An the company is a separate legal entity

An advantage of a limited company is that the company is a
separate legal entity distinct from the four members, which means that the
members’ liability is limited by shares or guarantee (Marshall and Oliver,
1998). If the company is wound up in the future or is in debt, the maximum the
shareholders will lose is the value of their shares, and they are not liable
for the cost of winding up. Shareholders face less risk as compared to traditional
partnerships when the company makes business ventures, and are safe from being
personally liable for losses. Furthermore, only the company will be liable on
its contracts, and the shareholders will not be bound and personally liable for
these contracts, unlike a traditional partnership, where partners are
personally liable for contracts.

Next a limited company has more opportunities in raising capital.

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The company can raise finance capital by creating a floating charge, which is a
security with an underlying group of assets. This allows them to obtain capital
secured with dynamic or circulating assets that the business can use as normal.

The business can have a stable financial position and a good gearing ratio
without having to make bank loans which involve complicated procedures and
interest payments.  In contrast, the business is likely to face difficulty
in raising finance as traditional partnership because the partners own the
assets jointly and thus cannot create floating charges.

A limited company enjoys perpetual succession, which means that
the continuation of an incorporated firm’s existence is unaffected by the death
of any of its owners or the transfer of its shares to a new entity
(BusinessDictionary.com, 2017). This action ensures that the business runs for
the long term, and gives the directors the chance to evolve their business and
make long term plans and goals. On the other hand, a traditional partnership
has to dissolve the partnership if the death, retirement or bankruptcy of a partner
happens. This implies uncertainty in the long-term existence of the
partnership.

Transforming the company to a limited company will allow its
members’ shares to be freely transferable. Members can sell their shares and
leave the company as a shareholder if they wish to do so. Potential investors
can easily become shareholders without much hindrances. If any of the four
decide to leave the business, they can privately sell their shares to another
friend without much difficulty. However, in a partnership, a partner may only
assign their interest, and cannot transfer their investment in the business to
someone else. Leaving the partnership would also mean dissolution of the
partnership.

One disadvantage of incorporation is that the company must be
registered and has to submit documents and accounts to the Registrar, meaning
the resources have to be spent complying with standards and legal requirements.

This is not necessary in a partnership. An incorporated company also faces the
cost of an annual audit to give assurance stakeholders like suppliers and
investors, while a partnership does not need to do so. As a limited company,
privacy is forsaken as certain company accounts and documents will be made
available to the public to inspect. On the other hand, in a partnership, only
members have access to these documents. A limited company is thus subject to a
higher level of scrutiny on its business operations. Another disadvantage is
that company members cannot be involved in managing the company unless they are
directors, which means potential shareholders cannot control the day to day
operations of the business unless they are made director, unlike a partnership
where every partner has the right to participate in management. It is also
harder to withdraw capital in a company, unlike a partnership where this can be
done more freely.

2. As a private limited company, the name of the company must be
registered when it is being set up, and must end with either ‘limited’ or
‘Ltd’.

 

The Registrar will not consider the name if it is offensive or
constitutes a criminal offence. If a name of company includes sensitive words,
the approval of the Secretary of the State is required (Companies Act 2006).

This pertains to implying a certain status or function, using words that may
indicate connection to the government or authority like the words “British” or
“National”. The name of the company cannot be the “same as” another registered
name, which is when the only differences to an existing name are certain
punctuations, special characters, or similar or frequently used words and
characters (GOV.UK, n/a). Misleading words that the company is of another type
or legal form are also forbidden. For example, choosing the name “Electric
Wimbledon”.

 

In this case, they may not be allowed name the company Wimbledon
Limited as the name has already been listed on the Company House Index.

Interestingly, said company has since gone into liquidation in 2016. However,
this may still mislead the public, if they are unaware of the liquidation. Thus,
the Registrar may not consider the name until a certain time period has passed.

The exceptions of the ‘same as’ rule do not apply here as the 4 partners did
not intend to be part of the same group as the liquidated Wimbledon Ltd. They
should consider using names like “Wimbledon Tennis Equipment Ltd” or even
“Wimbledon Tennis Supplies Ltd”. This may still be considered sensitive as it
may indicate connection to the actual Wimbledon Tennis Championships, which is
led by The All England Lawn Tennis & Croquet Club
Limited.

 

3.  

Andy will owe directors’ duties to the company. Firstly, Andy has
the duty to “declare interest in proposed transaction or arrangement”. He
should inform the other directors of his position as a partner in the other
firm, and make known their interest in supplying Wimbledon Limited with
equipment. He can do this by notice in writing or at a board meeting. When the
other directors are aware of this, they can make more informed decisions about choosing
suppliers, or perhaps reduce Andy’s authority in related decisions.

 

Andy also owes the duty to “avoid conflict of interest” and to
“promote the success of the company”. This means that Andy should not use his
influence as a director and recommend the equipment supplier firm to be
Wimbledon’s supplier if it is not the ideal choice for Wimbledon. For example,
perhaps the prices of the firm are higher than those of other suppliers, or
their goods lack quality. Wimbledon will lose out in the long run if they
choose this company and it may hinder their overseas expansion. If Andy pushes
for this supplier despite knowing that other suppliers more suited for
Wimbledon’s strategy and goals, he has knowingly failed to promote the success
of the company and has breached his duties. Andy also owes duty not to accept
benefit from third parties. If he accepts for example, a higher bonus from the
equipment supplier for Wimbledon to use them, he has breached his duty.  

 

If Andy is found to have breached his duty, the company i.e. the
other directors may bring a claim against him and will bring the proceedings in
the name of the company. Since the directors are members, they may also bring a
claim against him in the name of the company. Andy will be responsible for the
damages to the company, and he may be personally liable for these losses. The
contract between Wimbledon and the equipment may be deemed void. Andy may be
removed from office if all the other shareholders vote in favour and pass a
special resolution. Andy may face an injunction if the breach was discovered
early. It is thus advisable for Andy to keep his duties as a director, and
disclose any necessary information.

 

 

 

 

 

 

 

 

 

4. One of the
roles of a director is concerned with management which means that the director
is charged with instituting systems that facilitate the daily operations of the
organization. This means that the director makes the operational and strategic
decisions that are used to drive the organization forward. The director also superintends the activities of
the other leaders in the organization to ensure quality and consistency. The
director is also tasked with the duty of ensuring that the company meets the
different statutory obligations required (Brefigroup.co.uk, 2017). Another role
of the directors is that they hold the organization’s board meetings to
facilitate the decision-making processes, make future plans and report to
shareholders on performance. In this respect, the director of the company acts
as the agent of the company on behalf of the stakeholders and make binding
decisions. They delegate tasks to management and ensure that proper books of
account are kept. Lastly, the directors of the company are also responsible for
ensuring that the organization meets the needs of other stakeholders like
employees, the community, and perhaps even national interest
(Venturechoice.com, 2017). It is through these different duties that the
success of the director regarding how they run the company is achieved.

 

When it comes to the shareholders, the principal role is to
appoint the directors of the organization who in turn are charged with the
running of the organization of affairs. Another important role is that of
financial investment and with this role, they are entitled with the voting
rights to determine the appointed directors (Venturechoice.com, 2017). The
shareholders also arrange for meetings (annual general meetings) with the
directors, and in such meetings, the directors brief them on the progress that
is made in the company. Shareholders can review the company accounts and raise
any doubts about directors’ decisions (InBrief.co.uk, 2017).  Major
business decisions must be approved by shareholders through special
resolutions. The shareholders use the meetings as a way of gauging the
performances that organization is realizing vis a vis the established goals
that are pursued. They have to ensure that director’s do not go beyond their
powers. Where the shareholders are not content with the performance generated
by the directors, they can remove them or in other circumstances, they can
refuse to re-elect them. The shareholders speak in the management of the
company through their votes and they do this to ensure that their investment
goals in the company are achieved.

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