Company Law

US: corporation law.

INTRO:
The concept of company first appeared in GB in the end of the Middle Age (15th century). There were groups of merchants that exercised the same activities together in “guilds”. Those ones had no legal personality.

The word “company” was used for the first time at the beginning of the 18th century where the first companies were created. There were only few of them. They were created by acts of Parliament or by the Crown to exercise a very specified activity.
The “East India Company” was the first company.

The companies could only exist if they were made under the procedure of the charter. Therefore, merchants tried to form their own companies by contracts, so lots of entities were created. There were so many of them that in 1720, the first Act of Parliament was passed to prevent the creation of companies that would not have a charter.
Until the beginning of the 18th century (1825), this act was canceled. The creation of small companies was authorized.
1844: completed 1st act.

Pb: those companies had no legal personality. Liability was not limited therefore. So in 1855, Parliament passed the “Limited Liability Act”. It created a personality specific to the company.
In 1862, the first “Companies Act” (in the current form) was passed. All rules concerning companies are set forth. It is quite complete.
Since 1862, Parliament passed different laws in parallel with evolutions in company law (1905/1929, 19848/1957 & 1976, 1980, 1985).
3 other laws: - 1986: Financial Services Act
•   1985: Companies Directors Disqualification Act
•   1989: Small Companies Law

Company law is mainly based on statute law as opposed to contract law. The “company” concept is very simple; there is no difference between civil and commercial form.
The form of the company is not the only concept that exists to allow persons to do something together. There is also partnership but it has no legal personality.
Few chartered companies still exist nowadays.
Ex: the Bank of England

In GB, there are 2 different sorts of companies:
•   private companies: small companies with less than 50 members, Kal more than £50 000
•   public companies: big  companies





Part I: THE FORMATION OF THE COMPANY


First, you have to draft certain documents. A company is based on a contract drafted on a written document.

In GB, there are 2 kinds of docs:
•   memorandum of Association:
? short (only 1 or 2 pages).
? Only basic information on the company:
•   name of the company chosen by the promoters of the company
•   PLC (Public Limited Company)
•   Registered office of the company = place where the company is registered. Can only be mailbox. The importance is different from the one in France (for jurisdiction competence). In GB, it is centralized (in Cardiff, in Wales). Therefore, there is no importance except if the company is not registered in England.
•   Object of the company: when it is a general activity, it is not really important to define it specially. In France, the definition of the object is often very short (even if you can include a lot of things). In GB, object can take 1 or 1 pages.
•   If liability of the members is limited.
•   Shares and capital: for private companies, there is no limitation.

•   articles of Association:
? doc which contains all regulation to be observed in the company.

Once the capital is made, the company must be registered. The company then receives a certificate of incorporation. Thus it acquires a legal entity.

Pbs related to the incorporation of the company:
•   what is called liability of the promoters?
Various periods: - when you decide to form the company
•   when you sign the document
•   when the company is incorporated
But you must do some acts before a company exists. The main one is a lease or a contract for the mailbox. Now, you must sign the lease before the company is incorporated.
Promoters' liability? Pb because sometimes the company is never formed.
1st aspect: situation of the promoter. Duty as a promoter:
a promoter cannot be the agent of his company (reason: the company does not exist yet). Cannot be considered as a representant of  his company.
promoter must then take the contract for himself. Provision at the end of the  constitution doc. But if the company is never formed, it cannot take the contracts for itself. Then contracts are supposed to have been signed by promoters individually.
Kelner vs Baxter (1866): a person who signs contracts "on behalf of" a company which does not exist, he is held personally liable. (= Phonogram v. Lane (1982))
2nd aspect: concerns contracts made between them and their companies. First, it was impossible because there was a conflict of interests between the promoter and the company. But court changed mind rapidly.

3rd aspect: value of the goods sold by promoter to the company.
Distinction between different types of companies:
In private companies, no control on the value of the goods, especially if they are paid in capital.
2) In public companies, control by auditors (= external persons to the company  who made evaluation of the goods).
Prospectus: document used in a public company  which offers her shares to the public.
Public company is not always open to the public (listed on the Stock Exchange).
Then a document is made called a prospectus. It gives details on the company (value, number of the shares proposed and its price) in specific newspapers or in financial places.  



Part II: COMMENCEMENT OF BUSINESS

Allotment of shares

It is the way  a company  issue shares distributing to members and to public.
When a company is created, it allots shares (= issues shares) which are granted to the members or after its creation, the company can raise its capital and issue new shares granted to the members or to the public.
When the company issues shares, they are proposed to members, public or both.
Shareholders have a preemption right which is the right to buy new shares created in proportion with their number of shares.

The shares must be paid by the shareholders or public who wants to acquire shares. 2 ways of paying shares:
•   With money? “cash consideration”
•   Giving property in consideration of the shares
Pb to evaluate the value of the property. Distinction between companies concerned.
If private companies, evaluation made by the promoter himself.
If public companies, evaluation made by an auditor, independent accountant.

When you pay shares, you pay them a price fixed by the company. It is called the “nominal value” of the share. They cannot be paid less (? R Wragg Ltd (1987))
“Shares paid at discount” are forbidden by the law (Oregum Gold Mining Co of India Ltd v. Roper (1892)). It is different from paying shares in different steps (paying part of the price at the beginning and the rest later).
It is possible to pay shares more than their nominal value: to “pay shares at a premium”. The additional cost will be put in a premium account in the company's account.


Share capital

Shares form the capital of a company.
There are 2 types of security (= any kind of property you can have in the company):
•   Share: part of the capital of the company
•   Debentures (=bond): loan which is made to the company.
If you buy debentures, you buy part of the loan. They will be reimbursed in 5, 10… years with an interest fixed previously.

Share = title of property and part of the capital of a company. It is also the amount which determines the liability of the shareholder (limited to his amount of shares).
The shares give the shareholder 2 rights:
•   Right to vote at the general meeting
•   Right to receive dividends if any.

In the 19th century, there was only one type of shares (paper). Nowadays, a share is immaterial and there are different types of shares.
Ex:                - preference shares: give the shareholder a preference right on the dividends.
•   redeemable shares: shares owned by a shareholder but the company can buy them at any time (a company may buy its shares)
•   shares that do not give the right to vote at the general meeting (only a right to dividends) and vice versa
•   shares that give certain rights on dividends (a certain percentage) ?classes of shares

The shares form the capital of the company.
When a company is created, it detains a capital (in England, can be £1). The concept of capital is different than in France, not really important in GB.
The capital which is described in the memorandum is called the nominal capital or authorized capital of the company.
Another concept: if a company has a nominal capital, it is not obligated to issue all the capital, can issue only a part of it? “issued capital”. It can issue the rest later on without increasing the capital in any delay and without a general meeting.
The company can increase its nominal capital by a decision from the general meeting but in certain companies, it can be a decision from the board of directors.
Unlikely, it is impossible to reduce the capital except in very precise circumstances and with an authorization of the court.

Redemption and purchase by a company of its own shares

It is possible for a company to buy its own shares. It is possible since 1985 but it must be included in the articles of the company.
But it is illegal for a company to give financial assistance for the purchase of its own shares (section 151).
Ex: a company can not lend money to its director to buy shares. But it is possible for a private company if a special resolution is passed.


Part III: GENERAL MEETINGS

One of the important function and right of the shareholder is the vote at the general meeting.
In France, there are 2 types of meetings: the annual general meeting and the extraordinary general meeting. The type of meeting depends on the type of society and the resolutions taken depends on the type of meeting (simple majority or special majority of 2/3).
In England, it is different.



Kinds of general meetings

There are two types of general meetings:
•   the annual general meeting
•   the extraordinary general meeting

The annual general meeting must be held every year with a maximum of 15 months between each and the object of the meeting is to examine the accounts of the company, the report of the auditors, if any and if needed, the election of the directors and auditors.

The extraordinary general meeting is any meeting  which is not an annual general meeting. The object is all matters that are not treated in the annual meeting.
Ex: increase of capital, changes in the articles.

At this general meeting, the shareholders must be summoned. There are delays to respect, which depend on the meeting.
For the annual general meeting, the delay is 21 days.
For the extraordinary meeting, the delay is 40 days.
(In France, the shareholders are summoned by a letter without any specific formality.)
Since 1989, it is possible in private companies not to hold the meeting. It may take decision only by signing documents without having to summon a meeting.

Proceedings

•   A quorum: minimum nb of shareholders present at the meeting. At least, 2 mbers. A company may decide in its articles to fix a higher quorum.
•   A chairman : president of the board of directors is designed.
•   The shareholders vote. Different possibilities exist. Each company has its own internal rules (secret votes, raising hand-votes).
A shareholder may also represent another shareholder thanks to a special document which gives him power in order to allow him to vote, called a “proxy”.
He can only be represented by a shareholder and not by an external person.
When a shareholder receives the summon, they also receive a proxy they have to fill in if they want to be represented. The document must contain all the resolutions to be voted and the explanations about accounts to be adopted as well as the consequences of his vote.

Once the general meeting is held, a minute is made and it must be signed by the chairman and the secretary of the minute which is kept at the registered office of the company.

Resolutions

The shareholders vote resolutions at the general meeting. In England, 3 types of resolution are distinguished by the law:
•   ordinary resolution: taken at the annual general meeting for lots of types of decision (election of directors and auditors, increase of capital, approval of accounts).
•   special resolution: Taken at the extraordinary general meeting with a ¾ majority for very specific decisions (alteration of the object of the company or reduction or capital).
Andrews v. Gas Meter Co (1987): a company can change the articles of the company at any moment by a special resolution even if the decision is not favorable to the minority.
•   extraordinary resolution: extraordinary general meeting, requires a ¾ majority but it is used on 1 or 2 special circumstances: to vote a creditors voluntary winding-up.


Part IV: DIRECTORS AND OTHER OFFICERS


Þ Executive organ of the company, has the power on the company.

The directors

In private companies, you may have one director. In public ones, there is more than one director (with no max).
Directors are appointed in the articles of the company. Persons who have created the company appoint themselves.
They  can be removed or replaced by the general meeting. They are appointed for a period of time (defined according to the companies). They can be reelected or removed by an ordinary resolution at the annual general meeting by a simple majority.

Anyone can be director of a company if s/he is more than 18 years old and less than 70 when s/he is appointed.
The only restriction is that s/he must not have been condemned before for bankruptcy (= disqualified because of fraudulent acts, for ex.). S/he cannot be reelected either.
According to liberty of company law, anyone can create a company but there are specific rules for certain activities: an architect must be director of an architect company.

If you are a director, you are also a shareholder (you may have only one share ? minimum required).

At the end of the period defined, they stop being directors but they can be reelected.
During the period, directors can be removed by the general meeting at any moment. No reason is necessary to remove a director Þ "the director may be removed without a cause". He can not ask for damages.
Marshall's Value Gear Co Ltd v. Manning Wardle & Co. Ltd: the general meeting has the right to control theBoard of Directors.

There can be one or several directors. If they are several, the directors do not act individually but in the Board of Directors Þ organ which manages the company.
There are meetings of the Board of Directors and a chairman (president of the company) is elected by the other directors.
Decisions of the Board of Directors are taken very informely at a simple majority.
Þ Directors do not act alone except for the chairman who has specific powers.

In the 19th century, a director was a person appointed by the company whose function was to attend the Board of Directors and to vote decisions taken at those meetings. Directors alone had no specific or individual powers. They did not always exercize other functions in the company.
Recently, there are directors who have also other functions in the company.
Their role is to work all day for the company.
Þ They are called "managing directors". They are directors who work really for the company in addition with their function of director.
Csq: • they are paid by the company as managing directors. They are also employees of the company.
  • they can be removed as directors but not as employees (they can only under the labour law ie not without a cause)
  • They have more duties than a director who is not a managing director. They have more responsabilities.

Remuneration: In GB, obligation for the company to disclose to the shareholders the remuneration of the managing directors and of the chairman.


Powers and duties of directors

• Powers of the directors (= in the Board of Directors):
They are described in the articles of the company.
Þ very general because 99.99% of companies use the same model of articles.
They are all powers to manage the company excepted the powers devoted to the general meeting. (Automatic Self-Cleansing Filter Syndicate Co. Ltd v. Cuninghame (1906): 1st decision stating that directors have autonomous specific powers; all powers not given to the general meeting by the articles of associations belong to directors.)
Ex: day-to-day management of the company.

The chairman has specific powers in the company. He takes alone a certain nb of decisions. He represents the company (signs the contracts on behalf of the company). He can delegate these powers.
Most powers in the company are exercized by the Board of Directors and not by the general meeting (which approves decisions).
Quin & Axten Ltd v. Salmon (1909): the general meeting could not take decision contrary to the articles of association which gave the Board of Directors specific powers.

• Duties of the directors:
At the beginning of company law, there was not a lot of information on the duties of directors because they were not considered as the main organ of the company.
This was the court who first defined the duties and responsabilities of directors. It tried to compare the position of directors to concepts already existing.
Director is appointed to manage property for shareholders and the company Þ ˜ a trustee.
Court: he has the same duties as the trustee = fiduciary duty.
Do they have to be qualified and to take care of the affairs of the company? Is he liable for his acts?
The Court developed the idea of "care and skill".

1920: Re city equitable fire insurance
The court defined the duty of care and the duty of skill.
Duty of skill: "a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience"
Þ not a duty at all, you just be as you are.
Directors can not be personally liable for his mistakes (except fraudulent acts)

Duty of care: what kind of care must bring to affairs of the company?
"A director is not bound to give continuous attention to the affairs of his company. His duties are of an intermittent nature to be performed at periodical board meetings. He is not however bound to attend all such meetings. Though he ought to attend whenever he is reasonably able to do so. A director is, in the absence of grounds of suspicion, justified in trusting any other person to perform such duties honestly."
Þ duty of care: no obligation to a day-to-day attention, if he cannot come, he can delegate his power and he is not liable for the wrongful acts that can be committed by the other person.
Duty extremely large (nearly no duty)
The definition is still applicable nowadays but today certain limitations:
•   the definition does not concern managing director ("work all day for the company)
•   more and more decisions ask the directors to come to the Board meetings and to give more attention to the company.
Þ more duties

Concept of fiduciary duty: inspired by the law of trust.
Idea: a director must exercize his powers in good faith and in the interests of the company.
Þ the directors must act honestly (cannot commit any fraud against the company or the shareholders) and must always act  in the interest of the company: They must do their best for the company (no obligation to reach such result) and they must not be in a situation where their personal interest would be in contradiction with the interest of that company.
Punt v Symons & Co. Ltd (1903) or Piercy v. S. Mills & Co Ltd (1920): ex of breach of fiduciary duty ? abuse of power. Issue of shares not in the interest of the company.
Ex:  • situation where the director is interested in a contract made by his company.
Þ a conflict of interest is not possible.
The contract is possible but at a double condition:
•   the director must disclose his interest in the contract before it is signed
•   the contract must be approved by the Board meeting before it is signed
The director cannot vote at this meeting.

  • situation of "corporate opportunity" where a company is proposed to sign a contract then the company refuses to sign it. One of the directors signs the contract for himself or for one of his own company.
Court: considers this is a breach of fiduciary interest because there is a conflict of interest
A director cannot act this way even if the company refuses the contract and with good reasons; it is still a breach of fiduciary duty (it is though possible in the USA and in Canada).
The fiduciary duties are owed to the company so if there is a breach the company can bring an action against the director.
If the director made a profit, the company can ask for the reimbursement.

Rules apply to the official directors but also to the persons called shadow directors (=persons who are not officially directors but act as directors). They have the same duties and obligations as directors.
For a long time, there was nothing in Parliament's acts about duties but nowadays, there are few dispositions regarding obligations, duties and responsabilities:
•   Company Act 1985: loans made by a company Þ a company cannot make a loan to one of his directors excepted if the loan does not exceed £2000 or if the object of the company is to make loans.
•   Financial Services Act 1986: different dispositions concerning "insider-dealing" Þ when you are a director, you know a lot of information about your company (inside information which is not public). If the company is listed on the Stock Exchange and if the information is disclosed, there may be consequences on the value of the shares. Directors may be tempted to buy shares and to wait the information to become public to sell them and make profits.
1970-80s: idea that it was contrary to the interest of the company.
1986: clear law Þ an insider (anyone who has access to inside information), if he is in possession of unpublished sensitive information which he has obtained by virtue of his connection with the company and which it would be reasonable to expect him not to disclose, cannot: - deal himself in the listed securities of the company
•   council another person to deal in those securities
•   communicate that information to another person
Hogg v. Cramphorn Ltd (1967): court will look at the purpose of the decision of directors to see if valid. If improper, decision will be considered as invalid.
There are strict sanctions because it is a breach of fiduciary duty (civil sanctions) but it is also a criminal offense. Directors can be prosecuted (2 years' imprisonment and unlimited fine). Þ difficult to apply because difficult to prove.

Secretary and auditors

Secretary

Function which has no equivalent in French company law. It is a person who is appointed (in important companies) by the company. His function is to do all the administrative work for the company especially concerning the Board of Directors, the general meeting (drafts minutes, writes reports, prepares the summons…).
He is present at the general meeting but he does not vote.
Þ often exercized by a solicitor even if there is no specific qualification required.

Auditors

Same function as in French law. They are independent persons therefore they are not employees of the company. They are accountants but not of the company. They have a special qualification as auditors.
Their function is to examine the accounts of the company and to make a report which will be disclosed and discussed at the annual general meeting.
Þ it concerns only public companies.
They are appointed and revoked by the general meeting.
They must act with reasonable skills and care Þ duty towards the company.
They also evaluate any non-cash consideration in a public company.

Part V: ENFORCEMENT OF DIRECTORS' OR CONTROLLING MEMBERS' DUTIES

Controlling members' duties

In the 19th c., powers were exercized by the general meeting.
At the beginning of the 20th c., powers were transferred to the Board of Directors which have all the duties (skill and care) and fiduciary duties.
In the middle of the 19t c., not only directors had duties, controlling members (= shareholders that have more than 50% of the right to vote, who have at least the majority) also had some. These persons could take decisions. It can be a director or not.

In the 20th c., there is a change.
1960s: the idea is that even if you had the majority in the company, it did not mean that you can vote against the interest of the company. Controlling members have duties: they do not take the decision they want. They have a fiduciary duty.
The minority has also certain rights, it cannot be imposed any decision.
? "fraud on the minority" if you take a decision against the rights of the minority.
When there is a fraud, the minority can bring an action against the majority but they must via a vote. They have no chance to succeed so there are certain rights to bring an action granted to the minority.

The rule in Foss v Harbottle

? Old decision of the 19th c., which set for the first time: "when an action is committed against the company, only the company can bring an action". (If there are damages, they go to the company).
Þ simple when the action is decided by the directors or by the general meeting.

But when there is a fraud on a minority or a resolution against the interests of the company, it is possible for any shareholder (or a group of shareholders) to bring an action on behalf of the company.
? derivative action (brought by a minority of shareholders for the company against either the directors or against the majority of shareholders).
It is opposed to the personal action : action brought by a shareholder personally if he considers he has suffered a personal and individual damage.

Minority protection and protection of outsiders

Minority protection

To protect minority shareholders against abuses of the majority, certain rules concerning the duties of the majority and rights of the minority exist.
2 important dispositions can be used by the minority :
•   art 122 Company Act (1985): "Any shareholder may petition the court for the decision of a company where the court is of opinion that it is just unequitable that the company should be wound-up" (= liquidated).
? gives the power to any shareholder to go to the court.
The court will examine if the situation is such that it justifies the winding-up of the company.
Limit: very exceptional circumstances in which art 122 can be used.
•   sect 459 Company Act (1985) (existed in the 1948 and 1980 Acts but now more favorable to the minority shareholders): " A member may petition the court for an order on the ground that the affairs of the company are being or have been conducted in a manner which is unfairly prejudicial to the interests of some of the members including at least himself, or that any proposed act or a mission of the company would be so prejudicial. "
Þ fundamental disposition. It gives huge powers to minority shareholders.
• "A" member: any shareholder (even if he owns only one share) can bring an action
• "for an order": the text does not precise what kind of remedy can be granted (cancel a resolution, damages…).
• "affairs of the company": very general term
•" unfairly prejudicial to some of the members": does not have to prove that is against the interests of the company.
He must prove that the act is unfair (not for all shareholders)
            is prejudicial to him (lien de causalité).

The minority shareholders may, if consider that there is fraud or an act against the interests of the company, complain to the Department of Trade (depends from the government).
? political and administrative institution whose function is to regulate companies' affairs in England.
It has the power to investigate into the affairs of a company.
These investigations are made by inspectors who are public officers who have lots of powers (come to company officers, ask for all documents and can hear any person).
The Department of Trade can decide by itself to investigate or may be seized by a (or a group of) minority shareholder(s).
Restriction: need either that one shareholder holds at least 10% of the shares or a group of 200 shareholders to be able to seize.

When the Department of Trade has terminated its investigation, inspectors draft reports. Either it shows nothing or it shows irregularities then the Department of Trade may bring criminal proceedings in criminal courts against persons who have committed such acts or against the company. Or it can bring an action of any sort against the company before a commercial court.

Protection of outsiders

An outsider (= person who is not a member of the company (nor employee nor shareholder)) deals with the company (Þ contract dealing).
When a person deals with a company, this latter is represented by a physical person. The contracting person is supposed to verify if the person who signs the contact has the power to represent the company.
Most of the time, it is difficult to check by public documents.
Rule to protect outsiders: theory of apparent authority.
Þ A company is bound by the acts of its agents who have actual authority but also by the acts of a person who has apparent authority (=an outsider cannot know that the person has not authority) when an outsider cannot verify that the person has not the power to act on behalf of the company.

Theory of ultra vires Þ the company has an object and it can only make contracts which are within the object.
Until 1970s, any contract, which was not within, was considered as having been made ultra vires and could be declared void.
Nowadays, objects are larger and English law has been influenced by European law.
1972 European law: even if a contract is made ultra vires, it remains valid (even if it is not really within the object of the company).





Part VI: WINDING-UP

Winding-up
By the court                                   Voluntary
Members  Creditors Under the supervision of the Court




2 important categories of winding-up exist: compulsory (or by the court) winding-up or a voluntary winding-up.

Compulsory winding-up

It is a winding-up that is not decided by the company but by a court.
This can be decided under different circumstances:
• The Court may be seized by a shareholder (under sect 122 ? the court may decide the winding-up when it is just and equitable).
Ex: the company has no activity, the company was formed for a fraudulous purpose, its object has disappeared, the company is in a complete deadlock (cannot continue its activity)…

• The petition (document produced before the court) may also be filed by a creditor of a company (if the company has not paid its debts) who ask for a winding-up of the company.
• The court may also be seized by the Board of Trade that asks the Court to pronounce the winding-up.

The procedure of winding-up starts with the petition filed before the court. There is a suspension of the company's activities. The company is placed under the control of the Court and the powers of directors stop.
Once the petition is filed, no transfer of shares or property is possible.

The Court appoints a provisional liquidator or "official receiver". It is a person appointed on a special list, on a temporary basis, whose function is to manage the company during the procedure and to make a report for the Court. He drafts a preliminary report under which he will explain to the Court the situation of the company and gives his opinion if the company should or not be wound-up.
The liquidator has very important powers (nearly all the powers as a chairman of a company). He takes all decisions in the company: he can appoint and dismiss employees.
He has also duties (fiduciary duties).
When the report is made, the Court will examine it and will decide or not to continue the winding-up procedure. If the Court decides the company should be wound-up, it pronounces a winding-up order.
If an order is pronounced, the provisional liquidator becomes the liquidator of the company whose function is to manage the winding-up of the company: all the assets must be sold and most of the debts paid.
When the  whole winding-up procedure ends, the liquidator drafts a final report for the Court which pronounces the dissolution of the company. It stops to exist as a legal entity.

Voluntary winding-up

The shareholders decide the winding-up of their own company.
For different reasons: - they do not want to continue the activity
•   because the company is unable to pay its debts
The shareholders can decide it before the company is submitted to a compulsory winding-up.

The procedure starts by a special resolution passed by the company. Same csq as the petition in the court? powers of the directors cease.
The directors may make a very important declaration:
•   declaration of solvancy : (when the company has no financial problems) made at the same time the resolution is voted. The directors declare that they are under the opinion that the company will be able to pay its debts within a specified period during the winding-up procedure.
•   Declaration of unsolvancy: made when the company has financial problem


The type of declaration made will decide the kind of voluntary winding-up:
• by members if the company is able to pay its debts
• by creditors if the company is unable to pay its debts.
The main difference is in the choice of the liquidator because when the company decides its own winding-up, a liquidator will be appointed (same function as in a compulsory winding-up but he drafts no reports, he organizes the dissolution of the company).
In a members' voluntary winding-up, the shareholders will appoint one of the directors.
In a creditors' voluntary winding-up, this is the creditors who appoint the liquidator who will be an external person. Creditors will have a power in the liquidation of the company (different from France).
Function of  liquidators: selling all the property of the company and will have all the powers for the dissolution and liquidation.
At the end when all the property is sold, the company by a special resolution votes its own dissolution. This is the end of the company.

Rare voluntary winding-up:
? Under the supervision of the Court Þ sort of mixture  between the compulsory and voluntary winding-up.
A voluntary winding-up is voted by a special resolution but the Court is seized by a member or by a creditor, which continue the procedure of winding-up.







Part VII: RECONSTRUCTION, AMALGATION AND TAKE- OVERS

Reconstruction and amalgation

A reconstruction is a very general term which designates different types of procedures that may happen in a company.
Þ change in the company shareholding.
It happens in different circumstances, one of them is the amalgation (= merger): two or more companies join together to form a new company or when a company is included in another one.
There is a specific procedure under which companies may decide amalgation, procedure defined by the law:
- Financial Act (1986): the amalgation must be decided by the companies concerned. The companies make an agreement or compromise (document in which the directors explain to shareholders the amalgation, it contains details on it (price of the shares or if it will have exchange, what will be the Board of directors of the new structure…). The document is proposed by the Boards of Directors to shareholders. Each company concerned must vote by a special resolution the amalgation. All information given must be true, must not be wrongful.


Take-overs

It is a procedure under which a company decides to take control of another company.
? concerns only companies listed on the Stock Exchange.
The first company will make an offer to  the shareholders of the other company. The offer contains the number of shares proposed, the price of the shares (must be attractive, higher than the market value) and a period of time during which the offer remains valid.
Þ take-over bid
When an offer is made, the take-over may or not be successful.

Pb: no real disposition that are applicable to the take-over itself.
Few exist but not specifically related to take-over.
Only rules of behavior, not laws.
City Code on take-over and mergers Þ document which is drafts and amended every 2 or 3 years by the City Pavel (part of Securities and Investment Board). It is an administrative institution responsible for the London Stock exchange.
No value as a law can have, cannot be enforced by the courts. It is just an example that must be followed by the companies on the Stock Exchange.

The City Code is composed of 14 general principles (the Board of directors must act in the best interests of their shareholders…) and 42 general rules (the identity of the offerer must be disclosed…).
Once a take-over bid is made, the shareholders must be individually informed by a letter which contains the terms of the offer).
If the rules are not applied by the company, there is no sanction.
Nowadays, take-overs do not obey to strict rules.