Company Law Essay Help : Formation and Form of UK Companies
Law Cases referred to in this section:
Re Stanley, Tennant v Stanley [1906] 1 Ch 131
Sadler v Whiteman [1910] 1 KB 868
Newborne v Sensolid (GB) Ltd [1954] 1 QB 45
R v P & O Ferries (Dover) Ltd (1990) 93 Cr App R 72
Richmond on Thames Borough Council v Pinn & Wheeler [1989] RTR 354
What is a company?
The word 'company' in law is used to refer to an association of a number of individuals formed for some common purpose. Its meaning comes with two implications:
-
that the members of the association are so numerous that it cannot aptly be described as a firm or partnership; and
-
that a member may transfer his interest in the association without the consent of all the other members (Re Stanley, Tennant v Stanley [1906] 1 Ch 131 at 134 per Buckley J; however, note that if the company is a private company limited by shares, there are often restrictions on the transfer of the member's shares in the company).
In English law, use of the word 'company' is usually associated with companies that have been incorporated by registration under the Companies Act 1985 and which are governed by the provisions of that Act and subsequent legislation, although it may include companies formed and registered under earlier enactments.
Types of Businesses
There are many other types of corporate bodies who engage in trading and similar business activities to a company, but cannot be described as companies. These include:
-
Organisations incorporated as a result of provisions in an Act of Parliament which permits incorporation to be effected by any body of persons which fulfils specified conditions (such as building societies and industrial and provident societies); and
-
Organisations known as public corporations created to fulfil a special purpose, by Royal Charter or more commonly, by an Act of Parliament that defines the objects, constitution and powers of the corporation (such as the BBC, OFTEL and the Coal Authority - the Coal Authority is, for example, created by the Coal Industry Act 1994 s 1, Sch 1).
Companies can be incorporated or unincorporated. Incorporated companies are recognised by the law as having a personality which is distinct from the separate personalities of the members of the company in question (Companies Act 1985 s 13(3), (4)). Unincorporated companies on the other hand have no separate existence and are not an entity that can be distinguished from their members in law.
Company Form
Other than a registered company under the Companies Act 1985, a business may take an alternative structure for the purpose of trading, perhaps because the registered company form is unsuitable for that type of business. For example, they may choose to be:
-
a sole trader - they may carry on their business as an individual without being in partnership with any other person. A sole trader can form a private company limited by shares or by guarantee but they must accept the responsibilities that come with registration under the Companies Act 1985, such as the requirement that accounts are delivered to the Registrar of Companies annually;
-
a partnership or firm - a 'partnership' refers to a relationship that exists between persons who are carrying on a business in common with a view to making profit (Partnership Act 1890 s 1(1)). A 'firm' refers to the persons who constitute the partners (Partnership Act 1890 s 4(1)). A partnership or firm is not recognised as a 'person' or legal entity in law (Sadler v Whiteman [1910] 1 KB 868 at 889, CA, per Farwell J) and thus the partnership cannot sue or be sued (but the partners can);
-
a limited partnership - this is a partnership formed under the Limited Partnerships Act 1907 and allows a limited partner's liability to the creditors of the firm to be strictly limited;
-
a limited liability partnership - this refers to a body corporate, with legal personality separate from that of its members, governed by the Limited Liability Partnerships Act 2000, the Limited Liability Partnerships Regulations 2001, SI 2001/1090, and the Limited Liability Partnerships (No 2) Regulations 2002, SI 2002/913.
A company is a legal person that can sue and be sued, but it cannot enter into or be sued on contracts before it is properly incorporated - Newborne v Sensolid (GB) Ltd [1954] 1 QB 4.
Note however that a company cannot be held liable for the doing of a physical act. In Richmond on Thames Borough Council v Pinn & Wheeler [1989] RTR 354, the company was charged with a driving offence. It was held that a company could not be guilty of an offence which required for its commission the physical act of driving a lorry. This can be contrasted with R v P & O Ferries (Dover) Ltd (1990) 93 Cr App R 72 in which P & O, along with five of its managers, were indicted for manslaughter which was later overturned due to insufficient evidence that any of the managers had the necessary mens rea - mens rea could not therefore be attributed to the company. This does not mean that the court will never find the necessary mens rea.
This study area has been created by our experts to help students with Company Law Essay and Problem Questions. If you require further help with your question, why not order a fully customised model answer on which to base your assignment? Use our online order form to submit your request and you could have a complete model answer written to your specification within 24 hours.
