Company formation & constitution
A company is created by registration at Companies House and is governed by its constitution — principally its articles of association. SQE1 requires you to know how a company is formed and how its constitutional documents bind the company and its members.
What "Company formation & constitution" covers
- Formation requires delivery to the Registrar of a memorandum, an application (form IN01) stating proposed name, registered office, articles and statement of capital, and a statement of compliance (ss.9-13 CA 2006).
- The Registrar issues a certificate of incorporation which is conclusive evidence that the company exists and is duly registered (s.15 CA 2006).
- Under the 2006 Act the memorandum is now a short historical document; the operative constitution is the articles plus special resolutions and certain agreements (s.17 CA 2006).
- If no bespoke articles are registered, the relevant Model Articles apply by default (ss.19-20 CA 2006).
- The articles form a statutory contract between the company and each member, and between members, but only in respect of membership (constitutional) rights (s.33 CA 2006).
- Articles are amended by special resolution (75%) (s.21 CA 2006); provisions may be entrenched so they need more than a special resolution (s.22 CA 2006).
- Alteration must be bona fide for the benefit of the company as a whole; an amendment cannot be used simply to expropriate a minority.
Key cases & statutes
The authorities and provisions most likely to matter for this subtopic:
How it's tested in SQE1
SQE1 uses single best answer questions: a short factual scenario, one precise question, and five options of which only one is the best answer on the law applied to the facts. For company formation & constitution, expect to be asked what the correct legal position is, what a party may or must do, or which outcome follows — with more than one option looking arguable. Reading the facts carefully and eliminating the near-misses is the skill that earns the mark.
Where candidates lose marks
- Overstating the memorandum's modern role — since 2006 it merely records the subscribers' wish to form the company, it is not the substantive constitution.
- Forgetting that s.33 only enforces rights in a member's capacity as member (Eley), not rights given to someone in an outsider capacity such as solicitor.
- Using an ordinary resolution to amend articles — amendment needs a special resolution.
Learn this subtopic in the course
A video lesson, notes and exam-style practice on company formation & constitution.
FAQ
Is company formation & constitution tested on SQE1?
Yes — company formation & constitution is part of the SQE1 Business Law and Practice syllabus (FLK1) and can appear in single best answer questions.
How is company formation & constitution examined in SQE1?
SQE1 tests it by application: you're given a realistic scenario and choose the single best answer from five options. The focus is on using the law correctly, not reciting it — knowing the leading authorities (s.9 CA 2006, s.15 CA 2006) helps.