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Lecture

Forming a company

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Department
Accounting
Course
ACC 414
Professor
Franklyn Prescod
Semester
Fall

Description
Incorporation - forming a company Author: Jim Riley Last updated: Wednesday 24 October, 2012 Forming a company Who can form a company? The Companies Act generally allows one or more persons to form a company for any lawful purpose by subscribing to its memorandum of association. However, a public company or an unlimited company must have at least two subscribers. What needs to be done? Ready-made companies are available from company formation agents whose names and addresses appear in directories such as Yellow Pages. These are essentially "shell companies" where all the relevant documentation has been completed and the company assigned a generic name (e.g. "Newco 123345"). Company formation agents charge a fee (around £200 per company) for providing this service. Individuals can choose to complete the process themselves by using company formation documents provided by Companies House. These documents are summarised below: Memorandum of Association The Memorandum of Association is one of two official documents that describe the company's constitution (the other being the Articles of Association). The Memorandum of Association sets out the details of a company's existence. It must be signed by the subscribers and contain the following information: - The company's name: the last word of the name must be "limited" or "Ltd" - Address of the Registered Office - this must be England, Wales or Scotland and means that the company operates under British law and pays British tax. - The objects for which the company is formed (the "objects clause") - this sets out the objects for which the company is incorporated (usually a very general statement such as "to carry on its trade and business"). - A statement that the liability of the company members is limited. This means that if the company is insolvent, the shareholders are liable to creditors for only the amount of their shares - The amount of the authorised shares capital and how it is divided. The amount of share capital subscribed in cash or assets is called the "issued share capital" - The names of the subscribers Articles of Association This document governs the running of the company. For example, it describes the voting rights of shareholders , the conduct of shareholder and directors' meetings, and the other powers of management. The articles constitute a contract between a company and its members, but this applies only to rights of the shareholders in their capacity as members of the company. The contents of the articles include: Classes of sh
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