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although many of the principles are applicableto the other two types of company.A company limited by shares can be a “privatelimited company” or a “public limitedcompany”. There are various differencesbetween the two types of company, but afrequent procedure is to start with a privatelimited company and then to convert thecompany into a public limited company if andwhen it is decided that the additional status isdesirable or required and the company cancomply with the relevant applicablerequirements.A company is a separate legal entity distinctfrom its shareholders. As of 1 October 2009companies are not required to have anauthorised share capital. A company limited byshares will however need to have a fixednominal value, for example 1 penny per shareand a statement of capital and initialshareholdings must be submitted to theRegistrar of Companies on application forregistration.Since the coming into force of the 2006 Act,the constitution of a company is governedsolely by its Articles of Association. There isconsiderable flexibility over the content of theArticles. A company must register its Articles ofAssociation unless it has model articles.Companies are also required to have aMemorandum of Association. Since thecoming into force of the 2006 Act theMemorandum of Association is now a purelyhistorical document, showing the status of thecompany at the moment of incorporation. It willbe in a prescribed form containing a statementby the founding members of the company thatthey wish to form a company, be members ofthat company and, in the case of a companywith share capital, take at least one shareeach.For companies incorporated prior to 1 October2009, the Memorandum contained an objectsclause, setting out the purpose of thecompany. Depending on the drafting of theclause, this limited the activities that thecompany could carry out. The object clause ofpre 1 October 2009 Companies Act is nowdeemed to form part of the Articles. For 2006Act companies, the notion of the objectsclause is abolished and the objects of thecompany will automatically be unrestrictedunless there are restrictive provisions in theArticles.There are also provisions requiring the displayof the company name, number and registeredoffice address on all invoices, letterheads,notices, etc including electroniccommunications. Under the 2006 Act, a newpower has been introduced for the Secretary ofState to make regulations specifying letters,symbols etc that may be used in a company’sregistered name. If a company is registered forvalue added tax (“VAT”) its VAT registrationnumber must also appear on any invoices andcredit notes.2. DirectorsThe management of a company is conductedby the board of directors. A company musthave at least one director (or two in the case ofa public limited company). Under provisions inthe 2006 Act private companies are no longerrequired to have a company secretary (therequirement to have a secretary is retained fora public limited company).Directors of a company in England and Walesare required as a matter of law to act in thebest interests of the company. The 2006 Actintroduced a statutory statement of directors’duties which comprises seven general duties.The statement also applies to shadowdirectors to the extent that the statement hasreplaced a common law rule or equitableprinciple that applied to shadow directors.The seven general duties are:• duty to act within powers;• duty to promote the success of thecompany;• duty to exercise independent judgment;• duty to exercise reasonable care, skilland diligence;• duty to avoid conflicts of interest;• duty not to accept benefits from thirdparties; and• duty to declare interest in any proposedtransaction or arrangement with thecompany.In addition, since 1986, legislation has existedthat imposes liability on directors formismanagement. The principal liability isknown as “wrongful trading” and may applywhenever a company has gone into insolventliquidation. The court can order that a directorPAGE 6