Solicitor Southampton

Can board decisions be made without calling a meeting ?

Yes if the company’s articles of association allow for it subject to every director who would be entitled to attend and vote at a meeting agrees with the decision.  Usually, this will mean the directors will sign a written resolution.

Companies should have a policy regarding how written resolutions are circulated and how directors can show they are in agreement.  For example, an email could be sufficient.

What are the rights of shareholders ?

Company law guarantees certain basic minimum rights, including the rights to attend general meetings; vote at general meetings; receive dividends; receive a proportion of anything left over if the company is wound up; receive important information, including annual report and accounts; inspect the registers of the company, including the register of directors, and see copies of the company’s articles of association and memorandum.

Can shareholders sell their shares ?

It depends on the articles of association.  Usually there will be a provision stating that the directors have the power to refuse to register the transfer of shares.

There are other types of restrictions as well.  For example, the shareholders might have to offer the shares to existing shareholders or sell them back to the company.  In all likelihood the articles of association will include provisions which dictate the calculation of the price should either of these two things happen.

It could also be the case that the articles allow shareholders to transfer their shares to other members of their family.

I am thinking of buying a company.  Should I just buy the shares or the assets ?

There are benefits and drawbacks of either approach.  You should carefully taken into account the level of tax burden and the amount of risk you are willing to take on. If, for example, you plan to buy the assets and the assets include land and buildings, you might have to pay significant amounts in stamp duty. If you buy the shares, you will also take on the liabilities of the company as well, making thorough due diligence an absolute necessity.

You may have to take into account TUPE regulations, which protect employees in the event a company is transferred.  This can apply to both the acquisition of shares and assets.

When is a company considered insolvent ?

This is not an easy question to answer.  However, the law states that a company is insolvent when it can no longer afford to pay its debts or when the company’s total liabilities are greater than its assets. It is important to keep accurate recordings in order to avoid trading insolvently.

How do the directors duties change when a company becomes insolvent ?

If a company becomes insolvent, the directors will be under a duty to protect the interests of the creditors rather than the shareholders as is the case during the normal course of trading.  An insolvent company must be run with the intention of getting the best returns for the creditors.