Smith and Keenan's Company Law

641 Pages·2009·4.72 MB·English

by  Josephine Bisacre

Smith & Keenan’s
company law
Scottish Edition
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‘The user-friendly approach coupled with the level of detail covered make Smith and mt
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whether taking college or university courses in law, accountancy or business… the &
inclusion of the Scottish Supplement makes the book an ideal choice for students p
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who are studying or intend to practice in Scotland’. Brian Pillans, Glasgow Caledonian University Scottish Edition
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Smith and Keenan’s Company Law is a clear and practical guide to company law ideal for those nn
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seeking to understand how company law works in real life context. The new edition has been
revised and rewritten to fully incorporate the Companies Act 2006 and provides a suitably detailed yn
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guide for undergraduates studying the subject for the fi rst time. s
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Presented in a fresh colour design, the many headings guide your progress through the subject
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while learning features such as case summaries, chapter maps and end of chapter questions
aid understanding and allow you to test how much you have learnt as you go along.
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Retaining the straight-forward style of previous editions, the new author team have The Scottish
Edition contains
incorporated a number of important changes in the fourteenth edition:
a supplement
● Increased coverage of the constitution of the company in line with the 2006 Act which highlights
the principal Scottish
● A new chapter on The Statutory Derivative Action
differences
Edition
● More detailed discussion of Minority Shareholder Protection between
● Greater consideration of company accounts and the auditing process company law
in England and
● In-depth coverage of Insolvency law
Scotland. f W
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Charles Wild (PhD, MBA) is Head of the Law School and the Centre for International Law at the
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University of Hertfordshire. He teaches Company and Business law to LLB and non-law students, e
undertakes postgraduate research supervision and is widely published in the area. e W fourteenth edition
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Stuart Weinstein (JD, MBA) is Associate Head (Professional) of the Law School at the t in
University of Hertfordshire and is also a practicing solicitor/attorney with over twenty h
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years practice experience. He regularly teaches accountants and non-lawyers in the UK e t
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and on overseas programmes.
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Josephine Bisacre is a Solicitor and Lecturer in Business Law in the School of t
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Management and Languages, Heriot-Watt University, Edinburgh. o
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& Josephine Bisacre
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www.pearson-books.com
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Cover photograph: Kazutomo Kawai/Getty Images
CVR_WILD6158_14_SE_CVR.indd 1 21/5/09 09:51:52
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Smith and Keenan’s
COMPANY LAW

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Also available:
Smith and Keenan’s
ENGLISH LAW
Smith and Keenan’s
ADVANCED BUSINESS LAW
Keenan and Riches’
BUSINESS LAW

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Smith and Keenan’s
Fourteenth Edition
COMPANY LAW
with Scottish Supplemement
Charles Wild
PhD, MBA, LLM, PCHE, LPC, CPE, BSc (Econ)
Head of the School of Law at the University of Hertfordshire
Head of the Centre for International Law, University of Hertfordshire
Stuart Weinstein
JD, MBA, BA
Associate Head (Professional), School of Law, Univesity of Hertfordshire
Solicitor, Supreme Court of England and Wales
Attorney-at-Law, New York, California, District of Columbia
SCOTTISH SUPPLEMENT
Josephine Bisacre
LLB(Ho ns), LLM, ILTM
Solicitor
Senior Lecturer in Law,
Napier University, Edinburgh
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Pearson Education Limited
Edinburgh Gate
Harlow
Essex CM20 2JE
England
and Associated Companies throughout the world
Visit us on the World Wide Web at:
www.pearsoned.co.uk
First published under the Pitman imprint in 1966
Second edition published 1970
Third edition published 1976
Fourth edition published 1981
Fifth edition published 1983
Sixth edition published 1986
Seventh edition published 1987
Eighth edition published 1990
Ninth edition published 1993
Tenth edition published 1996
Eleventh edition published 1999
Twelfth edition published 2002
Thirteenth edition published 2005
Fourteenth edition published 2009
© Kenneth Smith and Denis Keenan 1966
© Denis Keenan and Mrs K Smith 1970, 1983
© Denis Keenan 1987, 2005
© Mary Keenan, Charles Wild and Stuart Weinstein 2009
The rights of Charles Wild and Stuart Weinstein to be identified as authors of this work have
been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
system, or transmitted in any form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without either the prior written permission of the publisher or a
licence permitting restricted copying in the United Kingdom issued by the Copyright
Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS.
All trademarks used herein are the property of their respective owners. The use of any
trademark in this text does not vest in the author or p ublisher any trademark ownership
rights in such trademarks, nor does the use of such trademarks imply any affiliation with
or endorsement of this book by such owners.
Crown Copyright material is reproduced with the permission of the Controller of HMSO
and the Queen’s Printer for Scotland.
Law Commission Reports are reproduced under the terms of the Click-Use Licence.
ISBN: 978-1-4058-4615-8
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
A catalog record for this book is available from the Library of Congress.
10 9 8 7 6 5 4 3 2 1
13 12 11 10 09
Typeset in 10/12.5pt Minion by 35
Printed by Ashford Colour Press Ltd, Gosport
The publisher’s policy is to use paper manufactured from sustainable forests.
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Brief contents
Guided tour xiv
Preface to the fourteenth edition xvii
Law report abbreviations xviii
Table of cases xix
Table of statutes xxxi
1 The nature of a company 1
2 Promotion and incorporation 44
3 The constitution of the company – the memorandum of association 66
4 The constitution of the company – the articles of association 80
5 The constitution of the company – altering the articles 94
6 The company and its contracts 104
7 The capital of a company 118
8 Capital maintenance – generally 133
9 Capital maintenance – company distributions 159
10 Company flotations 175
11 Shares – generally 188
12 Shares – transfer and transmission 205
13 Shares – payment for and insider dealing 220
14 Membership – capacity, registration, director and substantial holdings,
annual return 237
15 The statutory derivative action 250
16 The protection o f minorities 268
17 Directors and management – generally 286
18 Financial arrangements with, and fair dealing by, directors 312
19 The duties of directors 330
20 Vacation of office, disqualification and personal liability 353
21 Meetings and resolutions 380
22 Debentures and charges 415
23 Accounts and audit 441
24 Amalgamations, reconstructions and takeovers 468
25 Corporate insolvency – company rescue 489
26 Corporate insolvency – procedures other than rescue 513
27 Corporate insolvency – winding-up in context 524
Answers to test your knowledge questions 548
Index 550
Scottish Supplement 559
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Contents
Guided tour xiv
Preface to the fourteenth edition xvii
Law report abbreviations xviii
Table of cases xix
Table of statutes xxxi
1 The nature of a company 1
General features 2
Classification of corporations – the company as a corporation 3
Classification of registered companies 7
Lifting the corporate veil 22
Companies and partnerships compared 31
The ordinary and limited partnership 31
Limited liability partnerships – the Act 33
Limited liability partnerships – the regulations 34
LLP or private limited company? – a checklist 37
Reform – an ordinary partnership with legal personality 38
Advantages and disadvantages of incorporation 39
Companies and human rights 40
Essay questions 41
Test your knowledge 42
2 Promotion and incorporation 44
The promoter 45
Incorporation 54
Electronic incorporation 57
Effect of incorporation 57
Ready-made companies 58
Publicity in connection with incorporation 58
Post-incorporation procedures for re-registration 59
Essay questions 63
Test your knowledge 64
3 The constitution of the company – the memorandum
of association 66
Company names 67
The objects clause 71
Capital 75
The registered office 76
Essay questions 77
Test your knowledge 79
vii
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Contents
4 The constitution of the company – the articles of
association 80
The legal effect of the articles 82
The articles and insider/outsider rights 85
The effect of the Contracts (Rights of Third Parties) Act 1999 89
Shareholders’ agreements 90
Essay questions 92
Test your knowledge 93
5 The constitution of the company – altering the articles 94
Breaches of contract arising out of alteration of the articles 100
Alteration of the articles by the court 102
Essay questions 103
6 The company and its contracts 104
Public companies and the s 761 certificate 105
Directors and others as agents 106
Essay questions 115
Test your knowledge 116
7 The capital of a company 118
Ordinary shares 121
Preference shares 121
Variation and abrogation of class rights 125
Alteration of share capital 127
Redeemable shares 128
Essay questions 131
Test your knowledge 131
8 Capital maintenance – generally 133

Reduction of capital 134
Acquisition of own shares – generally 139
Purchase of own shares 141
Financial assistance for the purchase of shares 149
Essay questions 156
Test your knowledge 157
9 Capital maintenance – company distributions 159
Profits available for distribution – generally 160
What is a distribution? 160
Profits available – public and private companies 161
Realised profits and accounting standards 162
Related statutory rules 163
Special cases 165
Relevant accounts 165
Audit considerations 165
Declaration and payment of dividends 166
viii
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Contents
Consequences of unlawful distribution 169
Capitalising profits 170
Reserves 171
Essay questions 171
Aid to learning on distributions 172
10 Company flotations 175
The official system for listing securities on an investment exchange 176
Offers of unlisted securities 181
The remedy of rescission 181
Procedures for issuing shares 182
Underwriting 182
Brokerage 184
Reform 184
Essay questions 185
Test your knowledge 186
11 Shares – generally 188
Subscribers’ contract 189
Allotment 190
Return of an allotment 192
Share certificates 193
Share warrants (or bearer shares) 195
Calls 196
Mortgages of shares 197
Lien 199
Forfeiture of shares 200
Surrender of shares 201
Essay questions 202
Test your knowledge 203
12 Shares – transfer and transmission 205

Transfer of unlisted shares 206
Transfer of listed shares 208
Companies whose articles restrict transfer 211
Transmission of shares 216
Trustees 217
Essay questions 217
Test your knowledge 218
13 Shares – payment for and insider dealing 220
The consideration – generally 221
Prohibition on allotment of shares at a discount 225
Shares issued at a premium 226
Insider dealing 229
Market abuse 231
Model Code for Securities Transactions by directors of listed companies 233
Essay questions 234
Test your knowledge 235
ix
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