CPA Intermediate Level

Company Law cheat sheet

Every chapter's key points, formulas and definitions on one page, for the last week before the exam. Each heading links to the chapter that explains it.

Nature and classification of companies

Separate personality: from incorporation a company is a legal person separate from its members and directors: it owns its own property, makes its own contracts and can sue and be sued (section 19; Salomon v A Salomon and Co Ltd).
Limited liability: a member of a company limited by shares is liable only for any amount unpaid on the shares, and a member of a company limited by guarantee only for the amount undertaken on a winding up.
Private and public: a private company restricts share transfers, may not invite the public to subscribe and needs one director, while a public company needs at least two directors, a qualified secretary and a trading certificate, and its name ends in PLC.
The corporate veil: the veil of incorporation stays down unless a statute lifts it or the company is a sham used to evade an existing obligation (Gilford Motor Co Ltd v Horne, Prest v Petrodel Resources Ltd).
Other business forms: a partnership is not a legal person, so its partners own the assets and owe the debts without limit, while a company trades privacy for limited liability and perpetual succession.

Key terms

Separate legal personality: The company is a legal person distinct from its members and directors. Three consequences follow:
Limited liability: Limited liability is a consequence of separate personality (the debts are the company's, not the members') and it is what makes it possible to raise capital from the public, since an investor risks only the investment. How far a member's liability for the company's debts reaches depends on the kind of company:
Perpetual succession: The company continues to exist until it is dissolved by the process the Act prescribes, however often its membership changes and whether or not any original member survives. The death, bankruptcy or withdrawal of a member does not end it. Kilifi Cement PLC has outlived several generations of shareholders; a partnership dissolves when a partner dies unless the partners have agreed otherwise.
Transferability of shares: A share is a form of personal property and can be transferred, subject to the articles.
Capacity to own property and to sue: The company holds its assets in its own name and is the proper claimant when it is wronged. Two things follow:
Management by directors: A company acts through human agents, so ownership and control are separated. That separation is the problem that directors' duties and the protection of minorities, covered in the chapters on directors and meetings, exist to manage. Power is divided like this:
Common seal and formality: A company acts, and accounts for itself, with formalities a sole trader does without:
Company limited by shares: Members' liability is limited to the amount, if any, unpaid on their shares (section 5). The ordinary trading company: Mwangi's Bakery Limited and Kilifi Cement PLC are both companies limited by shares.
Company limited by guarantee: Members undertake to contribute a stated amount to the company's assets if it is wound up while they are members or within a year afterwards, and are liable for nothing beyond that. Used for clubs, professional bodies, schools and charities that do not distribute profits and have no share capital.
Unlimited company: Members have no limit on their liability for the company's debts on a winding up. Rare, because the point of incorporation is usually to limit liability, but chosen where secrecy about accounts or a specific regulatory regime makes it attractive.
Private company: A company whose articles restrict the transfer of its shares, limit its membership (the Act sets the ceiling for a private company, and a single member is enough) and prohibit any invitation to the public to subscribe for its shares or debentures. What it needs:
Public company: A company whose certificate of incorporation states that it is a public company, which may offer its shares and debentures to the public and, if it meets the Capital Markets Authority's requirements, list them. Its name ends in PLC. What it needs:
State-owned and other special companies: Some companies carry a second status, and some bodies called societies are not companies at all:

The rest of the sheet covers

Formation of companies
Membership of a company
Shares
Share capital
Debt capital
Company meetings
Company directors
The company secretary
Auditors
Company accounts
Audit of company accounts
Company investigation
Corporate restructuring
Receivership and administration
Liquidation and dissolution
Foreign companies
Exam technique and revision
Glossary
Table of cases