Change of Company Name - Toys4U Ltd - Essay Example

Brief 3: Change of Company By Prepared For Francesca Summary The change of company is governed by the Companies Act 2006 but the law allows a different method if prescribed by the Articles of Incorporation of the company. Thus, Francesca and Don may either follow the Companies Act 2006 or Toys4U Ltd’s Articles, if the latter prescribes a different procedure for changing the company’s name. If done in accordance with the aforesaid law, Francesca and Don may request that the proposal to call for a general meeting for the purpose of submitting the motion to change the company’s name from Toys4U Ltd to Toys4Everyone Ltd be put to a vote. Since the two directors constitute the majority, their decision prevails. In the general meeting, the vote in favour of the motion must at least be 75% for the motion to pass, since this is the required majority to pass a special resolution. Another way of passing a special resolution is to directly circulate the motion in writing without calling for a meeting and have the same percentage of voting rights approve the proposal. 1 Introduction 1.2 Statement of the Subject Two directors of Toys4U Ltd want to change the company name to Toys4Everyone Ltd but the third director has indicated his objection. 1.3 Purpose The objective of this report is to outline a legitimate procedure, on behalf of Francesca, that will allow a change in the company name of Toys4U Ltd despite the objection of one of the three directors to the proposal. 2 Statutory Requirements in Changing a Company Name According to the Companies Act 2006, a company may change its name in compliance to an extraneous mandate such as one coming from the Secretary of State, an adjudicator upholding a protest on the company name’s use, the court or as a result of company name restoration. The company can also effect a change of its name upon its own initiative (§ (1) & (2), s 78, Companies Act 2006). It is the latter that is the concern of this report since it is the directors who are interested in pursuing a company name change. According to the relevant provision of law, a change of company name effected by the company’s own initiative can be made either through a special resolution or through any other means prescribe by the company’s Articles of Incorporation (§ (1)(a) & (b), Companies Act 2006). 2.1 Change of Company Name through a Special Resolution Under the British company law, there are two ways by which a company decides: an ordinary resolution, or; an extraordinary or special resolution. The two types of resolutions are distinguished from each other by the number of votes required to pass them. Whilst an ordinary resolution requires only a majority vote to be passed, an extraordinary or special resolution needs at least 75% of the votes cast by members (van Gerven & Storm 2006 468). Since the law mandated a special resolution to effect a change of a company name, the two directors must call for a general meeting so that the motion to change the company name can be submitted to the general membership. Such a meeting, called a general meeting, happens once every year in which case it is called an annual general meeting or AGM. It is a forum for the shareholders and members to discuss and air their concerns on the company’s workings (Sjåfell 2009 77-78). The company can pass both ordinary and special resolutions during the AGM with the rule on vote requirements applicable (van Gerven & Storm 2006 468). If however, Don and Francesca cannot wait for the AGM, they may instead opt to call for an extraordinary general meeting or EGM for the aforesaid purpose. An EGM is one that may be called at any time by the Board or the members, provided the requirements of the law are met, when company exigencies require major decisions to be made immediately, which cannot wait for the next AGM. Thus, in cases of mergers, tender offers, acquisitions, major debt or equity offerings, new investments” or any other issues of significant concern, the Board or the members may cause the calling of an EGM (Lundmark & Carroll 2001 72-73). If, Francesca and Don decide to call for one, they must invoke s302 of the Companies Act 2006 to do so. In addition, since the process requires a special resolution, notice must be sent at least 14 days before the day of the actual meeting in accordance with s 307(1) of the Companies Act 2006. Whether Francesca and Don can legitimately call an EGM for the aforesaid purpose will depend on the company’s Articles on how the Board of Directors must decide. If the company’s Articles on Board decision-making follow the Model Articles for Private Companies, then decisions, in general, are made collectively either by a majority vote or unanimous decision. According to the Model Article, a majority decision can be reached during a meeting of the Board but if the decision is made through any other means, like a written resolution circulated and signed by the other directors, then the decision must be unanimous (s 7 & 8, Model Articles). If Toys4U Ltd. was registered prior to 1 October 2009 and it adopted or followed the Table A format for its Articles, the same requirement is provided, that is, a written resolution must be decided unanimously (Slorach & Ellis 2007 74-75). Since Edwardo is not in agreement with the proposal of the other two, then the latter should move that the proposal to call for an EGM be put to a vote. Since the votes of the two would constitute a majority vote, they could prevail to call for an EGM. 2.1.1 Written Special Resolution Another method, which is shorter than that proposed in the preceding paragraphs, is the circulation of a written special resolution. A written resolution may be passed either by the members or the directors and has the force and effect of a resolution taken during a meeting, if done in accordance with law. It must, for example, be sent to all members of the company who are eligible to vote in a meeting, with an explanation of how their agreement must be signified (s 288, Companies Act 2006) and because it is about a proposal to change the company’s name, it must be signified to by 75%, at least, of the votes. 2.2 Change of Company Name in Accordance with the Articles of Incorporation As earlier stated, s 78 of the Companies Act also allow change of company name in accordance with the company’s Articles. If Toys4U Ltd., for example, provides in its own Articles a procedure of changing the company name different from that stated in the Companies Act 2006, Francesca and Don may instead opt to employ it instead of the procedures discussed in the previous paragraphs. If this is so, an additional requirement must be complied. The fact of employment of a method other than that outlined in the Companies Act 2006 must be specifically alleged and included in a notification to be sent to the Registrar (Judge 2008 183). References: Judge, S. (2008). Q & A: Company Law 2008 and 2009. New York: Oxford University Press. Lundmark, T. & Carroll, W. (2001). Business Associations in the Common Law World, Volume 3, Münster: LIT Verlag Münster. Model Articles for Private Companies. Sjåfjell, B. (2009). Towards a Sustainable European Company Law: A Normative Analysis of the Objectives of EU Law, With the Takeover Directive As a Test Case, The Netherlands: Kluwer Law International. The Companies Act 2006. The Companies House. (2003). Companies Act 2006- Model Articles. http://www.companieshouse.gov.uk/index.shtml Slorach, J.S. & Ellis, J. (2007). Business Law 2007-2008, 15th Ed., Great Britain: Oxford University Press. Van Gerven, D. & Storm, P. (2006). The European Company, Volume 2, Cambridge University Press. Read More