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Company Law Basics
Very Basic

A company is a separate legal entity, over and above its members. It allows people to trade without accepting personal (financial) responsibility for their actions. It is made possible by statute, and so exists, in all its forms, and in every way, only as defined by company law.

The word 'Ltd' (short for 'limited liability') is a warning. 'Plc' means public limited company'. It shouts out that, if the company gets something wrong, and you want your money back, you can get what the company has, but no more. You cannot go beyond the company's assets, and feast on those of the directors. You are dealing with an entity which has, precisely, limited liability. It should be noted however that, as time has gone on, the possibilities of making directors personally responsible for some company defaults have grown.

A company has two main documents containing the rules which govern it.

  1. The Memorandum of Association records the agreement which brought the promoters of the company together. Its principal significance is that it contains an 'objects clause', a clause which states what the company can do. If the company strays outside the range of that clause, then the associated actions are unlawful - the are deemed not to be the acts of the company itself, but those of the individuals who instigate them. You will find therefore that such clause tend to be drawn very widely. They are often so wide as to have lost any genuine meaning.
  2. The 'Articles of Association' sets out the company's in-house rules. It says how major decisions are to be made, what officers the company shall have and how they are elected. This is more complicated, and of greater variety than the Memorandum of Association, but is usually of greater interest to the members.

Much information about the affairs of a company must be made available. Some is available from Companies House, and some from the Company's registered office. Some information is open to everybody, and some to members only.

Company law is presently under review. It is not at all clear now what this review will lead to. A minimum should be

Important: Please note that our law-bytes are retained for archival purposes only. The law changes, and these notes are often, now, out of date. You must take direct advice on your own personal situation and the law as it currently stands.
All information on this site is in general and summary form only. The content of any page on this site may be out of date and or incomplete, and you should not not rely directly upon it. Take direct professional legal advice which reflects your own particular situation.
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Copyright and Database Rights: David Swarbrick 2012
18 October 2013 134 18 October 2013