Dealing With The Formalities

Like many things in life there is a certain amount of bureaucracy to be dealt with in starting a company. This chapter looks at some of the procedures to be gone through in order to get your company up and running. They include:

Understanding The Company’s Articles Of Association

Mention has been made in the previous chapters of the company’s Articles of Association. It would be as well at this point to explain what these are. The articles are the detailed rules that determine the internal management of the company.

They will normally show amongst other things:

which clauses of the Companies Act will not apply to the company
details of how shares are allotted, issued and repurchased
how share certificates are issued
how shares are transferred and how the price will be arrived at
what general meetings are required and for what purpose
how resolutions and decisions at meetings are to be effected
the rules governing directors and the secretary
the limits of the borrowing powers of directors
the rules for disqualifying directors from holding office
the extent of indemnity for officials in executing their duties on behalf of the company.

If you do not decide on these for yourself then the standard rules set out in the Companies Act will apply.

Appointing Your Directors And Secretary

The Directors

The law has given your company a personality but it is really fictitious. It cannot do anything on its own. It is, therefore, essential that it authorises someone to conduct its business for it. Those people authorised are called directors.

Officially directors are appointed to manage the affairs of a company in accordance with its Articles of Association and the law generally. In addition to this a director has responsibilities and these are outlined in Chapter 5.

Sometimes directors are appointed in the Articles of Association but these appointments are actually invalid.

Note: A director is not officially appointed until a Form10 is submitted to the Registrar of Companies showing details of name, address, date of birth, nationality, occupation and details of any other directorships held (see Figure 2).

Most modern forms of Articles of Association allow any person to be a director. That is, they do not preclude anyone who is barred from being a director by the regulations set out in Table A in the Companies (Tables A to F) Regulations 1985. For example persons over 70 years of age are precluded from being appointed under the regulations in Table A.

These regulations are put in place by the Companies Act to apply if there is no clause in the company’s own articles to overrule them.

Directors will have an equal say in the running of the affairs of the company irrespective of the number of shares they may hold, if they hold any at all. It is not compulsory. Also a director may contract with a supplier of goods or services on behalf of the company or may enter into agreements on behalf of the company. It is, therefore, important to choose fellow directors wisely. They could cost the company a great deal of money.

Case Study: Dean Works From Home

Dean has decided that his premises, which are mainly for holding his stock, are not suitable as an office. He therefore agreed with his parents to use their home as his office and registered his home address as the official Registered Office of the company. He completed Form 10 with himself as one director, his father as the other and his mother as company