BLP Flashcards
what’s an outgoing partner entitled to (dissolution)
default provision - interest at 5% per annum on the value of their share until it is paid
order of payment upon partnership dissolution
creditors
partners who have lent money
partners receive the share of capital they are entitled to
surplus is shared per the terms of the agreement
time notice required for BM?
must be reasonable + given to all directors (and include date, place and time)
holding a BM checklist
1) effective notice
2) is it quorate? (considering eligble/not directors)
3) deal with MA14 + s177
4) vote on show of hands
5) chair can have casting vote
6) must be over 50%
can MA 14 be disapplied?
yes
what happens if meeting did not comply with MA14?
meeting invalid - decision void essentially
can s177 be disapplied?
never! always need to declare interest in proposed transaction, even if MA 14 is disapplied and is allowed to vote/count
what are the exceptions for s177?
- cannot reasonably give rise to conflict of interest
- all other directors are aware
- meeting is about service contract
how can a director be appointed?
by unanimous decision of other directors (at BM - don’t need GM for it)
process of doing something that requires OR/SR
1) call BM to call GM
2) hold GM and vote*
3) call BM to implement vote of GM
*the GM can be held as written resolution (if private company)
- make sure to specify lapse date, how to signify agreement, what the resolution is proposing and attach copy of contract
when can SH not vote if conflict of interest?
only case if its to
- vote for share buy back of their own share
- vote to ratify breach of them as director
can you disapply the provision that a shareholder is not allowed to vote on their own share buy back?
yes! but this is only effective in GM - if the resolution is to be passed as a written resolution, still can’t vote
how is voting done in GM?
show of hands (1 Sh 1 vote)
poll vote (vote per shares = more shares more power)
how is voting done in WR? (private comp)
vote per shares = more shares more votes
notice needed for shareholders’ meeting (GM)
14 clear days - sent to every shareholder, director and auditor (hard copy, electronic or website)
must include place, time, date, general business to be dealt with and exact working of any special resolution + any right to appoint proxy
can SH requisition a GM on short notice?
yes - need to have 90% of voting shares in a private company and 95% in a public company
it can then be held straight away
(this obviously cannot work to dismiss a director because would need 28d space)
can SH requisition a GM?
yes - have at least 5% of paid up voting shares
directors need to answer within 21 days (this means send the WR + any statement of up to 1,000 words) and hold the meeting within 28d of their response
can a SH vote if they are interested in the decision?
yes, unless its about a breach of them as a director (attempt to ratify) or if its their own share buy-back
who can demand a poll vote
anyone with 10% total voting shares for that resolution
2+ people with right to vote
the chair
the directors
how does the vote counting in a WR differ from in a GM?
both are (GM can be) 1 vote per share
BUT
in a written res this is against the TOTAL amount of shares. in a GM its only against the amount of shares present
i.e if you know someone is not going to vote and won’t be present, better to do a GM (if quorate) because otherwise in the WR the vote ‘yes’ is against a bigger number
can SH % for requisiton of GM be changed?
normally its 5% of voting rights
articles can reduce % but cannot increase it
how can a director be appointed?
either by Board Resolution or by the Shareholders (means wouldn’t necessarily need a OR)
–> need to file AP01 within 14 days of appointment and change register of directors
administrative requirements post appointing new director
file AP01 within 14 of appointment
change register of directors + register of director’s address
does a service contract require GM?
usually the board (BM) will determine the terms
it will require an OR if it attempts to give a guaranteed term of employment for 2+ years
is a service contract invalid if no OR is passed to approve 2+ fixed years?
no it remains valid/enforceable, but the fixed term is not = implied term allowing termination on reasonable notice
how to terminate service contract?
directors decision
quirk of a company with only 2 directors wanting to approve a service contract?
might need to disapply MA 14 (suspend/remove) otherwise meeting will never be quorate
how is a director removed?
NEED OR (= BM - GM - BM)
- must give 28d clear notice (unless not practicable then only 14 clear days and an advert) = short notice or WR are not possible
- director is allowed to make representations at the meeting
- if they are a SH may have bushell v faith clause!
is a OR needed if a director chooses to resign?
no
what causes automatic termination of director?
- bankruptcy
- court disqualifies them
- doctor says they are (writing) physically/mentally unfit for 3+ months
what’s the admin when a director is removed?
- change register of directors + register of directors’ address within 14 days
- tell Companies House within 14 d
what’s the time limit to send resolutions to CH?
15 days
when does the PSC register need to be updated?
if it passes the “PSC threshold”
- over 25%
- over 50%
- over 75%
forms required to change PSC
PSC01 for first timer
PSC04 if change threshold
PSC07 if stop being
trigger words for when register may need to be changed
- PSC
- removing (TM01) /appointing (AP01) director
- filing of any special resolution
- filing OR related to share buy back (exception)
- change of articles
requirements for a SPT
director in their personal capacity (or someone connected to the director) buys or sells a NON-CASH asset of substantial value to/from company
what’s a person connected to director for SPT?
- spouse/CP/stepchild/ longterm partner/their child/ parent
- company in which the director or anyone connected to them hold more than 20% voting power
what’s a non cash asset for SPT?
any property or interest in property other than cash (including charges)
whats substantial value for SPT?
- over £100k
- over 5k and worth more than 10% of company’s net ASSET value (!!! 10% is super important)
–> if a director is eg buying a car or selling their car to the company, doesnt matter if its not over 10% (+5K) or £100k
what’s necessary to allowed a SPT?
OR from SH
(bm - gm - bm)
filing requirements post SPT
none (just make sure you got the SH OR)
what happens if director engages in SPT without shareholder approval?
transaction is VOIDABLE at option of the company
- director/person connected/ those who authorised may be required to account to company for gain and indemnify company for loss
against who can remedy for invalid be SPT be brought?
- director of compny
- director of company that co-entered transaction w
- connected person
- any other director who authorised such transaction
actions SH can take if they think they were injustcied?
- breach of contract (breach of articles - against fellow SHs or directors)
- breach of contract (breach of shareholder agreement - this is only against fellow SHs)
-unfair prejudice claim (members of group has been injusticed by a current or proposed act - objective test) (expensive, time consuming)
- derivative claim (also very rare, its a 2 step process and court has total discretion, will depend on the breach and evidence available)
s171 (directors duties)
duty to act within powers and use for proper purpose (promote success of C)
s172 (directors duties)
duty to promote success of the company (subjective look at long term consequences, interests, reputation, environemnt)
s173 (directors duties)
exercise independent judgement
s174 (directors duties)
reasonable care, skill and dilligence
2 part test - look at general skill of director in that position and what would be expected of a general dierctor
breach is akin to negligence (tortious damages)
s175 (directors duties)
avoid conflict of interests in a transaction the company is not involved in
!! strict liability - doesnt matter if the company would not have profited from it or knew and decided to go against
company buys and sells houses, a house comes on the market, the company decides not to buy it and the director buys and sells it - what breach is this?
s175 - avoid conflict of interest in a transaction with company
to circumvent: authorise it in advance (MA 14 rules apply)
s176 (directors duty)
not accept benefit from a 3rd party conferred because of their position as director
s177 (directors duty)
declare nature and extent of interest in a proposed transaction (make it before company enters)
when is s177 not considered breached?
- directo not aware of conflict in question
- cannot be reasonably regarded as giving rise to conflict
- directors are already aware
- its in the service contract terms
s182 (directors duty)
declare interest in an existing transaction - this is a criminal offence (fine)
(either because failed to declare under s177 or because happened before they joined and then they joined)
when is s182 not breached?
- The director was not aware of the conflict, or the contract
- The interest cannot reasonably be regarded as likely to cause conflict
- The directors are already/ought to be aware
- It is about the terms of the director’s service contract
- The interest was already declared under s177
how can directors duties breaches be ‘solved’?
by SH ratification (never by directors themselves)
in advance or after the breach
director in question, or any persons connected, are not allowed to vote
is shareholder approval required for loans?
no, this falls under directors’ general powers to run company UNLESS its actually a loan to a director!! in which case an OR is required
+ need to make sure terms of the loan are available 15 days before meeting or sent alongside WR = not possible to have short notice GM
procedure for doing a loan to director
- BM - GM - BM
must pass OR
must have terms of loan exposed for 15 days before meeting (or sent w WR) = not possible to have short notice meeting, better to do it via WR if want to go quickly
exceptions to loans to directors needing OR
- loan under £50k enabling director to do their duty (eg get a car for the company)
- if its a loan for personal reasons: limit is 10k
-minor and business transactions up to 10k
- if its a loan to defend themselves or company in proceedings or investigations
what’s the procedure to make a loan to a family member of director?
don’t actually need OR (so technically nothing) but need to make sure not breach director duties (interest in proposed/arranged transaction, SPT,…)
procedure for payment for loss of office
if entitled to over £200, need OR to approve it
- terms must be exposed 15d before GM so again can’t have a short notice meeting
will i be disqualified as a director and for how long?
- convicted for indictable offence
- fraud on winding up
- persistent breaches of company legislation
- summary conviction for failure to file a required notice or document
- breach of competition law
- fraudulent or wrongful trading
- being an unfit director of an insolvent company
–> any period between 2 and 15 years
will need leave of court to be a director again or deal with management of company
+ personally liable for debts they are involved in during their disqualification
steps for share allotment? CA 2006 companies (post 2009)
1) constitution restrict?
MA doesnt but may have special article in which case would need SR
2) do directors have authority to allot?
they will if its the same type as already existent and last allotment was less than 5 years ago, can do just with BM without SH (s550)
If its a public company, or its a private company and diff type of share or same type but last time more then 5 years ago = need SH through OR (need to call GM) (need to file this OR) (s551)
3) do pre-emption rights apply?
if equity shares (participating) for cash consideration = need to ask directors or disapply pre-emption via SR (and directors make written statement)
–> offer to exsiting SH needs to be for at least 14 and communicate when acceptance must be given, cannot remove until deadline
If equity shares or non equity shares and for wholly or partly non cash consideration, they dont apply
4) if its a new class of shares, will need an extra SR to incorporate in articles (change articles)
how to allot new shares in company pre CA 2006
1) there will be ceiling on allotment = need OR
2) will need OR to give directors rights
3) pre-emption rights work in the same way (= if equity and for cash = need SR to disapply)
admin checklist after alloting new shares?
within 15 days must
1) file any SR and OR in CH
2) file the changed articles (eg to change ceiling or disapply pre-emption rights or introduce new class of share)
3) send form SH01 to CH within 1 month of allotment (indicating return of allotment and share capital) and PSC form if changed
4) register any changes in members and PSC within 2 months
5) prepare and allocate share certificates within 2months of allotment