6) Company name - s82 CA 2006 Ongoing expenses • None necessary • Audited accounts prepared annually • Annual Return filed annually • Audited accounts prepared annually • Annual return filed annually Management structure • In accordance with partnership agreement • Very few formalities - look at specific partnership agreement • Meetings of directors and shareholders held in accordance with CA 2006 and company’s articles • Model Articles (MA) = default articles for companies incorporated on/ after 1 October 2009 Methods of financing • Cannot create floating charges • Cannot issue shares • Can create floating charges • Cannot raise finance by issuing shares • Can create floating charges • Can raise finance by issuing shares lOMoARcPSD|12263423 Downloaded by Anna Maina (annamurugijoe@gmail.com) Key differences between private and public companies (NB all references are to Companies Act 2006): Issue Private Company Public Company Name • Must end with Limited or Ltd - s59(1) • Must end with Public Limited Company or Plc - s58(1) Minimum no. of shareholders • 1 - s7 • 1 - s7 Minimum no. of directors • 1 - s154(1) • 2 - s154(2) Company Secretary required • No - s270(1) • Yes - s270 Certificates required before commencement of trading • Certificate of incorporation - s15 • Certificate of incorporation - s15 • Cannot commence business until a trading certificate is issued by Registrar showing that the allotted share capital is not less than the minimum - s761 Minimum share capital to be issued • Must have at least 1 share • Minimum of £50,000 (or prescribed Euro equivalent) - s763 Can it offer shares to the public? • Prohibited - s755(1) • Permitted under CA 2006, but note that FSMA 2000 imposes significant additional restrictions Minimum amount that must be paid up on share capital • No restrictions - shares can be issued without immediate payment • 25% of the nominal value must be paid on allotment, plus the whole of any premium - s586(1) • Note that only payments in cash are permitted, except where the consideration provided has been independently valued - s593 (1)