Who Actually Conducts the Business of the Corporation?

Although a corporation is a person by the language of the law, it must act through human agents elected by the shareholders, appointed by the directors, or hired by the officers. No shareholder, not even one who owns most or all the stock, can act for the corporation or bind it by contract merely because of such ownership. Shareholders indirectly control the affairs of a corporation by electing the directors. They also have the power to vote on major issues such as changing the corporate articles, merging with another company, or selling out in a firm take over. Antitrust laws do not forbid acquisitions or mergers of dissimilar companies. Large size in itself is not illegal.

The directors, elected by the shareholders, form a corporation's board of directors. The directors oversee the corporation and formulate general policies. They must not act fraudulently or illegally.

The board of directors may enter into any contract to promote the business for which the corporation was formed. While the board's powers are very broad, they may be limited by statute, by the articles of incorporation, or by its own corporate rules.

The number of directors varies among corporations. Most states allow the shareholders to determine the number. Some states require at least three. Other states require only one director, who can also be the sole officer and sole shareholder. This gives the corporation the attributes of a sole proprietorship plus the advantage of limited liability for its owner. Statutes sometimes require that directors be shareholders. A few states require that directors be adults. Some states require that the president of the company serve as a director, while in many corporations all the directors are officers. This is called an inside board, and is not considered ideal because the directors naturally tend to approve their conduct as officers. Better results are sometimes obtained from an outside board which has no officers in its membership, and which scrutinizes corporate performance more objectively and critically. Probably the best form is a mixed board, with some officers to provide information and detailed understanding, and some outsiders “to ask the embarrassing questions”.

TASK 2

Read the text “W hat is a Business Company? ”, give your appreciation of the material.

Describe in 150 words what kind of a business company you’d like to organize. Argue your choice. Discuss your point of view with your classmates.

W hat is a Business Company?

The company is a body corporate, which regulation is governed by one of the various Companies Acts, reduced effectively to the Companies Acts I948 and 1967. In popular usage it is a company with a share capital. Companies may be created by royal charter, by a specific act of Parliament, or may be registered with the Registrar of Companies Acts, particularly the Act of 1948.

In the case of companies dealt with under the 1948 Act, the liability of members may be limited by shares, by guarantees, or may be unlimited. The most common type of existed company in the UK is a company limited by shares. The principle characteristics of a company limited by shares are that each is a separate 'legal persona' ( i.e. a separate person) and that the liability of the company is limited to the nominal value of the shares.

Companies may also be public or private.

About 97 per cent of the limited companies registered in Great Britain are private companies. A private company is one which restricts the right to transfer its shares, limits its members to fifty (but has a minimum of two), and cannot invite the public subscribe for shares. It has certain legal privileges, but these are not of great consequence and the tendency today is towards removing them.

All companies registered as companies under the Companies Act 1948 are public companies, unless they satisfy the conditions necessary to constitute them.

A company may have any name provided that the board of trade does not think it undesirable. The last word must be 'Limited' except in the case of certain non-profit-making companies formed to promote the arts, science, etc. The name must be fixed or painted outside every office or place of business and must be conspicuous and easily legible. It must also appear on all business letters, notices, cheques, advertisements, bills, etc. If the word 'Limited' is omitted the consequences could be serious. The Registration of Business Names Act 1916 applies to any company carrying on business under a name not its corporate name. Where the word 'Limited' does not appear, the organization is not a company in the legal sense. The names of directors must also appear on catalogues, circulars, etc.

Undesirable names are those too much like the names of other companies. At one time words like 'royal' and 'imperial' were prohibited. They may still be disallowed by the Board of Trade.

The objects of a company must be stated in its memorandum of association. Anything inconsistent with these objects would be ultra vires. For this reason the powers or objects of the company tend to be stated in very broad terms.

If the main object of the company disappears, the company may be wound up. Objects must not be illegal. Objects or powers may be changed by altering the memorandum by special resolution. This alteration must enable the company to achieve its objects more effectively, to carry on some other business that can be conveniently combined with its own, to restrict or abandon some of its objects, to sell the business, or to amalgamate with another company. Application to the court may be made by holders of at least 15 per cent of issued share capital, or debentures, or any class of these. The application must be made within twenty-one days of the resolution. The court may confirm or cancel the alteration or may order the interests of the objectors to be purchased. Whatever the alteration, the court can do nothing if application is not made within the specified time. No alteration can be made which increases the liability of any member

TASK 3

Read the text “How to Found a Business in Great Britain ”, give your appreciation of the material.

Describe in 200 words what do you know about the ways of business foundation in Ukraine. You may describe the experience of your parents, friends, relatives.

How to Found a Business in Great Britain

Registration of a company in the UK is much easier than in Ukraine as there are fewer steps to take and fewer hurdles to overcome. The whole process can be completed simply by mail. In fact, there is just one necessary step before launching a business — to mail required documents to the Companies House, a non-profit government agency. This agency has three main functions:

• the incorporation, re-registration and striking-off of companies;

• the registration of documents that must be filed under company, insolvency and other related legislation;

—the distribution of information about a company to the public.

The newly established company then needs to register with the tax commission, which is also easy and described below.

To register a company one should submit the following documents to the registrar of companies — the main official of the Companies House:

• a memorandum of association;

• articles of association;

• form 10;

• form 12.

Below is a description of these documents.

Memorandum of association contains a company's name, address and objectives (for example, "to carry on business as a general commercial company"). Other clauses to be included in the memorandum vary depending on the type of the company being incorporated. A company's memorandum delivered to the registrar must be signed by each subscriber in the presence of a witness.

Articles of association specify the rules for a company's internal affairs. The Companies House provides model articles for a company's use.

Form 10 provides personal details of the chief executive officer(s), his or her secretary and the address of the company being registered. In addition to their names and addresses, the company's officers must give their birthdates, occupation and details of other management positions they have held within the last five years. Each officer must sign and date the form.

Form 12 is a statutory declaration of compliance with all the legal requirements relating to the incorporation of a company. It must be signed by the solicitor who is engaged in the company's registration, or by one of the persons named as an officer or company secretary in Form 10.

Every company must have formally appointed company officers. A private company must have at least one officer and one secretary.

A public company must have at least two officers and one secretary.

There are some restrictions on the choice of the company name. Before submitting the company formation documents one should check with the Companies House to ensure whether the name is acceptable. Briefly, the restrictions state that names must be original; the use of certain words is restricted; names likely to cause offence are not permitted. Also, if the chosen name is too similar to another name, an objection can be made within twelve months following the incorporation of the company and the company could be directed by the Secretary of State to change its name. The name of a public company must end with the words "public limited company." In case of a private company limited by shares or by guarantee, the name must end with the word "limited."

The registration documents are usually submitted to the Companies House by mail. It takes the Companies House five business days to register a company, and registration costs J20. Urgent (within one day) registration costs J80. After the registration of a company's memorandum, the registrar of companies gives a certificate proving that the company is incorporated and, in case of a limited company, that it is limited. The certificate may be signed by the registrar or authenticated by his official seal.

Besides registration with the Companies House, a newly established company must be registered with the Inland Revenue as a taxpayer of the corporation tax. (The Inland Revenue is a government agency which is responsible for the administration of income tax, capital gains tax, corporation tax, petroleum revenue tax, inheritance tax, stamp duty and, as of 1999, National Insurance Contributions (NIC)).

This is done by calling the local Inland Revenue office to inform that company X exists and it is liable to taxation. This must be done within twelve months from the end of company X's accounting period; otherwise the company will be subject to a penalty. The Inland Revenue then sends company X form CT41G to fill out and return.

I n most cases a company should also register as a value-added tax payer. It must register if:

• at the end of any month the total value of the taxable supplies it has made within the last twelve months exceeds J52.000; or

• at any time the expected value of its taxable supplies within the next thirty days will exceed J52.000.

To register for VAT, form VAT 1 is to be completed and sent to Her Majesty Customs and Excise (Her Majesty Customs and Excise is responsible for collection of VAT and customs and excise duties) within thirty days of either of the above. A firm with a taxable turnover below the above mentioned threshold can apply for voluntary registration if it finds this economically beneficial.