BL1

Question 1

Differences between public and private limited company?

Answer 1

Public:
- Qualified secretary
- At least two directors
- 50k minimum allotted share capital - paid at least quarter of
- Accounts cannot be abbreviated or exempt

Question 2

Name the forms of unincorporated businesses

Answer 2

1. Sole traders
2. Partnerships
3. Limited partnership (NOT an LLP)

Question 3

Name the forms of incorporated businesses

Answer 3

1. LLPs
2. Priv LCs
3. PLCs

Question 4

Difference between incorporated and unincorporated businesses?

Answer 4

SLP

Question 5

How do the different forms of business mediums pay tax?

Answer 5

Sole, partnership and LLP - income (unless partner is a company) and CGT
Priv and PLCs - corporation

VAT for most

Question 6

What happens when a sole trader retires or dies?

Answer 6

Business ceases

(but their assets and/or business can be sold)

Question 7

Definition of partnership

Answer 7

2 or more people with common view of profit

Question 8

Are partnership assets owned by a general partnership?

Answer 8

No

Owned by partners

Question 9

Are partners in a partnership employees?

Answer 9

No

Question 10

Difference between partnership and limited partnership (NOT an LLP)

Answer 10

Limited partnerships can have a partner whose liability is limited to the amount they invested

But they must not be able to control the business, take decisions on its behalf or remove their contribution

Question 11

Separate legal entity meaning

Most to lose?

Answer 11

Company (rather than individuals who own and run it) is liable for debts and would be a defendant/claimant

Most would lose is amount paid for shares.

Would otherwise lose personal asssets if don’t have funds to pay

Question 12

Salamon v Salamon - what did it establish?

Answer 12

Concept of SLP

i.e. creditors/liquidators can’t go for the individual shareholders/Ds assets/debts

Question 13

Will holding company be liable for acts/insolvency of subsidiary?

Answer 13

No

Even if a company is part of a group, can’t pierce a veil of incorporation and so the parent company is not liable

(would have to get a parent guarantee)

Question 14

What should you obtain if dodgy subsidiary but good parent company?

Answer 14

Parent company guarantee

(if X fails, we’ll step in)

Question 15

Prest v Petrodel Resources Limited

When can SLP veil be pierced?

(i.e. go for their personal assets)

Answer 15

Used company to DELIBERATELY evade or frustrate EXISTING legal obligations by putting a company under his control

Can only use to deprive of advantage would have had under SLP

Nothing to do with equity/fairness

Piercing is rare and specific to facts

Question 16

How are decisions made in private companies?

Answer 16

Directors:
- day-to-day
- in board meeting (or in writing)
- majority vote

Shareholders
- more imp
-shareholders general meeting
- special resolution (75%) - e.g. changing articles
- ordinary resolution (51%)

Question 17

How are decisions made in public companies?

Answer 17

Board of Directors: day-to-day majority vote at board meeting (or in writing)

Certain decisions reserved for shareholders at general meeting

Question 18

Describe liability in a general partnership (who and how much)

Answer 18

Partners are jointly and severally (i.e. argue between self) liable

Question 19

Describe liability in an LLP (who and how much)

Answer 19

Members liable limited to amount put into the business

But members would be liable for wrongful trading

Could be disqualified (as in a company)

Question 20

What could shareholders and directors be personally liable for?

Answer 20

Shareholders:
- liable to pay any unpaid amount on shares
- but not for any debts
- if contribute to wrongdoing (last one not as sure on)

Directors
- personal guarantee
- wrongful trading
- contract w/o authority (since company never entered)
- breach duties
(not exhaustive)

Question 21

How many members in an LLP and what type?

Answer 21

At least two

ALSO a requirement for at least two must be LLP designated (additional administrative responsibilities)

^ can be same people

Question 22

How many owners (i.e. shareholders) in private and public limited companies?

Answer 22

BOTH at least one.

Question 23

How many managers (i.e. directors) needed in private and public limited companies?

Answer 23

Private - at least one

Public - at least two

(I was in a 212 - 2 (LLP) 1 (Private) 2 (Public))

Question 24

What type of individual does a public limited company require (unlike any other of the mediums)

Answer 24

Qualified company secretary

Question 25

How many managers (i.e. directors) are required for an LLP?

Answer 25

at least 2

Question 26

How must decisions be made in general partnerships?

Answer 26

Majority vote of the partners

Three things require unanimity under PA (inc adding a new partner)

Can be varied in partnership agreement

Question 27

How are decisions made in an LLP?

What requires unanimity?

Answer 27

Majority vote of members

Unanimous:
- adding new partner
- changing nature business
- changing terms of contract

Can be varied in an agreement

Question 28

Who owns the business’ property and assets in a) sole and b) partnership?

Answer 28

sole - sole trader personally

partnership - members personally

Question 29

Who owns property/assets in an LLP/PLC/private LC

Answer 29

The company itself

Question 30

Accounting and address requirements for sole traders

Answer 30

No accounting requirements

Just name and address for service

Question 31

Accounting and address requirements for a partnership

Answer 31

Accounts must be produced but not audited or published

Only names and addresses for service

Question 32

Accounting requirements for LLPs

Answer 32

Must be audited and published unless exempt. May be abbreviated.

Question 33

Accounting requirements for companies

What must they do?

Must keep ___ ___ records

Directors must ensure and do what?

Send to who?

Answer 33

ALL must keep adequate accounting records.

Ds must ensure accounts give true and fair view state of affairs.

Prep director’s report (unless small or micro)
and circulate:
- accounts;
- D’s report; and
and
- auditor’s report (if req)
^ to shareholder, auditor, debenture holder and anyone else entitled arts of assoc to notice of GM

File accounts 9m b/6m b/3m after (priv/pub/newly incorp)

small = balance sheet max £5.1m, turnover max 10.2 mil, max 50 employees.
micro-entity = balance sheet max £316/turnover max £632k/max 10 employees

Question 34

What types of security can a sole trader or partnership get?

Answer 34

Fixed only

Question 35

What types of companies can secure fixed and floating security?

Adv and disadv of this?

Answer 35

LLPs, public and private limited companies

Easier to expand

May need to make personal guarantees

Question 36

Are any duties imposed on sole traders by law?

Answer 36

No

Question 37

Are any legal duties imposed on partners in a general partnership?

Answer 37

Any duties under partnership agreement (inc implied under PA 1980)

Fiduciary duties: good faith, not to make a secret profit.

Question 38

Legal duties imposed on members in an LLP?

Answer 38

Fiduciary duties
- good faith
(🙏mbm is indeed)
- account for money received on behalf LLP
(would m)
- render true accounts and full info on matters concerning LLP
(defo loves that0)

Some statutory duties under Insolvency Act

Question 39

Legal duties imposed on Directors of a private and public limited companies?

Answer 39

Statutory duties under Companies Act and Insolvency Act

Question 40

When can a sole trader terminate business?

Answer 40

Whenever they want

Question 41

When and how can partnership be terminated?

Answer 41

1. Notice (written or oral)
2. Bankruptcy
3. Illegality
4. Death
5. Charge
6. Termination of undertaking - if created by undertaking

Dissolved w IMMEDIATE effect

(can modify under Partnership Agreement)

Question 42

When can a public limited company be terminated?

Answer 42

Application to registrar to strike off - company must not have carried out any activity for three months prior; or

Voluntary or compulsory liquidation

Question 43

Does a sole trader require a constitution?

Answer 43

nope

Question 44

Does a partnership have a constitution?

Answer 44

Not formally

But some rules under PA 1980 - often supplemented with a partnership agreement

Question 45

What forms private and public limited companies’ constitutions?

Answer 45

1. Articles of Association
2. Memorandum of Association
3. Certificate of Association
4. Current statement of capital
5. Copies of any court orders/legislation impacting the constitution
6. Any shareholder resolutions impacting constitution
7. Certain agreements involving shareholders

Question 46

Does an LLP have a constitution?

Answer 46

Governed by almost all same rules as companies are under CA 2006 (LLP Regulations 2001 and 2009)

Doesn’t have Memorandum and Articles of Association.

Advise a Limited Liability Partnership Agreement.

Question 47

LLP what to send to CH when incorporation

Answer 47

LL IN01 and small fee

Question 48

Private and public LCs - what must send to CH to incorp

Answer 48

IN01 and small fee
(contains statement of compliance)
Memorandum of association
Articles (unless using default)

Question 49

Directors are also known as ____

Shareholders are also known as _____

Answer 49

Managers

Owners

Question 50

Does an LLP have shareholders? What are the owners called?

Answer 50

No

Owners are called members

Question 51

Requirements for public limited companies

Answer 51

1. Constitution states it is a public company
2. Words PLC or Public Limited Company at end of name
3. Owners must invest a minimum of 50k allotted share capital, up to a quarter of which paid
4. Have reached certain size, reputation and growth
   (SRG such real grievance can’t set up immediately!)

Question 52

Advantages and disadvantages of PLCs

Answer 52

• More prestiguous
• Raise money by offering shares to public

:(
- More scrutiny and regulations
- Admin burden e.g. secretary

Question 53

Who can private companies offer shares to?

Answer 53

People already connected with the company or other targeted individuals

Question 54

When does a company come into formation?

Answer 54

Date of incorporation with CH

Question 55

What do you get from Companies House once officially a formed company?

Answer 55

Certificate of Incorporation

Question 56

What’s a company limited by guarantee?

Answer 56

Shareholders don’t buy shares but guarantee debts up to a specified amount - usually £1

Question 57

When might SLP not be as much of an issue for partnership?

Answer 57

Professional indemnity insurance

Question 58

Adv and disadv LLP

Answer 58

Adv LLP
- SLP
- Floating charges
- Income tax
(retain personal allowance)
FLEXIBLE:
- Not subject CA strict requirements
= more freedom decisions
- No shareholders = more control
- Not required submit as many CH docs

Disadv
- public info
- file accounts/admin - CH
(e.g. AP01/TM01/register w CH)
- claw back provisions insolvency
(floating / preference / )
- misfeasance / wrongful / fraudulant
- can’t fund via shares

Question 59

Ongoing admin responsibilities for private and public limited companies

Answer 59

Minutes of meetings
Maintain statutory registers
File certain docs CH
Accounts audited and file at companies house

Question 60

How is flexibility limited for private and public companies compared to other forms of business mediums?

Answer 60

Bound by CA 2006
Limits how many and what decisions can make
Directors for some / shareholders for some
Can’t just terminate business like that.

Question 61

What must companies and LLPs reveal to the public?

Answer 61

• Certain financial info
• Keep company registers open for inspection on payment of fee (failure criminal offence)
• Info re directors, shareholders and many significant decisions (must also file w Registrar)

Question 62

What’s a floating charge?

Answer 62

Security/loan over all of a business’ assets (present and future)
Can sell these assets
Helps growth bcos can do lots of borrowing
Crystallizes when fail to repay loan (fixes on remaining assets - city have a right over it)

Question 63

What’s a fixed charge?

Answer 63

Charge over specific property e.g. machinery

Question 64

How can a company apply to Companies House (practical Q)?

Answer 64

Online, post or software

Solicitors/accountants may do for fee

Solicitors may have shelf company can use

Question 65

What must Certificate of Incorporate state?

Answer 65

• Name and registration number
• Date incorporation
• Whether limited or unlimited
  (if limited, by shares or guarantee)
• Private, public or LLP
• Registered office E/W or S/NI
• Signed by registrar or official seal

Question 66

When must company register with HMRC for corporation tax following incorporation?

Answer 66

If submitted CH application by:

• post or TP software, HMRC application within 3 months of starting to do business
• Online - done automatically

Question 67

Name requirements for sole and general partnerships

Answer 67

No requirement to register

Must not infringe trademarks

Own name(s) or business name

Question 68

LLP, private and public limited company name requirements

Answer 68

Not to infringe trademarks

Register at companies house

Can’t be too similar to an existing company

End in LLP, Ltd or Plc (or Welsh equiv)

No connection with gov’t department

Can’t contain sensitive words (inc if misleads re location/regulatory body)

Not offensive

Question 69

Do you need inform Companies House if have a trading name?

Any requirements to trading name?

Answer 69

No - can do after incorporation.

Similar to usual name requirements.

Question 70

How to prevent trademark infringement?

What could be liable for if don’t?

Answer 70

When picking name, carry out trademark search (diff to CH search)

Too similar - could still be sued in tort of passing off

Question 71

Where must a registered office be and what should it be used for?

Answer 71

Same part of UK

Official docs (inc CH) to be sent to

Where certain internal CH docs must be kept

Question 72

How can a registered office be changed - i.e. board or shareholders?

Form?

How long to take effect?

Answer 72

Board resolution

AD01
(a don’t 1nt to change address !!!!!!)

Can send docs previous office for 14 days after change

Question 73

Requirements for directors and what info needs to be supplied about them on IN01?

Answer 73

• Name, residential address, service address and DoB

Question 74

Who will director’s residential address be made available to?

Answer 74

Credit reference agencies and specified public authorities (CRAs and SPAs)

Question 75

When can a director keep their residential address private from CRAs and SPAs?

Answer 75

Application
Must be proof of serious risk of violence or intimidation to them/family
(e.g. if do animal testing)

Question 76

what info about company sec needs providing IN01?

Answer 76

name and service address

not resi

Question 77

Responsibilities of a company secretary and do they take away any from the directors?

Answer 77

Admin tasks

(e.g. filing Companies House docs and keeping board minutes )

No

Question 78

Who are a company’s subscribers and what info about them needs including on IN01?

Answer 78

FIRST shareholders
Name, address and details of shareholdings

• address doesn’t need to be residential.
• no need DoB

Question 79

Are there max numbers shareholders?

Answer 79

No

Question 80

What is included in a statement of capital and when does it need to be provided?

Answer 80

part of IN01

1. Class - ordinary or preference
2. Number of shares
3. Aggregate nominal value
   (number of shares multiplied by nominal value)
4. Total amount unpaid (if any)
5. Prescribed particulars for each class
   - i.e. any rights attach to certain class
   e.g. right to dividend
   (see sep card)
6. Details for each ‘subscriber’
   - name
   - address
   (breakdown of above)

Question 81

What must prescribed particular include?

Answer 81

(part of IN01 under statement of capital)

For each class of share (ie ordinary and preference):

1. What share of dividends they receive;
2. Can they redeem (ie exchange) shares for money;
3. Whether can vote on certain matters; and
4. How many votes their shares entitle them to.

Question 82

Nominal value meaning

Answer 82

What shares were originally purchased for

(e.g. £1 share)

Question 83

How can more shares in a company be allotted?

i.e. what decisions required

Answer 83

Board meeting decision

Shareholder resolution approves

Directors execute

(unless articles otherwise)

Question 84

What may articles of association include?

Answer 84

(just example in textbook not imp)
- - Notice period for board meetings
- Minimum number of directors for valid board meeting
- Whether board members can refuse a new shareholder
- When director can be prevented from participating in a board meeting

Question 85

Formality requirements for a memorandum?

Where kept?

Answer 85

• Statement that subscribers:
  1. wish to form a company
  2. agree to be subscribers; and
  3. take at least one share each
• Signed
• In the correct form (copy of this on CH)

Question 86

Something you may want to change with model articles

Answer 86

MA 14

Directors prevented from voting and counting in quorum if personal interest

e.g. small business - probs wouldn’t have enough directors to vote at meetings

BUT cannot remove statutory duty to declare nature and extent

Question 87

When do model articles operate by default?

Answer 87

If not provide another set of articles when incorporating

Question 88

Purpose of articles of association

Answer 88

Internal rulebook

Question 89

Does Companies Act 1985 apply for companies incorporated before 2006 Act?

How do these companies usually differ?

Answer 89

No.

Pre-2006 use Table A instead of model articles unless updated

Question 90

Key differences Table A and Model Articles?

Inc notice periods for both.

Answer 90

Table A:
- 21 days notice GM if special resolution

Model
- at least 14 Clear Days’ notice for GM - no diff if SR

95% table a consent short notice

table A: OR to remove ASC and OR to activate authority to allot

Question 91

How can Articles of Association be amended?

How long to tell CH?

Form?

Answer 91

Special resolution

Copy new articles - 15 days of them taking effect

Copy of special resolution - 15 days of GM

(doesn’t say anything about which form so doubt need one)

Question 92

What two types of provisions does the CA 2006 contain? How can you distinguish the two?

Answer 92

Voluntary and mandatory

Voluntary - can exclude/amend in own articles.

Will say ‘subject to company’s articles’

Question 93

What is classed as a person with significant control?

Answer 93

OVER > 25% of voting rights; or
OVER > 25% of shares; or
Right to appoint or remove majority of Board of Directors

(nb generally just shareholders)

Question 94

How must you initially tell CH about persons of significant control?

What are the thresholds and why?

Answer 94

IN01 - tick box to indicate whether:

1. Over 25% - 50% (of shares/VRs)
2. 51% - 75%;
3. 75% or more

Because:

1. Can block special resolutions and possibly ordinary
2. Can block ordinary
3. Can pass special

(box guides you on this)

Question 95

Why are the specified thresholds for persons of significant control selected?

Answer 95

1. Can block special resolutions and maybe ordinary too
2. Can block or pass ordinary resolutions
3. Can pass special resoluto

Question 96

What does a public company need to do before it can start trading?

Answer 96

Trading certificate which proves it can:
1. Trade and borrow; and
2. Satisfied allotted share capital requirements

And submit this to Companies House on SH50

Question 97

When can a private company become a public company?

What must be passed?

Is trading cert required?

Answer 97

Special resolution approving:
- approving re-registration of thecompany
- altering name (add Plc or Welsh equivalent)
- altering articles so in suitable form

At time SR passed, must have satisfied share capital requirements

Trading certificate not required

Question 98

How can a private company apply to be a public company?

ie what must they file? form name?

Answer 98

File at CH:
- Special resolution
- Application for reregistration (RR01)
- Fee for re-registration
- Revised articles
- Balance sheet; and
- auditor confirmation or valuation report re any allotted shares between date of balance sheet and passing of special resolution

Question 99

What are shelf companies?

How to make amendments?

Answer 99

Companies which law firms have already set up so clients can use at late notice

Usually two directors and two shareholders who own £1 ordinary shares each (employees)

Before first board meeting, stock transfer form

At board meeting - appoint new directors

Once taken effect, resign

Question 100

Benefits of shelf companies?

Answer 100

Quicker and cheaper than CH same-day registration service

Question 101

Decisions for board to make post-incorporation?

Answer 101

1. Want a chairperson?
2. Want a bank account? Rules on who can spend what etc.
3. Company seal - do we want one to execute docs?
4. Do we want to change name?
5. Accounting reference date
6. Appoint auditor
7. Service contracts (employment contracts for directors - terms? dish any out?)
8. Insurance - what type?

Question 102

How to change company name?
What must be sent to CH?

Answer 102

Special resolution or as per articles

Submit NM01, fee and special resolution

Question 103

What should directors do at first board meeting? (not decisions to make but actions to take)

Answer 103

1. Complete HMRC corporation tax form
2. Register company with HMRC to arrange PAYE tax deductions and National Insurance payments
3. Approve VAT application (although can now do whilst registering company)

Question 104

Effect of a chairperson

Answer 104

Casting vote in event of board resolution being tied

• Prevent stalemate but more control

Question 105

How can documents be signed if using a seal?

How can a company choose to use a seal?

What resolution required?

Answer 105

Board resolution

Under Model Articles - if using seal, must also be signed by one authorised person and witnessed
^ can disapply

Question 106

What will a company’s accounting reference date be?

How can this be changed?

What form?

(not limits on requirements of changig)

Answer 106

Last date of the month in which they were incorporated

Can change (e.g. to align with tax year)

(e.g. 2 November incorporated, would be 31 November)

Board resolution
AA01 form

(aa = accounting action)
(board ‘actions’)
🥋

Question 107

Rules around amending accounting reference date?

Answer 107

Shorten as many times as like

Can’t last over 18 months

Can amend more than once every 5 years

Question 108

Which companies can be exempt from auditing or abbreviated accounts?

Answer 108

Small, micro and dormant

Small:
- balance sheet not more than £5.1 mil
- turnover not more £10.2 mil
(double ^)
- max 50 employees

Micro:
- balance sheet max £316k
- turnover max 632k
- max 10 employees

Question 109

Who awards service contracts?

whats the phrase!

Answer 109

Board of directors can if two years OR less

If guaranteed term for over two years, need shareholder ordinary resolution (but will still be Directors who enter)

Question 110

Duties of LLP members?

Answer 110

Duties to each other governed by agreement between them

Fiduciary duties - good faith, account money received and render true accounts

Question 111

Which company decisions are reserved for shareholders (inc examples)?

Answer 111

1. Decisions which shareholders alone make and director’s cannot reverse
   (e.g. changing articles of association and changing name of company - both special resolutions)
   directors must ensure correct paperwork completed/CH notified
2. Decisions which give directors PERMISSION to enter certain contracts which carry particular risks or where directors could benefit personally from contract
   (e.g. SPT)
   (NB shareholders can never enter contracts on behalf company - just permit Ds to)

Question 112

How do directors make most decisions and what are these decisions called?

How else can they make?

Answer 112

Collectively in board meetings

Board resolutions

No - can delegate (e.g. HR Director)

Can also do written resolution if unanimous

Question 113

What notice is required for board meetings?

Answer 113

Reasonable.

What is reasonable depends on facts.

e.g. few minutes if same building and small company

Question 114

How should notice for board meeting be given? (who, method, what should it state etc)

Answer 114

State time, date and place.

If not intended meet in same place, state method (e.g. Teams).

Writing not required.

By any director or company secretary.

MA 9

Question 115

Quorum requirements at board meetings?

What is the MA number?

what if not comply

rly important

Answer 115

Minimum 2.

Unless only one director

(can count for part of meeting where other resolutions being passed)

If not complied with, meeting and decision invalid.

MA 11

Question 116

What must a director always do if they have a personal interest in a proposed transaction or arrangement with the company?

exceptions

Answer 116

Declare NATURE AND EXTENT to DIRECTORS

And even then, can’t vote or count to quorum - unless articles amended

don’t need declare if:

1. Cannot reasonably be regarded as conflict of interest;
2. Other directors already aware or ought reasonably to be; or
3. Concerns terms of their own service contract that are to be considered by directors

(but best practice always declare)

Question 117

What can and cannot company articles amend model articles regarding an interested director?

Answer 117

CAN allow to vote/count in quorum

CANNOT remove obligation to declare

Question 118

How is voting carried out by board of directors in company?

Answer 118

In meeting.
- Show of hands. 👋
- Each director one vote.
If chairman and a tie, can have casting vote (in favour).
Simple majority (OVER 50%) always
(no poll vote since they don’t have shares)

Or by resolution in writing or other method if UNANIMOUS decision

Question 119

Difference between ordinary and special resolutions?

Answer 119

OVER (!!!) 50% vs at least 75%

(so 50.1% vs 75%+)

Question 120

What are general meetings and how are they called?

Answer 120

Shareholders meetings

Board resolution

Or can be requisitioned by shareholders

Question 121

how often must a company hold a general meeting?

Answer 121

Public - at least annually

Private - no requirement

Question 122

How can GM be called?

(who to, how and what it must contain)

Answer 122

• DIRECTORS (not sec) give notice to every shareholder, director and auditor and anyone else under arts of assoc
• Given in hard copy, electronic, website or combination
• Set out:
• Time, date and place (DTP)
• General nature of business dealing with
• If SPECIAL resolution proposed, its exact wording
• Each shareholder’s right to appoint proxy to attend on their behalf

NB: this is diff to a notice to consent to short notice

Question 123

Notice period for general meetings?

Answer 123

14 CLEAR days from date notice deemed received by shareholders

48 hrs after if post or email
- otherwise deemed received then and there

Clear = not day of issue and not day of meeting - also any day regardless bank hol/weekend etc

(so 14 days in between those dates)

(e.g. issued on 1 March, would be 16 March)

(add 2 days on if post or email)

(if received on a Monday, should be a Tuesday)

Question 124

When will notice be deemed as received for shareholder meeting?

Answer 124

Handed = there and then

Posted or emailed = 48 hours after sent

Question 125

Quorum requirements for general meeting?

Answer 125

Two

Unless one shareholder, then one.

ma 11

same as Ds!

Question 126

What is a poll vote?

Answer 126

Shareholders vote in GM on one vote for each share they own
(usual = one vote each)

Question 127

short notice :

Answer 127

are all/majority in number of shareholders; and

together hold not less than 90% in nominal value of shares giving right to attend and vote

^ GM of Company to be held at DTP

…

agree meeting (and any adj) deem duly called

Resolutions set out in notice convening meeting may be proposed and passed

Notwithstanding

Dated: __
Signature of ___ : _____

(95% table A/public)

Question 128

How is a shareholder written resolution sent?
Inc who sent to?
Must include…?

Answer 128

Board:
- hand, post, email or website
the proposed OR or SR

to ELIGIBLE SHAREHOLDERS only.
i.e. those entitled to vote on resolution
(so not auditor)

Must include:
- how to signify; and
- deadline for returning.

Nb: shareholders can requisition

Question 129

When will a shareholder written resolution be passed?

How is voitng calculated?

Answer 129

SOON AS majority of eligible members SIGNIFIED (ordinary / special)

One vote per share (!)
^ makes sense that this is why only do poll vote in meetings

Question 130

A) If a section of CA states company may decide something, who makes that decision?

B) If it states resolution of members required, what is required?

Answer 130

A) Directors

B) Ordinary resolution shareholders

Question 131

Can arts of assoc amend the % VRs of shareholders who can request written res?

Answer 131

can reduce below 5%

can’t inc above 5%

power to the people !

Question 132

When and how can shareholders request the company to circulate a written resolution?

What can you require?

How long company to send?

What must be paid?

Answer 132

5% paid up VRs
- articles can reduce below 5% but not inc above
(regardless pub/priv)

Can require circulate with statement up to 1000 words on subject matter

must circulate eligible shareholders within 21 days

those Shareholders must pay company’s expenses in complying.

Question 133

How can shareholders require directors to call a general meeting?

Do they need to pay expenses?

Answer 133

Request from shareholders holding at least 5% paid-up capital and of voting rights

Must state general nature of business to be dealt

(no need to pay expenses)

Question 134

Penalty for company failing to comply with Companies House requirements (failing file docs etc) (under Companies Act)?

Answer 134

Fine for company AND all its defaulting officers

Usually criminal offence

Question 135

What internal CH docs must company maintain?

How long?

Answer 135

• Register of members and register of directors (i.e. statutory books)

For 10 years:
- minutes of all GMs and board meetings
- outcome of any written resolutions

(think of it as written resolutions are like the equivalent of minutes)

Question 136

Where must internal companies house docs be kept for companies?

How if using alternatives/forms?

Answer 136

1. Registered office; or
2. SAIL address
   (notify CH of address on AD02, moving to SAIL on AD03, from SAIL to office on AD04);
   (AD01 for registered, AD02 for SAIL etc)
3. Statute books
   - register members and directors only
   - can elect to just keep on CH central register.

AD for ADdress

Question 137

What is a small or micro company?

Answer 137

Small:
- balance sheet under £5.1m
- turnover £10.2m or under;
(double)
- no more than 50 employees

Micro-entity:
- balance sheet under £3126k
- turnover £632k or under
- no more 10 employees

(B comes before T - balance. turnover.)

Question 138

What are small and micro companies exempt from?

Answer 138

• Auditing
• Preparing director’s report

still need send CH

Question 139

Time limit for filing accounts and director’s report with companies house?

Answer 139

• Private: 9 months BEFORE accounting reference period ends
• Public: 6 months before
• Newly incorporated: 3 months AFTER

Question 140

What is a confirmation statement, how is it sent and when is latest date to send it?

Answer 140

Confirming CH info correct

Within 14 days of company’s confirmation date (anniversary incorporation)

Late = criminal offence

Question 141

Who are company officers?

Answer 141

Director, company secretary and auditor

NOT SHAREHOLDERS

Question 142

Role of company secretary? Must they be a human?

What if there is no company secretary in a company?

Answer 142

• Varies between companies
• Deal with legal administrative requirements (under CA)
• Usually board/GM minutes
• Smaller companies - usually just an extra responsibility
• If no secretary, can be performed by a director or someone authorised by Ds
• Can have a corporate one (but will act through the appointed human)

Question 143

How can a company secretary be removed from office? Board or shareholders?

Answer 143

Resigned or by board resolution

Question 144

What form to appoint secretary and when must it be sent to CH by?

What form to notify if resigned/removed and by when?

Answer 144

• AP03 (human) or AP04 (corporate secretary)
  14 days appointment
  (or IN01)
• Keep register of secretaries with particulars
  (if private can just ensure info on CH central register)
• resigned/removed - 14 days on TM02 and amend register
• change on CH03 (human) or CH04 (corporate) and amend register

Question 145

Role of auditor (inc what report must contain)?

Who must they send report to?

What must do if think fraud?

Answer 145

Prep report on company’s annual accounts to send to shareholders.

State on report if accounts give** true and fair view** / prepared properly

Qualified if think fraud/unethical dealings

Question 146

Who appoints an auditor and what requirements must you ensure they fulfil?

Answer 146

Directors first time

After that, either directors or shareholders by ordinary resolution

Must be:
- Independent (i.e. not connected with company)
- Qualified (certified accountant)

(high IQ to be auditor!

(Usually appoint accountancy firm)

Question 147

When to reappoint auditor?

who appoints?

Answer 147

Usually deemed reappointed automatically each year.

Exceptions include:
- appointed by directors
(first auditor will have been)
- articles require reappoint each year

^ so better if hsareholders appoint

Question 148

Will auditors ever be liable?

Answer 148

Case law established no duty to shareholders or potential shareholders when doing audit
- would have to be proximity between them.

Could be sued negligence by company.

Two criminal offences:
a) knowingly or recklessly including misleading, false, deceptive material
b) omitting certain statements which C Act requires to include

Question 149

How can an auditor be removed?

Answer 149

Anytime

Shareholders

Ordinary resolution

Shareholders must give SPECIAL NOTICE to company
- i.e. notice intent remove 28 days before GM itself
(not 28 days before call)

(can resign by giving notice)

Question 150

What must auditor do if resigned or been removed?

Answer 150

Must ALWAYS (if removed or resigned) deliver statement to company explaining circumstances re ceasing office

Question 151

Once company running, how can you become a new shareholder?

Answer 151

1. Obtain from existing shareholder (buy, receive as gift or transmission if dies/bankrupt and decide become shareholder instead transferring to a TP)
2. Allotted by company
   (create and sell new shares)

Question 152

How long for a company to register 1. a transfer and 2. allotment of shares?
(companies)

Answer 152

Soon as practicable

Latest two months after transfer lodged

Question 153

How long to issue share certificate?

Answer 153

Within 2 months of allotment

Or

2 months of transfer being lodged

(and old certs must be destroyed)

Question 154

What is a PSC register / what must it include?

do u need to maintain if no PSCs?

Answer 154

• OVER 25% voting rights; or
• OVER 25% shares; or
• right to appoint/remove majority of directors; or
• right to exercise or do actually exercise signif influence or control over the company (i guess de facto and shadow Ds)

(maintain even if no one has significant control)

Question 155

What forms must be filed with CH re PSC and deadline?

Answer 155

• PSC01 by any person appearing first time
• PSC02 any legal entity first
• PSC04 individual any chance of details
• PSC05 corporation any change of details

14 days from date company made change in PSC register

(14 y/o when do PSC)

Question 156

Rights of shareholders if company or other shareholders do not abide by articles of association?

Answer 156

Breach of contract

cos articles act as contract between shareholder and company, and shareholder to shareholder

I and —-

e.g. against other shareholder if infringed voting rights or right to profits

Question 157

Effect of a shareholders’ agreement and difference to articles?

Answer 157

Binds parties who are agreement to it

Get a remedy if term breached

Articles apply to all shareholders (not just those signed up)

Articles apply to a buyer of transferred shares, shareholder agreement only if they sign up to it.

Term must relate directly to their rights.

Question 158

Advantages shareholders agreement?

(there are 3 !)

Answer 158

1. Confidential
   (no need to lodge at CH)
2. Control minority shareholders

• sometimes provide veto
• little power under articles

^ eg won’t vote in favour of changing articles unless all in favour

3. Some rights and obligations better suited to contract than articles, since about things that are wider than the shares themselves
   - e.g. that certain shareholders must lend money to company

Question 159

matters commonly in shareholders agreement?

Answer 159

1. Restrictions on transferring shares
   (we 😍 want to keep !)
   - e.g. deed of adherence
2. Bushell v Faith clauses

”[] shall have weighted voted rights at a RATE of on any res to remove as D”

3. Non-compete clause
4. must vote against removal of other as d
5. must do certain things
   - e.g. lend

Question 160

What can a shareholders agreement NOT restrict?

Answer 160

Can’t restrict shareholders from voting particular way in board meetings if they are also a director

Question 161

1. Rights of shareholders if a GM is not being held
   - other than calling GM/WR?
2. % requirement to request a written statement re matters to be dealt w at GM?

How many words?

Answer 161

1. Apply court call GM if would not be held otherwise
   - e.g. shareholders refusing to attend so quorate
2. Circulation of written statement re anything to be dealt with at GM: 5% voting rights
   (or 100+ shareholders who have paid up to £100 on shares)
   ^ max 1000 words
   (this is diff to written res statement)

Question 162

Non-voting rights of company shareholders?

Answer 162

1. dividends
   if profits available and directors recommended amount, which shareholders approve.
2. Apply company wound up if** just and equitable**
3. Remove director or auditor
4. Inspect for free:
   (a) minutes GMs and shareholder resolutions
   (not always board mins)
   (b) all statutory registers
   (c) D’ service contracts and indemnities
   (c) buyback shares contracts
5. Receive copy of annual accounts and reports
6. Seek injunction to restrain company doing something constitution prohibits

Question 163

When is a company a subsidiary of a holding company?

Answer 163

1. Other holds majority of voting rights; or
2. Other company is a shareholder with right to appoint or remove majority of directors; or
3. Other company is shareholder and has agreemnent w other shareholders that it gives it control majority VRs; or
4. Subsidiary of another subsidiary of the company

Question 164

What is a wholly owned subsidiary?

Answer 164

No other shareholders than the holding company or any of that company’s subsidiaries
(or people acting on behalf of self or its subsidiaries)

Question 165

Joint shareholders - what is this and registration requirements?

Answer 165

Where two or more individuals jointly hold one share

Register of members must record both names but only one address

Question 166

Why would a large company operate several companies within one group structure (and what would these companies be called)?

Answer 166

Limit liability - if one is wound up, others continue operating (would just lose shares in that company)

Subsidiaries

Question 167

What are ordinary shares?

Answer 167

Give shareholders right to:
- attend and vote GM
- receive declared dividends

Sometimes ordinary A and ordinary B shares
- can treat shareholders differently
- but rules must be in articles
(if not, shares equal)

e.g. issue dividends to ordinary A but not ordinary B

Question 168

What are the two types of shares in a company?

Answer 168

Ordinary shares

Preference shares

Question 169

What are preference shares?

Answer 169

enhanced rights above ordinary shareholders

must be set out in articles

e.g. guaranteed right to dividends, ordinary shareholders only receive if profits left after preferential shareholders paid

Often give up voting rights in return

Will be cumulative or non-cumulative

Question 170

Cumulative vs non-cumulative shares

Answer 170

Types of preference shares

Cumulative: paid any missed dividends from previous years as well as current years if sufficient profits available
(their right to previous years ranked ahead ordinary shareholders right to shares for current year)

Non-cumulative: if not paid in particular year, lose right to that year’s dividend and no right to receive in future
(if poor financial year tough)

Question 171

What are participating shareholders?

Answer 171

Available for preference shareholders only

A right to profit share in addition to or instead of a fixed dividend

As set out in articles

e.g. 10% more than whatever declared dividend is
e.g. X% of company’s profits

In addition to their other preference share rights

Question 172

Recourse available to minority shareholder who is unhappy with running of company or relationship with other shareholders / directors?

Answer 172

1. Unfair prejudice petitions
2. Derivative claims

(no point using rights to requisition WR/GM etc if don’t get on with shareholders)

Question 173

UNFAIR PREJUDICE PETITION

What can shareholder do?
When can they bring?
When hard to argue?

Answer 173

Any shareholder apply court for order for remedy where feel unfairly prejudiced as a SH because either:

1. Company’s affairs conducted in unfairly prejudicial manner to interests of some or all of its members (inc them); or
2. Actual or proposed act or omission of company is/would be so prejudicial

^ assess objectively (bystander believe unfair)

harder to argue if permitted in articles

Question 174

Examples of what would be unfair prejudice petition?

Answer 174

• Diverting opportunities to competing business where majority shareholder has an interest
• Excessive pay to directors
• Excluding from management when shareholders’ negotiations (during incorporation) made think would participate
• Shareholders remove auditor because disagree on audit procedures

Question 175

What will court do if agree unfair prejudice occurred?

Answer 175

1. Buyback
   (company or shareholders)
2. Can’t change arts w/o court permission
3. Permission unfairly prejudiced brings derivative

Question 176

Disadvantages of unfair prejudice action

Answer 176

Expensive and time-consuming

Court requires a lot of evidence

Hard to get as most held by company

And need an expert’s report to put value on shares or show prejudiced

Question 177

What are derivative claims and when can they be brought/who by?

Who is the claimant?

Answer 177

Instigated and brought by shareholder

Company is the claimant
(usually proceedings board decision but allows shareholders to instigate since board aren’t acting)

D can be anyone

BUT USUALLY a director

For wrong done to company

Due to act or omission of DIRECTOR

Which is a breach of duty or breach of trust
(Ds duties. Fiduciary profit etc)

Question 178

First step of derivative claim?

(before get to hearing)

Answer 178

1. issue claim
2. apply court permission continue claim
3. court WITHOUT hearing will allow if prima facie case for continuing
4. If find a prima facie case, may give directions on evi company must provide
   (may adjourn to allow to obtain evi)
5. List hearing to determine whether to give permission to proceed

Question 179

When will court not give permission for derivative claim to proceed?

Answer 179

1. Applicant not promoting success of company
2. The act / omission has not occured (even if authorised); or
3. Act/omission already occured and was authorised

Question 180

What should court consider in derivative claim?

Answer 180

• good faith? ⛪️
• how imp someone acting in best interests of company would view continuing as being?
• authorised?
• had company decided not to pursue claim?
• could the shareholder pursue a different course of action?
• evidence of independent shareholders
  (starbs guy) (parishiners)

Question 181

Costs for derivative claim?

Answer 181

Paid by shareholder if refused

If permission granted, company meet all legal costs AND the other party’s legal costs if claim is UNSUCCESSFUL

^ usual rule

Question 182

What is a substantial property transaction?

Answer 182

Director in PERSONAL capacity or someone CONNECTED with them
(immediate relative)

Buys from or sells to company

A non-cash asset

Of substantial value

Question 183

If company wants to enter a substantial property transaction, what is required?

What if director is also a director of holding company?

Answer 183

Shareholders consent via ordinary resolution

AND

If director / connected person is also a director of the holding company (or connected with one of its directors)

…must be approved by ordinary resolution of parent’s shareholders

Question 184

Who is connected with a director ?

For purposes SPT and ratifying breaches

Answer 184

1. Members of fam
   i.e.
   spouse, child, stepchild, parents, partner - enduring reli - or child/stepchild of director’s partner -

NOT siblings, grandparents, grandchildren, aunt/uncle, nephew/niece

2. company in which
   D and/or persons connected (above) individually or collectively own in a comp:
   - AT LEAST 20% shares; or
   - OVER 20% voting rights

e.g. D owns 10% and daughter owns 10% - together they own 20%

Question 185

What is a non-cash asset for purposes of substantial property transaction?

Answer 185

Non-cash = Property or any interest in property other than cash
(so NOT a loan)

Question 186

When will a resolution not be required for SPT?

Answer 186

• acting in capacity as member
• WHOLLY owned subsidiary of the other company; or
• is between a holding and subsidiary; or
• between two wholly owned subs of same holding company

Question 187

Effect of a breach of substantial property transaction?

Answer 187

Voidable, account and indemnify seems to be common trend in business law

Transaction voidable

AND

May order any of the following to account for gain and indemnify for any loss:

• Director who company entered arrangement with;
• The connected person AND that D; and
• Any director who authorised the arrangement

(NB: first 2 could alternatively make director of holding company liable)

Question 188

Acronym for board meeting?

Answer 188

Can Newly Qualified Really Advise

Can - calling
Newly - notice
Qualified - quorum
Really - resolutions
Advise - administration

Question 189

When is special resolution required?

Answer 189

• change company name
• forcing directors to take or refrain from taking specified action
• amend articles of association
• reduction in share capital
  (dont think need to know) (presume it means share buyback out of capital)
• disapplication of shareholder pre-emption rights
  (offered shares being allotted)
• voluntary winding up
• Changing the company’s status by registration - e.g. from private to public (re-registration)

Question 190

Decisions for directors only? (default under Model)

Answer 190

• Changing accounting reference date
• Changing address/registered office
  (admin stuff)

others just added myself - there are so many others lol
- recommending dividends
- entering contracts
- commencing liti
- calling GM (although sometimes sharheolders can)

Question 191

Decisions for shareholders?

Answer 191

• Name change (special)
• Amending articles
• Remove director or auditor (ordinary)

THERE ARE OTHERS

e.g.
- re-registration
(although maybe other ones are approving stuff actually i guess)

Question 192

What businesses can use written resolutions?

Answer 192

PRIVATE companies only

Public CANNOT!
(i dont think LLP can either but can’t find clear answer - no statutory authority anyway)

Question 193

Decisions for shareholders AND directors? And one for either or :)

Answer 193

Entering SPT

Allotting / transferring shares
(i.e. directors initiate, shareholders approve and directors execute)

Appointing director (directors OR ordinary shareholders) !!!!!!!!

Question 194

What cannot be passed by written resolution?

Answer 194

Removal of director
Removal of auditor before their term of office expired

^ need right to make representations defo if D anyway

Question 195

Deadline for signifying shareholder written resolution?

Answer 195

Midnight on 28 days following circulation of resolution (dm when received)

(e.g. sent on 1st, lapse date is 28th at midnight) - day sent treated as day 1

Unless articles state otherwise

(i.e. lapse date)

Question 196

When must Directors respond to shareholder requisition for general meeting?
When must meeting be?

Answer 196

must call it within 21 days

and general meeting itself must be no later than 28 days from date of notice

^ so max of 7 weeks after notice

(so ideally don’t wait 21 days !)

Question 197

Minimum time period between circulating written resolution and it passing? When will it be passed?

Answer 197

No minimum time period.

Once signified and returned by requisite percentage eligible numbers.

(can be pretty fast)

Question 198

Percentage shareholding required to request a poll vote?

Answer 198

10%

Same public / private

Question 199

SPT - when is a director or connected person CONNECTED TO a company?

Answer 199

own 20% shares; or
right exercise OVER 20% voting rights

could be combo of shareholding
(they could hold 10% and their spouse 10%)

Question 200

What is substantial for purposes of SPT?

Answer 200

• £100k or more;
  OR
• more than £5k and more than 10% company’s net asset value

Question 201

How do shareholders vote?

Answer 201

Each has one vote at GM - regardless of shareholding

Show of hands at GM

Or poll vote

Question 202

When can poll vote be requested?

Answer 202

Before GM

At GM before voting

At GM after voting (via hands) - would override the hand vote

BUT NOT AFTER

(makes sense - could be like days after and board start making decisions then they change mind)

Question 203

Standard order of meetings?

Answer 203

(notice)
1. Board meeting 1

(notice)
2. General meeting

(notice)
3. Board meeting 2

Sandwich !

Question 204

When will shareholder have to declare an interest and will they be able to vote?

Can they vote on own removal?

Answer 204

Must declare.

CAN vote but it WON’T count

ONLY where:

1. BUYBACK of some / all their shares; or
2. RATIFYING breach of director duty

meaning can still vote in SPT
(this is 1000% right checked lexis)
and can vote on own removal!

^ some part of this queue card lol is 318 CA

Question 205

If model articles and had one interested director but only 2 directors, would you be able to vote on it?

Answer 205

Not sufficient quorum for initial board meeting

Shareholders could requisition a general meeting

Question 206

Does an interested director have any right to vote under model articles?

Answer 206

No. Not like shareholders where can vote but doesn’t count.

Question 207

How long update internal register after PSC change?

Answer 207

14 days

(nb this is internal but same as CH)

Question 208

How long update CH re PSC change?

Answer 208

14 days after updated own register.
(beginning with day after updated register)

PSC did aged 14

Question 209

Do company directors need to be human beings (natural persons)?

Could you have all company directors?

Answer 209

No, but every company needs at least one director who is a natural person.

Other director(s) could be companies

Question 210

Minimum age to be a director?

Answer 210

16

Question 211

MA 7 and MA8

How may directors exercise powers without a meeting?

Answer 211

If indicate to each other that unanimously share common view on a matter

e.g. text message from each director, written resolution

Question 212

Can directors delegate their powers? If so, as per what?

Answer 212

Yes

MA 5

Question 213

Do shareholders have power to override, amend and/or veto a decision?

Answer 213

CANNOT override or retrospectively alter

Can veto prior to decision in certain circumstances
e.g. SPT

Can force or refrain director from taking specified action via special resolution

Question 214

Definition of a director?

Answer 214

Any person occupying the position of director, regardless of their title

(so if fulfil that, even if say called a partner, they are a director)

Question 215

What can Board decide on in terms of director’s employment?

Answer 215

• their remunerations and benefits
• the services they undertake

Question 216

Diff exec and non-exec directors?

How are non-execs paid?

Why are they a good idea?

Answer 216

Both on Board and registered at CH

Executive directors
- have an employment contract (service contract/agreement)

Non-executive directors (NEDs)
- don’t have service agreements

• don’t receive salary

Receive directors’ fees for attending board meetings

NEDs can be more objective as less invested - so common in public companise

^ nEd - not EMPLOYMENT CONTRACT-ed director
( not clear if employed or not but don’t stray into that )

Question 217

Do NEDs and executive (employed) directors have same duties?

Answer 217

Yes

Question 218

Who appoints Chairperson?

Answer 218

By directors. Can do so via board resolution.

Question 219

Responsibilities and powers of chairperson?

Answer 219

• run company’s board meetings
• chair general meetings (if present and willing to)
  ^ checked this is correct
• casting vote if there is a tie, to ensure it is PASSED by simple majority

In PUBLIC but NOT private: 🚿
- acts as figurehead in dealings with shareholders and anyone outside the company

Question 220

What is a de facto director?

Answer 220

Someone who acts as a director even though they have never been appointed / validly appointed

They can fall within definition of director

Question 221

What is a shadow director?

Do all Ds need to act in accordance?

Answer 221

Ds tend act according to directions or instructions

Not necessary for whole board to - just governing majority

Not necessary act in accordance for all matters

(Usually in the background and don’t carry out normal functions, but will have influence and control)

NOT formally appointed as director

May be a major shareholder, lender or management consultant

Question 222

Diff between shadow and de facto directors?

Are they both directors?

Answer 222

De facto = tend to carry out job
e.g. Helen D

Shadow = in background and not carrying out functions but influence
e.g. Laura

Individual section on CA will tell whether they count as director
(varies between sections and so i imagine depends what they are doing)

Question 223

Only one director in a company - how does decision making work?

Answer 223

MA requires 2 quorum for director’s meeting

If only one, permitted to take decisions w/o board meeting.

Question 224

What are alternative directors and what is required for them to be valid?

Answer 224

If can’t attend board meeting, could appoint an alternative director to vote in accordance with their wishes.

Company must put special article in
(not covered under MA)

(diff to a proxy but like a proxy)

Question 225

How are directors appointed?

What is often best and why?

Answer 225

First directors = name on IN01

After that, under Model Articles:
- appointed by board or ordinary resolution shareholders
- board is quickest
(no need call GM or circulate a written resolution)
(can amend MA)

Question 226

When can you be prevented from being a director?

(clue: 3 circumstances)

Answer 226

• Disqualified
• Bankruptcy order
• Doctor gives opinion to company that they have become physically or mentally incapable and may remain so for more than 3 months

Question 227

Administrative requirements if appointing a new director?

Form and how long

Answer 227

Notify CH in 14 days on AP01 form (individual) or AP02 (corporate)

Enter director on its register of directors and register of directors’ residential addresses

Question 228

If got a director-shareholder, do the roles merge?

Answer 228

No. Separate.

When in board meetings, you attend as director without thinking personal interests of shareholders and vice versa.

Question 229

What type of authority do directors have to bind company into contracts with third parties?

Explain.

Answer 229

Need actual or apparent
- tend to have

If don’t, director personally liable to the TP and company is not a party to contract
- see sep card

(They are agents of the company - the company is the principal)

Question 230

Explain actual vs apparent authority of a director

Answer 230

Actual
- express or implied consent from other Ds
A) express e.g.:
- in service contract
- verbally given
B) implied:
- not expressly permitted but acted this way in past and not said anything

Apparent:
- w/o company’s consent
- but company prevented from denying authority
- generally when company failed to use info to correct impression
(not about Ds actions

e.g.
- company sec will have apparent authority to bind compan into admin contracts but not trading contracts

Question 231

Under what powers in MA can board of directors decide on terms of a director’s service contract?

Answer 231

• general powers to run company
• specific powers to decide on directors remuneration

^ both MA

(nb only if 2 years or less)

Question 232

What is considered a long-term service contract?

Answer 232

GUARANTEED term over 2 years

so not if company has powers to terminate w notice 2 yrs or less

e.g. 10 year service contract with 1 year notice period not long-term

Question 233

Requirements for long-term service contracts?

What resolution?

Answer 233

Must be approved by shareholders via ordinary resolution

Question 234

Potential issue with approving directors service contract via board meeting if only 2 directors and ways to overcome this?

Answer 234

• Need quorum of 2 and one won’t be able to vote since personal interest

Can:
- Change company articles so can vote on service contract (or any matters where they have an interest) (special res)
- Shareholders temporarily suspend model article (ordinary res)

(nb they don’t need to declare it if relates to own service contract)

Question 235

If board proposes ordinary resolution to pass a long-term service contract, what administrative requirements must happen?

Answer 235

• Keep memorandum of proposed contract at registered office for 15 days before GM and at GM itself
  (so no short notice unless written)
• If written resolution, attach copy

Question 236

What would happen if company entered a long-term service contract without shareholder approval?

Answer 236

Guaranteed element would be void, meaning could terminate on reasonable notice

Rest would be enforceable

Question 237

When director has been appointed, what are requirements surrounding inspection of their service contracts?

Answer 237

Available for inspection by shareholders at registered office during term and a YEAR after termination

Shareholders right inspect without charge and within 7 days of requesting to see them

Question 238

Administrative requirements if director resigns/removed?

Answer 238

Director themselves file TM01 (individual) or TM02 (corporate)
^ or service contract may allow company to complete on their behalf by giving power of attorney

File CH 14 days of resignation / removal

Question 239

Will removal of director terminate their service contract?

Answer 239

No

Can only be terminated in accordance with terms of the agreement

UNLESS director is in repudiatory breach of their contract - can be instantly dismissed

also, ending service contract does not mean they will be automatically removed from office of director
(since being a director is about what position you actually occupy - not just what called)

Question 240

How can a director be removed?

(what type of resolution and the steps)

Answer 240

Ordinary resolution.

1. Special NOTICE required
   i.e. notice intention to pass to Ds at least 28 days before GM
2. Once company receives notice, must inform director fortwith
3. When calling GM
   - if practicable, company must give notice of the resolution to shareholders (at same time calls GM)
   - If not practicable, at least 14 days notice before GM
   (by ad in newspaper with ‘appropriate circulation’ or other way allowed in articles)

(call GM in 28 days or less - statute doesn’t specify diff to that - but common practice is not use short notice procedure i think)

4. D entitled to
   - speak at GM; and
   - require company to send copies of written representations from them to shareholders

Question 241

What should director do during the special notice period?

Answer 241

Seek legal advice and obtain evidence to help argue should not be removed

Prepare written representations to send to shareholders with such arguments and prepare what say at GM

Question 242

How long is special notice?

Answer 242

28 days

(before general meeting at which resolution to remove director proposed)

Question 243

Resolution for removal of director?

Answer 243

Ordinary resolution

(shocking !)

Question 244

If directors themselves have proposed resolution to remove director, what must they do to comply with special notice requirement?

Answer 244

Prepare formal notice of intention to propose ordinary resolution and keep at the registered office

Would then have to inform the director fortwith

(yes checked this and is correct/Ds can propose general meeting to deal w it)

^ so the same except not sending to anyone and just keeping at registered office

Question 245

After special notice given (ie 28 days notice of intention to remove), when can general meeting be called?

Answer 245

i have over complicated with this queue card.

just need 28 days notice before the meeting
- 1st. then 28th.

nb this is what textbook says

If, after special notice has been given to the company, a general meeting is called for 28 days or less after the notice has been given, the notice is deemed to have been properly given
(s 312(4)). This provision is designed to prevent the board from calling a meeting before the 28 days’ special notice has expired in order to frustrate the shareholders’ intention to dismiss the director.
(nb - read online that no specific law on this but tend not to do the 14 days notice)

Question 246

What is a Bushell v Faith clause?

Answer 246

Can include as a clause in company’s articles

Gives someone who is both a shareholder and a director greater voting rights as a shareholder if there is a resolution to remove them as a director

(I would have a lot of FAITH if I was a director shareholder with this clause that would not be removed!)

Question 247

If company has a few shareholder-directors, what may a provision in shareholders agreement say re removal of directors?

Answer 247

Obliging to vote AGAINST removal of fellow shareholders from office as director

If then voted in favour of removing another shareholder as director, dismissed would have claim for breach of shareholders agreement

Question 248

Notification requirements for company directors?

(nb LLPs/public/private)

Answer 248

1. Register of Ds containing:
   - DoB, address if indiv and registered office
   - available FREE inspection shareholders or others for FEE
   - registered office or central CH register (if elect)
2. Register of Ds residential addresses
   (individuals only)
   - not open to inspection
   - can keep on central register
3. CH01 and CH02 forms if change in particulars for indiv/corp directors
4. AP01 and AP02 appointment - 14 days appointment. TM01/TM02 resign - 14 days.

Question 249

Offence for not maintaining register of directors or keeping open for inspection ?

Answer 249

Criminal offence

Question 250

Who do directors owe their duties to?

Effect of this?

Answer 250

The company

Not shareholders / creditors

Meaning claim for breach of duties will be brought by company itself

(initiated by board or shareholders only if derivative)

Question 251

What duties do directors owe under Companies Act?

(nb fiduciary duties codified by CA)

Include sections.

Answer 251

• Act within powers (s 171)
• Promote success of company (s 172)
• Exercise independent judgement (s 173)
• Exercise reasonable care, skill and diligence (s 174)
• AVOID conflicts of interest (s 175)
• Not to accept benefits from TPs (s 176)
• DECLARE interest in proposed transaction or arrangement (s 177)
• Declare interest in EXISTING transaction (criminal matter) (s 182)

^ all companies act

Question 252

Explain director’s duty to act within powers?
(s 171)

Answer 252

A director of a company must:
(a) act in accordance with the company’s constitution, and
(b) only exercise powers for the purposes for which they are conferred.

powers conferred to promote success company so breach if act in personal interest

e.g. entering contract w/o authorisation, despite being prohibited by articles

Question 253

Explain directors’ duty to promote success of company

Answer 253

considers in GOOD FAITH, most likely promote success of company for benefit of members as a WHOLE

Success usually means promote share value

Must** have regard **to:

(a) long-term consequences of decision
(b) employees,
(c) need to foster the company’s business relationships (suppliers, customers etc),
(d) community and environment,
(e) maintaining reputation for high standards of conduct, and
(f) acting fairly between members of company.

hard to prove
example:
- may buy factory even though terrible env’t/jobs/residents etc, cos had regard and believe lot money for shareholders

Question 254

How does court determine if director breached duty to promote success of company?

Objective or subjective?

Answer 254

Subjective

Not in breach if considered in good faith that actions most likely promotes success

Difficult to establish breach - even if belief misguided, as long as good faith

Even if bad for env’t - had regard to it

Question 255

Explain director’s duty to exercise independent ____

(s 173)

When will this not be infringed?

Answer 255

Judgement.

e.g. told to vote that way so did cos offered something

This is NOT infringed if:

1. company entered agreement which prevents directors exercising direction; or
2. acting in a way authorised by constitution

e.g.
if appointed to board by a company shareholder, must make decisions independently and ignore any loyalty to that company

Question 256

Explain duty to exercise reasonable care, skill and diligence

Answer 256

Means care, skill and diligence exercised by reasonably diligent person with:

a) general knowledge, skill and experience may reas expect of person carrying out those functions ; AND (objective)

b) that director’s general knowledge, skill and experience (subjective)

CSD - care skill diligence
KSE - knowledge skill experience
OS - objective / subjective

Question 257

Explain duty to avoid conflicts of interest?

(s 175)

Answer 257

Avoid situs reasonably regard likely either direct or indirect conflict with company’s interests

Esp exploting property, info or opportunity offered to company

Regardless of whether company could have used

This only applies to contract which company NOT involved in

e.g. company declines opportunity to design new range so D carries out in personal capacity

Protected if board resolution authorised
- Won’t count in quorum to authorise, even if excluded relevant MA

Question 258

Which director breach of duty can be authorised by Board resolution?

Answer 258

avoid conflicts of interest
(ie company not transacted but opportunity/info/property arose within company)

nb: duty declare interest proposed and existing transaction also must be declared to directors)

but will not count in quorum, even if MA 14 excluded

Question 259

Explain duty not to accept benefits from third parties

(s 176)

Answer 259

Director cannot accept benefit from TP for reason of them either:
- being a director; or
- doing/not doing something as a director

But no breach if accepting can’t be reas regarded as conflict interest

(e.g. breach if offered trip away in return for renewing service contract)

Normal corporate hospitality not covered unless excessive/reas conflict

Question 260

Explain duty to declare interest in a proposed transaction or arrangement

(s 177)

Answer 260

If directly or indirectly interested in proposed transaction or arrangement with company in any way

Must declare NATURE and EXTENT of interest to other directors

Before company enters transaction

Flexibility as to how declare
(can be written notice or at board meeting)

Must relate to transaction WITH the company

Question 261

Exceptions to director’s duty to declare interest in proposed transaction/arrangement

Answer 261

• not aware of interest or transaction and reasonable that not aware
• interest can’t reas regard as giving rise to conflict
• other directors already aware of interest or ought to be
• concerns terms of their service contract

Question 262

Difference between duty to avoid conflicts of interest (s 175) and duty to declare interest in proposed transaction/arrangement (s 177)

Answer 262

use s 175 if company not involved in it

(e.g. had opportunity to tender but didn’t)

Question 263

If a company misapplies MA 14,

when does obligation to declare remain?

Answer 263

If directly or indirectly interested in proposed transaction or arrangement

(S 177)

(MA 14 = quorum)

BASO JUST DECLARE IT I KNOW THIS WELL

Question 264

Civil consequences of breach of directors duties?

Answer 264

how would corresponding common law or equitable principle:

Potential remedies are:
- Account of profits
- Compensation for loss (equitable)
- Rescind any contract
- Injunction - to prevent further/continuing breach
- Restore transferred property
- Common law damages re negligence
(^ inc for duty reas care, skill and deligence)

nb not really fines

A C R I R C

Amazing Chapsticks Read Imi Really Cool !

Question 265

How can shareholders RATIFY a breach of director’s duty?

When can board?

Can shareholder countin quorum?

Answer 265

ORDINARY RESOLUTION.

If director is also a shareholder, their vote won’t count

NEITHER will votes of any connected shareholders eg spouse)

Question 266

Effect of director’s breach of duty being ratified?

Answer 266

Will be as if no breach at all and escape total liability

Good for directors who take an action without fear on condition that shareholders will ratify if future board of directors or liquidator may pursue for breach

Question 267

What’s a written resolution?

Can all companies use?

How do the Board distribute?

Can right to pass this way be limited in articles?

Answer 267

Priv LC only

Shareholders pass resolution this way instead of in GM
(so in writing instead of attendance)

Board hand out/post/email/place on website

Sign and return if want to vote in favour

Right to pass this way cannot be limited under company’s articles

Question 268

Explain duty to declare interest in EXISTING transaction or arrangement

(s 182)

What must you declare? When? How?

How does procedure differ to proposed?

Answer 268

Declare nature and extent

Soon as reasonably practicable

Declare at:
- board meeting
- writing to all directors; or
- general notice given at board meeting

(unlike proposed transactions where states don’t have to make this way)

Same exemptions as duty to declare in proposed

Question 269

Exceptions to duty to declare interest in EXISTING arrangement/transaction?

Answer 269

• Director not aware of interest OR transaction in Q
  (treated as aware of what reas ought to be)
• Interest not reas regard giving rise to conflict
• Other directors already aware interest / ought to be
• Concerns terms of their service contract

Question 270

Consequences of failure to declare interest in - and how punishable?:

A) proposed transaction/arrangement (s 177)

B) existing transaction/arrangement (s 182)

Answer 270

A) Civil matter
(looking at corresponding principles)

B) Criminal offence punishable by fine

(NB: remember existing transaction, may e.g. your mum become a shareholder or something)

Question 271

What claims can be brought against directors of insolvent companies?

Answer 271

• Wrongful trading (s214 Insolvency Act)
• Fraudulent trading (s 213 IA)
• Misfeasance (s 212 IA)

Question 272

Explain when claim can be brought against director for wrongful trading and what court can order?

Answer 272

Court can order director contribute company’s assets (inc amount available to creditors) if:

• company gone into insolvent liquidation or insolvent administration;
• before winding up, director knew/ought concluded NO (!!!!) reasonable prospect of AVOIDING liquidation; and
• was a director at the time

Question 273

Defence available to directors for wrongful trading?

Howis this assessed?

Answer 273

(one defence)

TOOK every step with view to minimising potential loss to creditors

test for that is what reasonably diligent person would have done with:

1. KSE reas expect person carrying out that role;
2. KSE of that director.

OS^

(other queue card but prevent by seeking advice/limit spending/check accounts etc - other card)

Question 274

How can a director prevent a successful claim for wrongful and/or fraudulant trading?

Answer 274

• seek legal/accountants advice first sign of insolvency
• limit spending
• check accounts regularly
• keep records of actions

Question 275

Who can bring claim for wrongful and/or fraudulent trading?

When?

Answer 275

Liquidator or administrator

When in insolvent liquidation or insolvent administration

Question 276

When will a director be liable for fraudulent trading?

Answer 276

In course of being wound up, appears

business was being carried on with intent to:

• defraud creditors of company or any other person; or
• any other fraudulent purpose

Question 277

Aside from relating to D, what could court order if find director liable for fraudulent trading?

Answer 277

Any knowingly parties to fraud make contributions court deems proper

Question 278

Are successful fraudulent trading claims common? Why/why not? Implication on claims brought by liquidators/administrators.

Answer 278

No

Need to show intent to defraud. Difficult to evidence.

Same facts tend to give way to wrongful trading claim - which is about what ought known - easier

So tend to bring claim for both wrongful and fraudulent

Question 279

Penalty for director convicted of fraudulent trading?

Answer 279

Potential criminal conviction

And potentially contribute to assets

Question 280

What is misfeasance during insolvency?

What may court order?

(directors)

Answer 280

BREACH OF ANY FIDUCIARY OR OTHER DUTY by Ds

During wind up, may be ordered to:
- contribute to company’s assets in respect of misfeasance
- repay, restore or account for money/property or any part it misapplied due to misfeasance

Question 281

What controls can be placed on directors?

Answer 281

1. Substantial property transactions
2. Authorisation of loans to directors
3. Authorisation of long-term service contracts
4. Authorisation of payments over £200 for loss of office
5. Other liabilities

(nb 1 - 4 defo apply to shadow directors)

Question 282

When will a company make a loan to director be approved?
(assuming requires shareholder approval)

Formalities surrounding where loan should be?

What about if D of holding co?

Answer 282

Ordinary resolution

If D also director of holding co, the holding co must also pass ordinary res

Loan available inspection 15 days before and at meeting

Or send copy with the written notice

Question 283

Main exceptions to requirement for ordinary resolution to authorise loans to directors?

Is anything else required?

Answer 283

• max 50k - expenditure for purposes of company or to enable to perform duties
  (50 y/o director loves)
• max 10k - minor and business transactions
  (10k would be a smaller transation than 50k)
• no max:
  1. defending civil/criminal proceedings relating to company or associated company
  2. defending regulatory proceedings or self in regulatory authority investigation

^ any of above - Ds must authorise.

Question 284

Effect of directors loaning money to director without shareholder approval?

Answer 284

VOID. ACCOUNT. INDEMNIFY. or - AFFIRM.
(same as SPT)

Voidable

Director who received loan and any director who authorised are liable to:
- account for any gain;
- jointly severally liable to indemnify company for any loss/damage

OR

affirmed by ordinary resolution within reasonable timeframe.
(Ds then not liable)

Question 285

Will director receive payment for loss of office?

Answer 285

if entitled under service contract

if entitled for unfair / wrongful dismissal etc

^ company would be legally obliged ^

Aside from those, if over £200, ordinary resolution

Question 286

Aside from directors, who else does there need to be an ordinary resolution for to make payments to?

Answer 286

• Past directors
• Persons connected with a director
• Any person at the direction of, or for benefit of, a director or a person connected with a director

Question 287

Aside from loss of office, when else does payment related to an exiting director need to be authorised?

Answer 287

Director selling shares for more than other shareholders could have obtained them for

(ah yes so as if they were overcharging - doesn’t say so in textbook but i presume related to pre-emption rights)

Question 288

Administrativey requirements if ordinary resolution for payment for loss of office?

Answer 288

memorandum for particulars of payment registered office 15 days before and at GM

or attach to written resolution

(same as loans to Ds)

Question 289

Implications if company makes payment for loss of office without shareholder approval?

Answer 289

Recipient holds money on trust for company

Any director who authorised jointly and severally liable to indemnify company for any loss

(not voidable)

Question 290

What controls are placed on shadow directors (which are also placed on normal directors) by shareholders?

i.e. shareholder authorisations required

Answer 290

Authorisation for:
- loss of office
- loans
- SPT
- long-term service contracts

baso treated same/authorisation needed same way!

Question 291

What are the other main ways can directors be held liable in connection with their role? Include the penalty.

(aside from SPT/loss office/loans/long-term service)

It is a write down situation !

Answer 291

1. Failure to maintain company records
   - fine
   - or if accounting, 2 years prison
2. Failure to file certain documents at CH
   - usually a fine (e.g. SR is fine)
3. Re accounts and related reports (eg misleading)
   - criminal and civil liability
4. Health and safety legislaton
   - 2 yrs prison and up to 20k fine
   - gross neg manslaughter
5. Bribery
6. Political donations /o shareholder approval
7. Environmental legislation
   - civil and criminal liability

Question 292

How long may a director be disqualified for and who by?

Answer 292

Court

Between 2 and 15 years
(depending on behaviour)

e.g.
- 2 years breach fiduciary duty/file accounts
- 15 years seeking money when assets exceeded liabilities

Question 293

Grounds for disqualification of director?

Answer 293

(really bad stuff eg fraud)

• Convicted of imprisonable offence
• Persistent breaches of companies legislation (CA etc)
• Fraud on a winding up
• Failing to file required document
• Unfit director of insolvent company
• Investigation finds to be unfit
• Fraudulent or wrongful trading
• Breach competition law

Question 294

When may a director be disqualified for being unfit director of insolvent company?

Factors in favour and against?

Answer 294

Consider
- misfeasance
- extent of failure to comply with CA 2006
- Extent of director’s responsibility

Factors against director:
- using money meant for VAT/PAYE/national insurance as company’s capital (Crown monies)
- paying directors excessive amounts
- recklessly trading whilst insolvent

Factors in favour:
- employing qualified financial staff
- taking professional advice
- personal financial investment in company

(none are conclusive on own)

Question 295

Effect of disqualification order on a director?

When may leave be granted?

Answer 295

Can’t be director for length of period; or

Concerned in promoting/forming/managing any company

Unless leave of court. Rarely granted.

May be if:
- not dishonest
- business profitable so unlikely insolvent
- other Ds provide a check on D’s activities

Question 296

Consequences of breaching disqualification order (director)?

Answer 296

Criminal offence - 2 yrs or fine

Personally responsible for debts of any company involved in managing whilst disqualified

Question 297

When will there be conflict of interest?

Answer 297

Direct or indirect interest that conflicts or may conflict with interests of company

Esp where exploiting property, info or opportunity - regardless of whether company could/would have taken advantage of it

Unlikely if v small shareholding in other company

Or if normal corporate hospitality which wouldn’t reas regard as giving rise

Question 298

How to appoint company secretary?

Shareholders or directors?

Answer 298

First time IN01

Then board resolution

I think AP01/AP02

Question 299

Penalty for failing to state it is a one member company on register of members?

Answer 299

Criminal offence

Question 300

Who can demand a poll vote under mA?

Answer 300

1. Chair of meeting;
2. Directors;
3. Two or more who have right to vote on resolution; and
4. Shareholder with at least 10% of total voting rights on that resolution

(checked this in textbook)

Question 301

Can directors appoint another director?

Why not always a good idea?

Answer 301

Yes

But not necessarily good idea

Larger shareholder could eventually use powers to remove the new director (and those who appointed if want to!)

Question 302

When do first directors take office?

Answer 302

once certificate of incorporation issued

Question 303

Diff s 177 (interest in proposed) and 182 (interest in existing)

Answer 303

177 proposed:

flexibility re how to declare

civil

182 EXISTING :

criminal

prescriptive - at BM or by notice in writing (or general notice at BM I thinK)

Question 304

3 claims a REMOVED DIRECTOR could bring if removed

Answer 304

Redundancy, unfair dismissal and wrongful dismissal

Question 305

What are statutory directors

What is the consequence of statutory directors being removed in terms of their other office?

How can we avoid that as good practice?

Answer 305

Statutory directors are registered at CH

Just remember is diff to their employment contracts

Want a provision saying if statutory directorship ends, automatically terminates or company have right to terminate the emp contract

(does not prevent director from bringing wrongful dismissal claim etc)

If have directorship terminated via emp contract, doesn’t automatically terminate emp as statutory director of the company.

Yes this makes sense. Service agreement needs to state once service contract/employment terminated, their directorship ends and vice versa

Question 306

If shareholders are approving a nwe director’s service agreement (over 2 yrs etc), can GM be held on short notice?

(ahh this is such a good sneaky SBAQ question)

Answer 306

No

Cos need proposed terms available 15 days company registered address before GM

But could use written resolution procedure cos only requires copy contract and reso to be sent - passed as soon as minimum percentage required votes

Question 307

does director duty to avoid conflicts of interest apply in respect of TRANSACTIONS with the company?

Answer 307

no

its about avoiding situations which cause conflict of interest

Question 308

Can director-shareholder vote on proposed loan to themselves as a director?

Answer 308

Yes as shareholder.

Not as director.

Question 309

Class rights clause

Answer 309

1. Class rights
   Each of the following shall be deemed to constitute a variation of the rights attached to each class of shares:
2. any alteration in the articles of association of the Company;
3. any reduction, subdivision, consolidation, redenomination, purchase or redemption by the Company of its own shares or other alteration in the share capital of the Company or any of the rights attaching to any share capital; and
   [ADD OTHER MATTERS AS AGREED BY THE PARTIES.]

(class rights are matters which cna only be done wtih consent of each class of shareholder on basis that such matters constitute a variation of class rights)

Question 310

Weighted voted clause example in articles

Answer 310

1. In resolution proposed re the matters listed below, any [holder of X Shares or of Y Shares] voting against shall be entitled cast such number of votes as is necessary to defeat the resolution:
2. any alteration in the articles of association of the Company;
3. any reduction [etc] own shares or other alteration in the share capital of the Company or any of the rights attaching to any share capital; and
4. [any resolution proposed to remove the [CLASS OF DIRECTOR]].

Any resolution proposed as a written resolution in relation to any of the matters listed in clause 3.1 shall be proposed in a form that provides shareholders with the ability to cast their votes against as well as in favour of such resolution.