16) KEY LEGAL CONCEPTS Flashcards
What is a ‘legal person’?
An indi or a body that has a legal existence, and can therefore, enter into a contract, sue or be sued in a court of law. (includes executors, groups of individuals such as trustees, limited co.s)
How does liability differ between a limited co, a partnership and a limited liability partnership
A company has a certification of incorpn, registered at Companies House. Info at Co. HSe. incl shareholding, and shareholders, names and addresses.
The memorandum and articles of assocn tell nature of co and rules of can and can’t do. eg. power to borrow but restriction on limits of borrowing by Co. (always advised to check if a co. dir is allowed to borrow and how much)
Ltd liability co. shareholders are not liable for debts of co, but stand to lose investment if Co shd be insolvent.
Partnerships: arrangement betn people carrying out a business toge for profit.
Ptners jointly own the co and responsible for liabilities of the ptship. Written agreement shd say propor of invest/profit for each ptnr, and what happens if a ptnr leaves, retires or dies.
Ltd liability ptships: Since 2001. Ptnrs run busi as LLP. Busi is regd with Co. Hse. Their liability is ltd to amts invested in ptship along w any personal guarantees for the busi.
LLP do not have Corpn tac regime, but same way as ptship..each ptr is taxed on self-employed basis, indi share of profits being treated as personal income and subject to IT.
Requirements for a contract to be legally binding
*Offer and acceptance - one pty offers and the other has communicated acceptance…maybe after negotn
*Consideration - Subject of contract is matched by a consideration (not always money)..promise to pay is valid consideration.
* Capacity to contract - Each pty must have legal capa to enter into contract eg minors, those unsound mind
* Contract terms - complete, certain and free from doubt if agent, agent commitments detailed in contract
* Intention to create legal contract - not just informal
* Legality of object - not illegal or immoral purpose
* Misrepresentation - Shd not be coerced, led into contract
ALL CONTRACTS INVOLVING LAND SALE MUST BE IN WRITING AND CONVEYANCING PERFORMED BY DEED
How does agency law affect financial advisers?
It is imp to ascertain how much power and authority an agent has, what they can and cannot do. Sometimes adviser can only give advice wh client may or may not be act on, sometimes they may have discretionary powers to buy/sell investments on client’s behalf.
Agent shd stay w.in authority, sometimes they may act on ‘apparent authority’ whn outside their actual authority. Acting outside authority may result in principal being liable on contract. Ano result is that agent may be liable - third party must be able to hold agent responsible,
Who is an attorney?
A person given legal responsibility to act on behalf of ano person either
in anticipation of inability to manage in future
OR not in UK but has with affairs in UK
Enduring POA not anymore. From 1 Oct 2007,
Lasting POA 1) for health and welfare or 2) Property and Finl affairs
If no POA in place, for people incapable of making own decisions, Court of Protection can appoint a deputy. A deputy’s powers are more restricted than an attorney’s
How is an estate distributed with a valid will, or in cases of intestacy?
With valid will: An executor may be named in will who is resp for distri of estate acc to how specified in will. For this exe appls for grant of probate, a legal authority to carry out instruc in will.
Sometimes, beneficiaries of a will vary the way estated has been distri by executing a deed of variation - usu done for advantageous IHtax purposes, everyone affected over 18 yrs, and shd agree to new terms - deed of varn. MUST be executed w.in 2 yrs of death and HMRC informed w.in 6 mths of execution. SHD NOT BE DONE FOR ANY CONSIDERATION OF MONEY OR MONEY’ WORTH.
Invalid will/no will: An approp person such as spouse acts as administrator and applies for letter of administration, (not probate). Administrator distri estate acc to rules of intestacy.
What are the gen rules of a trustee?
A settlor creates a trust for their assets to be distri for benefit of another person/persons (beneficiaries). Once trust is created, those assets in the trust are no longer owned by settlor. Beneficiaries are named individually or referred to as a group eg all my children
A trustee/trustees administer the trust acc to the terms of the trust…trustee can also include the settlor. If a trustee dies, is replaced.
Duties of Trustees:
Shd act in accordance with terms of the trust deed..al trustees shd agree on action
Must act in best int of beneficiaries…if conflict, shd balance rights of diff beneficiaries, eg. investmt shd be a fair bal to provide income for some beneficisries or capital to others
Trustees who invest shd:
1 need for suitability and diviersification of funds
2 obtain and consider proper advice whn making/reviewing investments
3 keep investments under review
What are some financial restrictions imposed on a person declared bankrupt
Person can ask or creditor/s jointly ask for declaration if more than £5000 is owed.
Bankruptcy ( BRcy)order must remain for 12 mths (person is undischarged bankrupt). Terms of BRcy not complied, can remain in place until official receiver/insolvency practitioner satisfied reqts are met
All indi’s assets (except clothing, household, work-related items) are surrendered to receiver.
Altho all debts are cancelled, hard for indi to obtain credit, (only nominal amts allowed) or employment, may be only able to open basic bank acc
After discharge, by law, reqd to disclose previous BRcy when applying for mortg.
Why do mortg lenders insist that jt mortgs on joint tenancy basis?
In jt tenancy, each jt owner owns a 100% of the prop, on death of one the other will be responsible for payment of mortg. Transfer is automatic and cannot be changed by will or thro laws of intestacy - lenders more sure of being repaid the mortg amt borrowed.
