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ACCA F4 Chapter 10 Company Law part 2
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In salomon v salomon co, when forming (incorporating) the company, would salomon be considered as a promoter? How would you define a promoter in any case & will the promoter and owner always be the same person?
Yes, I suppose he would be considered the promoter – he’s the one that created the company and became the major shareholder.
No, it is NOT always the cases that the promoter and owner will be the same person. The first owners are the subscribers to the documents that have to be submitted to the Registrar of Companies and that’s not necessarily the promoter
Ok?
Ok, I got it, thanks 馃檪
That’s good, but post again if you have any problems
sir how much we recived out of total 50000 share capital 22500?
At 7 minutes 13 seconds, the video tells you that we received $22,500 of which $12,500 relates to 25% of the nominal value and $10,000 relates to the whole of the share premium
Is it not clear in the video?
Hi Mike. The 2011 BPP book states that “A public company must have a minimum of *one* member. This is the same as a private company. However, unlike a private company it must have at least two directors. A private company must have just one. Directors do not usually have liability for the company’s debts.”
The notes mention that a public company must have *two* members. Which one is the correct figure? or have the laws changed since the book was published?
Well, I’ve looked this up on the Nernst as a direct result of the study text saying just one member and from what I can find on the net, it’s two.
I’ve subsequently taken legal advice on this and the answer appears to be just one member for any company, public or private
solomon v solomon co
why doesnt everyone do this set up another company with a big loan to themself?
So I have a company ‘Paul’ worth 10k with assets if I go bust I have to sell up assets and give assets to creditors. So I just set up another company ‘Paul2’ and enter a 10k debenture loan to myself, now if paul2 goes bust I will be the number one creditor and therefore now I should get some of the 10k assets perhaps all. What is wrong with above idea and if nothing why doesnt everyone do it?
Qwhen you set up Paul2, what was the 10,000 benefit you paid into the company in exchange for the company giving you an IOU?
lets say a desk (really worth 拢100), but 100% of both companies are run by myself then I was happy for paul2 to pay 10k for the desk is this allowed?
Hmmm! Not convinced a liquidator would view this favorably.
On application to the Court, a director involved in 2 insolvent companies within a 3 year period could face a 15 year ban from holding the position of director or taking part in management in any way.
And if you disobey that Court ruling, you face 2 years in prison
Maybe that’s why more people don’t follow your little scheme!
馃檪
thanks for replies. So guess if you are young and starting out you do not do this but if its the last company you will run then this scheme seems clever unless I have missed something. If company goes well then great if goes badly then chance this idea will get you back some of the assets only downside is ”could face a 15 year ban from holding the position of director or taking part in management in any way” but if like I said above will be last company you intend to run then seems like no downside.
Dont worry do not intend to do this but is it not things like this an an auditor needs to be on the ball about.
Another idea I had which was a different topic F3. You pay sales tax on the price after discounts. So you sell a desk for 拢1000 to a good client/mate. You agree you will give him 20% off if early payment, so now sales tax is only on 800 not 1000 but you tell mate he has to pay late so he has to pay 1000. So no difference to him he pays 1000 but your sales tax is now reduced by 17.5% of 200 so 拢35 saved.
Now that’s what I call a “healthy degree of professional scepticism”
Hello
Thanks alot for the amazing lectures. But I have a question on Salomon v Salomon Co Ltd case. According to wikepedia, “Mr Aron Salomon made leather boots and shoes in a large Whitechapel High Street establishment. His sons wanted to become business partners, so he turned the business into a limited company. His wife and five eldest children became subscribers and two eldest sons also directors. Mr Salomon took 20,001 of the company’s 20,006 shares. Transfer of the business took place on June 1, 1892. The company also gave Mr Salomon 拢10,000 in debentures (i.e., Salomon gave the company a 拢10,000 loan, secured by a charge over the assets of the company).
Soon after Mr Salomon incorporated his business a decline in boot sales, exacerbated by a series of strikes which led the Government, Salomon’s main customer, to split its contracts among more firms to avoid the risk of its few suppliers being crippled by strikes. Mr Salomon assigned Edmund Broderip his debenture, the loan with 10% interest and secured by a floating charge. But Salomon’s business still failed, and he could not keep up with the interest payments. In October 1893 Mr Broderip sued to enforce his security. The company was put into liquidation. Broderip was repaid his 拢5,000, and then the debenture was reassigned to Salomon, who retained the floating charge over the company.”
My question is, if he transferred the debentures to Edmund, isn’t the company liable to pay Edmund 拢 10,000?
This is the first time I am going through this case, so hope you will explain this a bit in detail.
It sounds like Broderip only paid 拢5,000 when Salomon assigned the debenture. You say “Broderip was repaid his 拢5,000” suggesting Broderip was only owed 拢5,000
Good!
hello
what is profit and loss test in paying dividend