London Car Repair Company Formation and Compliance

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BUSINESS LAW
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Table of Contents
INTRODUCTION............................................................................................................................. 3
STEPS FOR FORMATION OF THE COMPANY...................................................................................3
SHARES, THEIR NATURE, SHAREHOLDERS AND RESOLUTIONS OF THE COMPANY........................4
DUTIES AND POWERS OF THE DIRECTORS OF THE COMPANY.......................................................5
RECOMMENDATIONS AND CONCLUSION......................................................................................6
REFERENCES...................................................................................................................................6
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INTRODUCTION
Each and every business or company has to operate according to the law of the country or state
in which it operates. The Companies Act, 2006 is the act governing the activities of the
companies under the company law in the UK (Talbot, 2015). This report will be focusing on the
various steps taken for the formation of the London Car Repair Company. Also, the report aims
at assessing the roles and responsibilities of the company staff to comply with the company law
and making certain recommendations so that the company can abide by the company law of
the UK.
STEPS FOR FORMATION OF THE COMPANY
The first and foremost step of the formation of a company is to determine its type. Generally,
there are two types of companies i.e. Public companies and Private companies (McLaughlin,
2018). The London Car Repair is a private limited company which shall be registered with the
registrar of the Companies House of the UK. After this process, various investors show their
interest in investing in the company and they sign a memorandum of associations, which also
involves taking the pledge to follow the provisions of the Companies Act, 2006. Later, the
directors of the company are appointed and as London Car Repair is a private limited company,
it shall have at least 1 director which should be appointed by the company (Bawah, 2019).
However, any company which is being established for an unlawful purpose or which violated
the laws and rights of the people of that country or state, such a company cannot be registered.
It must also be kept in mind that the name of the company shall be proper and suitable and
must not be in the use of any other company (Dorresteijn et al, 2016). The main objective of
LCR Pvt. Ltd is lawful as it aims at providing car repair services to people, thus, it can be
registered by the registrar.
Furthermore, there are two very important documents which a company shall have i.e.
Memorandum of Association (MOA) and Articles of Association (AOA) (Parker, 2015). These two
documents are the basic pillar of the company. The nature and the essential content of the
Articles of association and Memorandum of the association are:
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BASIS FOR DIFFERENTIATION ARTICLES OF ASSOCIATION
(AOA)
MEMORANDUM OF
ASSOCIATION (MOA)
Meaning
This is a document containing
essential rules, policies, and
regulations which are
required to govern the
company.
This is a document containing
essential information about
the company and its
incorporation.
Nature It provides with the rules
governing the company.
It provides with the powers
and purpose of the company.
Subordinate to It is subordinate to MOA It is subordinate to the
Companies Act.
Requirement for registration Not required. Required.
Content
Contains information
regarding the directors,
general meetings,
management decisions,
dividend policies, etc.
Contains information
regarding Name, purpose
and objectives, capital,
liability, etc. of the company.
SHARES, THEIR NATURE, SHAREHOLDERS AND
RESOLUTIONS OF THE COMPANY
A share is the smallest unit of the capital of a company. Each person who holds a share is
known as its shareholder (Haldane, 2015). As the LCR is a private limited company, it can issue
preference shares, equity shares, ordinary shares, and any other shares as per its wish (Keay,
2016). Generally, ordinary shares are the normal shares of the company that does not carry any
other special rights rather than voting rights. However, preference shares are those shares
which do carry some specific preference rights concerning the preference to be given to
preference shareholders at the time of payment of dividends. These shares do not carry any
voting right with them (Gullifer and Payne, 2015).
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Shareholders of the company are the main supporters of a company who invest their money
into the company and take the responsibility and accountability of the decisions made by the
company (Moore, 2018). They provide financial support to a business to grow and develop in
the market. Along with certain powers, shareholders have some liabilities as well. However, in
the cases of debts, the liability of the shareholders gets limited (Schall, 2016). The liability of the
shareholders in the cases of company’s debts is only limited to the nominal value of their
shares, and thus, no further liability gets aroused in the case of private limited companies as
London Car Repair.
A company requires effective and efficient decisions, which would help the company to grow
and sustain in the market. The major decisions of the company are taken by passing resolutions
within the company (Roach, 2016). The Companies Act, 2006 provides for the ordinary and
special resolutions under Sections 282 and 283. The ordinary resolution is generally passed by a
majority of 50%, while in the case of the special resolution, the majority of not less than 75% is
required. Generally, the ordinary resolutions involve subjects like dividends payment;
appointment of directors and their removal, etc. The special resolutions involve subjects like
change in the name of a company; winding up of a company etc. (Wild and Weinstein, 2019).
DUTIES AND POWERS OF THE DIRECTORS OF THE
COMPANY
The directors being the main support system of the company enjoys certain powers and are
obliged to fulfill certain duties as well (Kraakman, 2017). Some of the duties of the directors of
a company are:
 To avoid the situations of conflicts in the company especially in the cases where the
director has any interest for a proposed transaction. The director should be transparent
to the staff as well as other directors as well.
 To protect, promote and ensure the success and growth of the company.
 To abide by the legal and regulatory framework provided by the government governing
the functioning of companies and to ensure that no laws are being violated (Talbot,
2015).
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 To be fair and honest while making the judgments or decisions for the company and to
protect the rights and interests of the employees as well.
The powers of directors are as follows:
 To call out meeting for making important decisions or changes which will affect the
operations of the business.
 To appoint or remove the auditors whether internal or secretarial.
 To take decisions concerning the company’s diversification (Haldane, 2015).
 To grant loans and approve financial statements.
 To issue securities and shares or approve amalgamation, if any.
RECOMMENDATIONS AND CONCLUSION
It can be recommended on the basis of the above research and analysis that the LCR should
follow and abide by the rules and regulations governing company law in the UK (Villiers, 2015).
It can also be concluded that the staff of LCR should be aware of the rules and regulations of
the company and also they must be responsible towards the company, its employees and the
environment as well.
REFERENCES
1. Talbot, L., 2015. Critical company law. Routledge.
2. McLaughlin, S., 2018. Unlocking company law. Routledge.
3. Bawah, A.S., 2019. A Comparison of the Statutory Provisions of the United Kingdom (UK)
Companies Act 2006 and Ghana's Companies Act 1963 (Act 179), to the Rule in Foss v
Harbottle. Beijing L. Rev., 10, p.153.
4. Dorresteijn, A.F., Teichmann, C., Werlauff, E., Monteiro, T. and Pocher, N., 2016.
European corporate law. Kluwer Law International BV.
5. Parker, D., 2015. The Company in the 21 st Century: Piercing the veil: reconceptualizing
the company under law. Journal of Business Systems, Governance & Ethics, 10(2).
6. Haldane, A., 2015, May. Who owns a company?. In Speech, University of Edinburgh
Corporate Finance Conference, May 22nd.
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7. Keay, A., 2016. Assessing and rethinking the statutory scheme for derivative actions
under the Companies Act 2006. Journal of Corporate Law Studies, 16(1), pp.39-68.
8. Gullifer, L. and Payne, J., 2015. Corporate finance law: principles and policy. Bloomsbury
Publishing.
9. Moore, M.T., 2018. 6. Shareholder primacy, labour and the historic ambivalence of UK
company law. Research Handbook on the History of Corporate and Company Law,
p.142.
10. Schall, A., 2016. The new law of piercing the corporate veil in the UK. European
Company and Financial Law Review, 13(4), pp.549-574.
11. Roach, L., 2016. Company Law. Oxford University Press.
12. Wild, C. and Weinstein, S., 2019. Smith and Keenan’s company law. Pearson UK.
13. Kraakman, R., 2017. The anatomy of corporate law: A comparative and functional
approach. Oxford University Press.
14.
15. Villiers, C., 2015. Sustainable companies: barriers and possibilities in UK company law.
International and Comparative Corporate Law Journal, 11(1), pp.2010-03.
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