Company Law Notes

Company Law Assignment
BUS 3010
Submitted To:
Duncan Ojwang on November 4th , 2014
By: Ivy Waithera Ndungi 641245
Ivy W. Ndungi
641245
Voting In Corporations
Cumulative voting is a multiple-winner voting system intended to promote
more proportional representation than winner-take-all elections. In corporations, it can be
defined as a method of election of the board of directors used by corporations whereby a
stockholder may cast as many votes for directors as he/she has shares of stock, multiplied by the
number of directors to be elected.
The purpose of cumulative voting is to facilitate the representation of minority stockholde
rs on the board. The stockholder may cast all of his or her votes for one or more, but not
all of the directors on the ballot which therefore promotes representation of small shareholders.
For example, there are five directors to be elected, and 10,000 shares issued a
shareholder with 1,000 shares could vote 5,000 for his candidate rather than being limited to 1,00
0 for each of five candidates, always outvoted by shareholders with 1,001 or more shares.
Different Types of Companies

Private companies
The vast majority of trading companies are private companies limited by shares. A
private company limited by shares must have the word 'Limited' or 'Ltd' at the end of its name.
The main advantage of trading through a limited company is to have limited liability.
Many private companies are very small and there is no minimum capital requirement for a
private company.
Public Limited Companies (PLC)
A small proportion of companies are public companies. Such a company must have a name
ending in the words 'public limited company' or 'PLC'. This type of company is appropriate for
larger businesses where shares are intended to be available to the general public. Most public
companies are not set up as such but are converted from private ones. This is the only type of
company which may raise capital by offering securities (shares or debentures) to the public. This
is usually done by obtaining a listing on the Stock Exchange or another public market such as the
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Public companies are subject more bureaucratic than private companies on a wide range of
matters, especially in relation to share capital, directors and accounts.
Different Types of Shares

A company may have many different types of shares that come with different conditions and
rights.
There are four main types of shares:
Ordinary shares shares that are standard shares with no special rights or restrictions. They
have the potential to give the highest financial gains, but also have the highest risk. Ordinary
shareholders are the last to be paid if the company is wound up.
Preference shares shares that typically carry a right that gives the holder preferential treatment
when annual dividends are distributed to shareholders. Shares in this category receive a fixed
dividend, which means that a shareholder would not benefit from an increase in the business'
profits. However, where a business is wound up, they are likely to be repaid the par or nominal
value of shares ahead of ordinary shareholders.
Cumulative preference shares shares that give holders the right that, if a dividend cannot be
paid one year, it will be carried forward to successive years. Dividends on cumulative preference
shares must be paid, despite the earning levels of the business, provided the company has
distributable profits.
Redeemable shares- shares that come with an agreement that the company can buy them back at
a future date - this can be at a fixed date or at the choice of the business. A company cannot issue
only redeemable shares.
Meaning of Piercing Corporate Veil

Piercing the Corporate Veil may also be referred to as lifting the corporate veil.
This is a legal decision to treat the rights or duties of a corporation as the rights or liabilities of its
shareholders. Usually, a corporation is treated as a separate legal entity than its shareholders
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meaning limited liability - which is solely responsible for the debts it incurs and the sole
beneficiary of the credit it is owed.
Courts might pierce the corporate veil and impose personal liability when the following is true:
There is no real separation between the company and its owners. If the owners fail to
maintain a formal legal separation between their business and their personal financial affairs,
a court could find that the corporation or LLC is really just a sham (the owners' alter ego) and
that the owners are personally operating the business as if the corporation or LLC didn't exist.
The company's actions were wrongful or fraudulent. If the owner(s) recklessly borrowed
and lost money, made business deals knowing the business couldn't pay the invoices, or
otherwise acted recklessly or dishonestly, a court could find financial fraud was perpetrated
and that the limited liability protection shouldn't apply.
The company's creditors suffered an unjust cost. If someone who did business with the
company is left with unpaid bills or an unpaid court judgment and the above factors are
present, a court will try to correct this unfairness by piercing the veil.
Selling of shares
Shares represent ownership of a company. When an individual buys shares in a company, they
become one of its owners. Shareholders choose who runs a company and who is involved in
making key decisions.
A company doesnt have to issue all its capital at once. Issued capital is the nominal rather than actual - value of the part of the share capital that has been issued to shareholders.
Once a PLC has started to trade, every share issued by a plc must be paid up at least as to a
quarter of its nominal value - plus the whole of any premium from issuing the shares at a higher
price.Further shares can be issued in the company by the directors, subject to the rules set out in
the Articles of Association, but typically by being authorized to do so by ordinary resolution of
the company's existing members.
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Functions of Executive & Corporate Managers
Planning: This step involves mapping out exactly how to achieve a particular goal. The
manager first needs to decide which steps are necessary to accomplish that goal.
Organizing: After a plan is in place, a manager needs to organize her team and materials
according to her plan. Assigning work and granting authority are two important elements
of organizing.
Staffing: After a manager discerns his area's needs, he may decide to beef up his staffing
by recruiting, selecting, training, and developing employees. A manager in a large
organization often works with the company's human resources department to accomplish
this goal.
Leading: Leading involves motivating, communicating, guiding, and encouraging. It

requires the manager to coach, assist, and problem solve with employees.
Controlling: After the other elements are in place, he/she needs to continuously check
results against goals and take any corrective actions necessary to make sure that his area's
plans remain on track.
Rights of Shareholders
Right To attend general meeting and vote

Typically shares carry one vote each but there may be non-voting shares or shares with
multiple votes. Some shares may carry the right to vote only in particular circumstances.
Right To a share of the company's profits

The distribution of profits is paid by means of a dividend of a certain amount paid on
each share. A dividend may be paid only if the company has made profits and to the
extent that it decides to distribute them.
Right To a final distribution on winding up

If the company is wound up and all the creditors are paid, the remaining assets are
available for division among the members. Either a return of capital or distribution of
surplus capital.
Right To receive a copy of the company's annual accounts
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Right that the company be run lawfully

That is in accordance with the Companies Act, the general law and the company's
constitution.
References
Types of Shares. Retrieved on October 29th, 2014 from
https://www.nibusinessinfo.co.uk/content/types-shares
Retrieved on October 29th, 2014 from http://en.wikipedia.org/wiki/Cumulative_voting
What Rights Does a Shareholder Have? Retrieved on October 29th, 2014 from
http://www.companylawclub.co.uk/topics/what_rights_does_a_shareholder_have.shtml
H. Mifflin (2009). The American Heritage Dictionary. Retrieved from http://legaldictionary.thefreedictionary.com/Cumulative+Voting
Retrieved on October 29th, 2014 from http://en.wikipedia.org/wiki/Piercing_the_corporate_veil
Issuing Shares. Retrieved on October 29th, 2014
fromhttp://www.companylawclub.co.uk/topics/issuing_shares.shtml
What are shares and why are they issued? Retrieved on October 29th, 2014
fromhttps://www.nibusinessinfo.co.uk/content/what-are-shares-and-why-are-they-issued
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Company Law Assignment

Duncan Ojwang on November 4th , 2014

By: Ivy Waithera Ndungi 641245

Different Types of Companies

Different Types of Shares

Meaning of Piercing Corporate Veil

Functions of Executive & Corporate Managers

Leading: Leading involves motivating, communicating, guiding, and encouraging. It

Right To attend general meeting and vote

Right To a share of the company's profits

Right To a final distribution on winding up

Right To receive a copy of the company's annual accounts

Right that the company be run lawfully

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