ACCA F4 - Corp and Business Law (ENG)

200 13: Company formation  Part D The formation and constitution of business organisations

3.3 Companies 'off the shelf'

Buying a company 'off the shelf' avoids the administrative burden of registering a company.

Because the registration of a new company can be a lengthy business, it is often easiest for people

wishing to operate as a company to purchase an 'off the shelf' company.

This is possible by contacting enterprises specialising in registering a stock of companies, ready for sale

when a person comes along who needs the advantages of incorporation.

Normally the persons associated with the company formation enterprise are registered as the company's

subscribers, and its first secretary and director. When the company is purchased, the shares are

transferred to the buyer, and the Registrar is notified of the director's and the secretary's resignation.

The principal advantages for the purchaser of purchasing an off the shelf company are as follows.

(a) The following documents will not need to be filed with the Registrar by the purchaser:

(i) Memorandum and articles (unless the articles are not model articles)

(ii) Application for registration

(iii) Statement of proposed officers

(iv) Statement of compliance

(v) Statement of capital and initial shareholdings

(vi) Fee

This is because the specialist has already registered the company. It will therefore be a quicker, and

very possibly cheaper, way of incorporating a business.

(b) There will be no risk of potential liability arising from pre-incorporation contracts. The company

can trade without needing to worry about waiting for the Registrar's certificate of incorporation.

The disadvantages relate to the changes that will be required to the off-the-shelf company to make it

compatible with the members' needs.

(a) The off-the-shelf company is likely to have model articles. The directors may wish to amend these.

(b) The directors may want to change the name of the company.

(c) The subscriber shares will need to be transferred, and the transfer recorded in the register of

members. Stamp duty will be payable.

3.4 Re-registration procedures

A private company with share capital may be able to re-register as a public company if the share capital

requirement is met. A public company may re-register as a private one.

Note. For a private company to re-register as a public company it must fulfil the share capital requirement

of a public company: Its allotted share capital must be at least £50,000 of which a quarter must be paid

up, plus the whole of any premium.

Re-registering as a public company Re-registering as a private company

Resolution The shareholders must agree to the

company going public

 Convene a general meeting

 Pass a special resolution (75%

majority) – Alters the constitution

The shareholders must agree to the

company going private

 Convene a general meeting

 Pass a special resolution (75%

majority of those present and voting) –

Alters the constitution

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