Advantages and Disadvantages of Incorporation : Assignment
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Added on 2020-07-23
Advantages and Disadvantages of Incorporation : Assignment
Added on 2020-07-23
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COMPANY LAW
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 Concept of corporate personality and lifting the veil.......................................................11.2 Analyse the advantages and disadvantages of incorporation...........................................21.3 Law on promoters and pre-incorporation contracts..........................................................21.4 Requirements for registration and commencement of trading.........................................3TASK 2............................................................................................................................................42.1 Requirements for the memorandum to a given scenario..................................................42.2 Articles of association in a given scenario.......................................................................52.3 Doctrine of ultra vires and its effect.................................................................................52.4 Contents of a prospectus and listing particulars...............................................................6TASK 3............................................................................................................................................73.1 Explanation of the different types of capital....................................................................73.2 Law on issue of shares, class rights and dividends..........................................................83.3 Law applicable to capital maintenance and insider dealing.............................................8TASK 4............................................................................................................................................94.1 Duties and powers of directors.........................................................................................94.2 Rules on the different types of meetings........................................................................104.3 Discussion on the law on minority protection................................................................114.4 Rights of shareholders and debenture holders................................................................124.5 Discussion rights on liquidation.....................................................................................12CONCLUSION..............................................................................................................................13REFERENCES..............................................................................................................................14
INTRODUCTIONLaw is a system in which various rules and regulations implied by governmentinstitutions to regulate and ensure fair behaviour. It helps to implement code of conduct insociety so that no right is violated. Company law is a major part of legal instrument whichincludes rules to regulate how to run a firm. Organization has its own particular identity apartfrom its employees. There are many situations when, organisation has to reveal its private data infront of public which is called lifting the veil (Braun, Eidenmüller and Hornuf, 2013).Establishment of firm as a legal entity has positive as well as negative side. On one hand, itprotects people in case of sue, on the other hand, company image can be harmed by anyindividual. Before establishing organisation, promoters have to obey some rules so that no unfairact is done. While incorporation, various compulsory requirements must be fulfilled to register thefirm. Memorandum and association articles are also important part of company law whichcontains documents of particular matter. Doctrine of ultra vires is a situation when efforts aremade beyond capacity of organisation and it affects whole business (Davies, 2010). There aredifferent capital which is used in corporate industry. It can be gained through issue of dividends,class rights and shares to public. In the following report, different applicable laws will bediscussed which are useful to maintain capital, and insider dealing in company.TASK 11.1 Concept of corporate personality and lifting the veilCorporation is a type entity which has its own rights and responsibility according to law.It acts like a legal person who has right to sue & to be sued, hire employees, pay taxes and enterinto contract. Another classification of enterprise is registered company. It is a legally confirmedby law according to records in legal documents. A separate legal personality of a firm isindependent existence of it and makes it new entity which is different from its employees andshareholders. Separate identity benefits employees as well as the firm itself in many ways. Lifting the veil- It is the situation when disregard of separate legal entity from itsemployee or owner in case of any fraudulent act. For example, if any employee found guilty infont of law. Then company must reveal all confidential data related to matter (Hanrahan, Ramsayand Stapledon, 2013). Case study of Prest v Petrodel Resources Ltd [2013] UKSC 34, where Mrs1
Prest claimed that Mr pest had not revealed all his assets to court which he owned. Afterhearings, judgement was held that Mr. Prest had possession of properties not of companywhether he was entitled of them or not.1.2 Analyse the advantages and disadvantages of incorporationIncorporation is process in which a corporate company or entity is formed and they havetheir particular rights and obligations separate to owners and employees. Most of incorporationare identified as Inc. and Ltd in company’s name. Some advantages and disadvantages of it asfollowings.AdvantagesCompany can own property without its shareholders and owners.It has set structure which enables business to run more efficiently and effectively.There are well defined roles and responsibilities of board of director to operate firm inbetter way.It has right to act and bear the consequences without inference of another legal person(Kershaw, 2012).A legal entity has better investors as it has good image and attracts more capital fromother entities in market.It has right to pay taxes by its own.Separate legal entity has perpetual existence.Liability is limited on the part of company.DisadvantagesCost of incorporation can be higher for owners.Operating and tax cost can be difficult for starting time.All rules and regulations have to be obeyed by legal entity to avoid any breach.More business regulations increase huge amount of paper work which can produce extracost to company. Thus, there are different positive and negative side of incorporationaccording to company law.1.3 Law on promoters and pre-incorporation contractsPromoters are persons who are involved in setting up the business and enter into contracton behalf of firm before get it registered in companies act. According to law, promoters have2
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