A Business Start-up Report.

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A Business

Start-up Report

By Martin Crangle

Table of Contents

Introduction

. Private Limited Company

.1. What is a Private Limited Company?

.2. Limited liability

.3. Members

.4. Address

.5. Contractual capacity

.6. Criminal liability

.7. Shares

.8. Dissolution of a Private Limited Company

.8.1. Voluntary winding up

.8.2. Compulsory winding up

.9. Summary of a Private Limited Company

2. Partnerships

2.1. What is a partnership?

2.2. The Partnership Act 1890

2.3. Agency

2.4. Liability in contracts

2.5. Liability in torts

2.6. Liability by holding out

2.7. Unlimited liability

2.8. Limited Partnerships

2.9. Limited Liability Partnerships

2.10.Dissolution of a Partnership

2.11.Summary of a Partnership

3. Documents required

3.1. Memorandum of Association

3.2. Articles of Association

3.3. Form 10

3.4. Form 12

3.5. Deed of Partnership

3.6. Passing off

4. Legal Rules Effecting management of a Private Limited Company

4.1. Directors of a Private Limited Company

4.1.1. Fiduciary duties

4.1.2. Duty of skill and care

4.1.3. Duties to outsiders

4.1.4. Statutory duties

4.1.5. Duties to employees

4.1.6. Duties to shareholders

4.1.7. Duties to creditors

4.2. Board Meetings

4.3. Debentures

5. Legal Rules Effecting management of a Partnership

5.1. Remuneration

5.2. Disputes

5.3. Financial records

5.4. Removal of a partner

5.5. The duty of good faith

6. Conclusion

7. Employment Law

7.1. Hiring

7.2. Working

7.3. Contract of Employment

7.3.1. Duties of an employer

7.3.2. Duties of an employee

7.4. Additional statutory rights

7.5. Discrimination

7.5.1. Sex Discrimination Act 1975

7.5.2. Race Relations Act 1976

7.5.3. Disabled Persons (Employment) Acts 1944 & 1958

7.5.4. Remedies

Form 10

Form 12

Introduction

This report is designed to outline the ways in which you can start trading as JAC Catering and offer my advice on what I believe to be the best way forward.

With the capital you are investing you can trade as either a:

Private Limited Company

Or Partnership

Chapter 1

Private Limited Company

.1 What is a Private Limited Company?

A company has to be created by registering with Companies House in accordance to The Companies Act 1985. When all the formalities of document creation and company acceptance are done, Companies House issues a Certificate of Incorporation, which is effectively the birth certificate of a company.

As a human is considered a separate legal entity when issued with a birth certificate, so does a company.

The House of Lords with the SALOMON v SALOMON & CO Ltd case established this principle of a separate legal entity in 1897:

"In the eyes of the law a company is a person capable of perpetual succession** and quite distinct from the natural persons who are its members at any given time."

** perpetual succession = A company created by a process of law can only be destroyed by a process of law. It will exist even if all its human members are dead because is a separate legal person.

As a separate legal entity a company can:

* Own and deal in property

* Sue and be sued in its own name

.2 Limited liability

As a Private Limited Company is a separate legal entity, it can own property, borrow, sue and be sued. For this reason members of a Private Limited Company have limited liability. Limited liability ensures that an investor will only lose what he has invested should the company cease to exist. Although it may seem a little severe for someone to lose their invested life savings, it prevents creditors demanding debts be paid by the shareholders who haven't put up any guarantees.

.3 Members

There must be at least two members of a Private Limited Company; a director and a company secretary (these cannot be the same person). You can only be a company director or company secretary if you are not a discharged bankrupt, or have been disqualified by a court from holding such a position.

.4 Address

Each company has to have a registered address (in your case the restaurant), where all the statutory documents (register of members, memorandums) for the company are kept.

.5 Contractual capacity

Please be aware that all the contracts you have entered into already are "pre-incorporation contracts". This means that because your company is not yet a separate legal entity, contracts cannot be made on its behalf. Be warned, whoever made the contracts will be held personally responsible until the company is created, so we need to get proceedings under way post haste.

.6 Criminal liability

A company can be convicted of a crime, even though the directors themselves do not have to be convicted, although there are some limitations:

A company cannot be convicted of a crime which requires the physical driving of a vehicle (RICHMOND & THAMES BOROUGH COUNCIL v PINN & WHEELER).

A company cannot be convicted of a crime for which the only available sentence is imprisonment.

As all three of you will be deemed ultra vires (the controlling mind) of the company, you will be held personally responsible as well.

.7 Shares

Limited companies are either limited by shares (what your company should be), or limited by guarantee (these are usually charities and non-profit companies).

Companies limited by shares are owned by a minimum of two shareholders (in your case three) and is run by a board of directors (again you three).

To have an equal share in the business you will all be required to have an equal number of shares.

.8 Dissolution of a Private Limited Company

Although it may seem premature and pessimistic, I feel you need to know what processes are involved in winding up a company:

.8.1 Voluntary winding up

If the shareholders decide to wind a company up because they no longer wish for the company trade, a special resolution is passed. Where the company cannot meet its obligations then an extraordinary resolution is passed. These rules are laid down in the Companies Act 1985

If a company declares its solvency then the company will be in control, where a company does not declare its solvency then it will appoint a liquidator. It will be the liquidators job to pursue any outstanding debts owed to the company, sell off the company assets that are needed to settle any outstanding creditor debts.

Although the directors will lose their ability to run the company, the liquidators may keep them on in order for the company to be wound up successfully. Under the process of insolvency, employees will be dismissed but they too may be re-employed by the liquidators to help in the winding up.
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.8.2 Compulsory winding up

Under Section 123 of the Insolvency Act 1986, Companies may be forced into insolvency when:

* It hasn't paid a creditor debt of £750 or more within three weeks of that creditor having served a demand for outstanding monies.

* A warrant has been issued by the courts to allow bailiffs to take goods belonging to the debtor - which have been returned unpaid.

* It can be proved that the company is unable to settle outstanding debts.

* The combined assets of the company can be proved to ...

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