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Q: Law ( Answered 5 out of 5 stars,   1 Comment )
Subject: Law
Category: Business and Money > Consulting
Asked by: malteser-ga
List Price: $8.00
Posted: 09 May 2002 00:17 PDT
Expires: 16 May 2002 00:17 PDT
Question ID: 13927
Preferably basing on UK laws:

When a limited liability company is registered, the obligations of
directors contemplated in the Companies Act have to be kept in mind: 
what kind and quality of attention has to be given to the Memorandum &
Articles of Association.

Please describe in a fairly non-legal or easy legal terminology, and
in a descriptive & point form way.
Subject: Re: Law
Answered By: drdavid-ga on 10 May 2002 11:16 PDT
Rated:5 out of 5 stars
Since you are apparently forming limited liability company in the UK,
it is definitely UK company law that you must look at. The details of
company law vary widely from one jurisdiction to another. A very
useful place to read "non-legal" descriptions of UK law related to
business and companies is the library at The Company Law Club:

You have to sign up for a free membership to use their library (I

A search in the library on "memorandum and articles of association"
turns up several useful articles.

As you probably know, "The memorandum and articles are a company's
constitution. They are two separate documents (the memorandum of
association and the articles of association) but they are usually
printed and bound together as one. CA 1985, sec1 states that every
company must have a memorandum of association." (from "What are
memorandum and articles?") The details vary somewhat depending on
whether you are forming a public or private company.

To learn about the role of directors, I suggest you read the article
"What powers do directors have?" which shows up at the top of results
from the same search. Essentially, "the directors have the power to
deal with any particular matter unless the Act, the articles or a
(previously passed) special resolution says to the contrary."
Directors are typically given very broad powers, but if you want to
limit them in any way, the memorandum and articles are the place to do

Following the links at the end of the article to "What legal
liabilities could directors incur?" we finally get to possible
obligations. Very briefly, "directors' legal duties fall into the
following categories:
(1) general fiduciary duties imposed by the branch of the common law
known as equity;
(2) the duty to observe care under the common law of negligence; 
(3) duties under the Companies Acts, the Insolvency Act 1986 and
related legislation, including for fraudulent and wrongful trading;
(4) duties imposed by the company itself; 
(5) duties imposed by other legislation and common law provisions."

These can be fairly complex issues, but you can read through some
further discussion of each duty to see which may apply to you. Again,
you may wish to incorporate specific language into your memorandum &
articles to address particular issues relevant to the company you are

I hope that gives you enough to get started. It is difficult to be
more specific without knowing the nature of the business you have and
the specific concerns you are worried about. Clearly, you should pay
careful attention to the drafting of your memorandum and articles with
the assistance of a competent legal advisor, since these articles will
govern how your company is run and determine in detail both the powers
and obligations of your directors. Good luck!
malteser-ga rated this answer:5 out of 5 stars
Great guidance!

Subject: Re: Law
From: deago-ga on 09 May 2002 09:14 PDT
When we formed our LLC ( here in the U.S.) they told us to be sure to
have a "Indemnification Agreement and Covenant not to Sue. This is a
agreement that says that the Corporation has agreed not to sue and
that the Corporation agrees to indemnify the partners and to pick up
the expenses if they are sued. Also look into getting Officers and
Directors Insurance, it is expensive but???????
Not sure about the UK but here in the States the LLC is  a new deal
and the case law is fresh and one must really check with the cases and
case law in the state that the corporation is incorporated. I know I
had a problem so I say to you mate, pick good partners. Best  Regards

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