Legal Eagle: An Example of the “Life – Cycle” of a Company

Nick Gould Partner / Solicitor at www.aria-grace.com has been providing us with his legal advice and expertise for over 12-years here he provides key points a company needs to think about as the business evolves…

• THE COMPANY IS “BORN” IT NEEDS, FOR EXAMPLE:

1. ONE OR MORE SHAREHOLDERS (OWNERS)
2. ONE OR MORE DIRECTORS
3. A BANK ACCOUNT
4. A SPACE (EVEN THE KITCHEN TABLE) FROM WHICH TO OPERATE
5. A BOOK-KEEPER (PERHAPS)
6. A COUPLE OF KEEN BUT NON-PAID HELPERS (ALWAYS USEFUL)

• THE COMPANY STARTS GROWING: IT NEEDS, FOR EXAMPLE:

1. SOME PREMISES
2. STAFF
3. CONTRACTS WITH SUPPLIERS/CUSTOMERS/AGENTS/DISTRIBUTORS
4. IT SYSTEM
5. BRAND PROTECTION
6. AUDITORS

• THE COMPANY GROWS BIGGER – IT NEEDS FINANCE:

1. FROM BANKS [DEBT]
2. FROM THE FOUNDER(S) INVESTORS [DEBT AND/OR EQUITY (SHARES)]

• THE COMPANY ACQUIRES:

1. OTHER COMPANIES (SHARE ACQUISITIONS)
2. OTHER BUSINESSES OR THEIR ASSETS (BUSINESS ACQUISITIONS); AND
3. ENTERS INTO JOINT VENTURE AGREEMENTS WITH INTERNATIONAL BUSINESSES
4. A CREATIVE TEAM

• THE COMPANY GROWS ITS MANAGEMENT AND BRINGS IN SOME “HEAVYWEIGHT” DIRECTORS

• THE COMPANY SET SUP SUBSIDIARIES AND/OR BRANCHES IN SEVERAL NON-UK JURISDICTIONS

• THE COMPANY GOES PUBLIC AND LISTS ITS SHARES ON THE LONDON STOCK EXCHANGE

• THE COMPANY MERGES WITH A SIMILAR BUSINESS IN THE FAR EAST

• THE ENLARGED GROUP OVER-EXPANDS- NEITHER ITS BANKS NOR ITS ARE PREPARED TO MAKE MORE FUNDS AVAILABLE.  THE SUCCESSFUL BUSINESSES ARE SOLD, THE OVERSEAS SUBSIDIARIES ARE CLOSED DOWN.   THE COMPANY IS STILL SHORT OF CAPITAL

• THE GROUP GOES INTO INSOLVENT LIQUIDATION

• SMALL PARTS OF THE GROUP ARE BOUGHT BY EX-EMPLOYEES AND THE CYCLE STARTS AGAIN.

Nick Gould May 2022