01 and 02. intro to blp, partnerships Flashcards
what is the aim of the ECCTB?
aimed at preventing abuse of UK corporate structures and addressing economic crime
what is the impact of the ECCTB on set up and ongoing costs for businesses?
- It will introduce identity verification requirements for new and existing registered company directors, people with significant control and those delivering documents to the Registrar of Companies (Registrar) such as company secretaries and authorised corporate service providers such as accountants and legal advisers.
- It proposes to give the Registrar wider powers to allow it to become a more active gatekeeper over company creation and a custodian of more reliable data. This includes powers to verify and decline information submitted or already on the register.
- It will also improve financial information in respect of accounts and reports on the register, so it is more reliable and accurate enabling better business decisions to be made.
- It will give greater protection to some personal information provided to Companies House to limit fraud.
- There will be amendments to the current provisions on company names, the registered office and members to improve transparency and a requirement to maintain a registered email address.
- It will tighten the provisions surrounding limited partnerships.
at what stage in the legislative process is the ECCTB?
- still passing through
- timeline has not yet been set out for it to receive Royal Assent or for the provisions to be implemented
what is limited liability?
shareholders of limited companies or members of LLPs are only liable to contribute the amount unpaid of their share capital or capital contribution
on losses or insolvency
if a business loses money or becomes insolvent, what happens to:
- sole traders
- partners
- shareholders of limited companies
- members of LLPs
- sole traders: personal assets at risk
- partners: personal assets at risk
- shareholders of limited companies: only liable to contribute the amount unpaid, if any, on their share capital (limited liability)
- members of LLPs: only liable to contribute the amount unpaid, if any, on their capital contribution (limited liability)
how do lenders try to circumvent limited liability?
by seeking personal guarantees from shareholders/directors or a company or members of an LLP
what is the difference between joint and joint and several liability?
Joint: Performance by one discharges another
Joint and several: Each party is independently liable for the full extent of the losses
why do lenders prefer to lend to companies and LLPs (rather than a sole trader or partnership)?
a company (and to a lesser extent an LLP) is subject to a higher degree of regulation and disclosure, and therefore the lender may feel comfortable that it has full information against which to measure the risk it is undertaking in lending
what is a partnership?
automatically formed where
- two or more people
- carry on a business in common
- with a view to profit
default provisions of PA 1890
- Section 24(1) Profits and losses: Partners are entitled to share equally in the profits of the business, and must share equally in the losses of the business, even where the parties have contributed to the capital unequally. There should therefore be an express provision in the agreement setting out a profit sharing ratio, otherwise both profits and losses are shared equally.
- Section 24(6) Remuneration: Partners are not entitled to a salary.
- Section 24(8) Decision Making: Decisions arising during the ordinary course of the business are decided by a majority except for any change to the nature of the partnership business which requires unanimity.
- Section 25 Expulsion: A partner cannot be expelled by majority vote unless all of the partners have previously expressly agreed that a majority of the partners can do this.
how is a partnership dissolved?
retirement of a partner
how can the partners’ mutual rights and obligations can be varied under PA 1890?
at any time by their unanimous consent
when can a partnership start trading?
straight away
how do partners pay tax?
each partner is liable to pay their own share of
- income
- CGT
do you need a partnership agreement for a partnership?
no. in this situation the default PA 1890 provisions will apply
what liability do partners have?
unlimited liability
in contract: joint
in tort: joint and several
does a partnership have separate legal personality?
no
what are the 2 different types of partners of limited partnerships?
- limited partners
- general partners
what liability do limited partners (sleeping partners) have?
limited liability
they are not involved in management
what liability do general partners have?
unlimited liability (like a traditional partnership)
are the managers of the business
which act governs limited partnerships?
Limited Partnership Act 1907
what are the registration requirements for limited partnerships?
must be registered at CH
but no requirement to file accounts
for what are limited partnerships commonly used?
as investment vehicles
what is a private fund limited partnership?
- 6 April 2017 a new sub-category of limited partnerships was created
- now commonly used for investment vehicles
- will be subject to greater scrutiny as a result of the ECCTB provisions which are aimed at tackling the misuse of limited partnerships through strengthening transparency and disclosure requirements and enabling them to be deregistered