BLP - weak areas Flashcards
1
Q
New CGT rates
A
- 18% - basic
- 24% - higher / additional
2
Q
New investor relief lifetime allowance
A
£1m (down from £10m)
3
Q
When do pre-emption rights not apply?
A
- allotment of bonus shares
- consideration is partly or wholly non-cash
- employee share scheme
4
Q
If authority is to be given by OR under s 551 for allotment, what 2 things must be stated?
A
- max number of shares to be allotted
- date authority will expire (max 5 years after OR)
5
Q
AP01
A
Appointment of director
6
Q
AP03
A
Appointment of CS
7
Q
TM01
A
Termination of directors
8
Q
TM02
A
Termination of CS
9
Q
What is important to remember re shelf company incorporation
A
Under MA, company must always have min 1 director and so order of appointment is important
10
Q
AD01
A
Change company address
11
Q
Docs to be sent to CH on incorporation
A
- IN01
- Memorandum
- Articles (if not using MA)
- Fee
12
Q
Special rule re WR of SR
A
Must state it is a special resolution
13
Q
Proxy vs alternate
A
Proxy in GMs
Alternate in BMs
14
Q
Who carries out PMM
A
CS
15
Q
What happens in BM1
A
- convene / call GM
- approve form of notice for GM / short notice consent
- authorise circulation of above to shareholders
BM then adjourned
16
Q
BM2
A
Directors informed how shareholders voted & they authorise one of their number to take the relevant action and deal with PMM
17
Q
3 categories of PMM
A
- Internal (minutes for 10 years / updating registers, books)
- CH filings (SRs and exceptionally ORs / amended Articles & forms)
- Record keeping (e.g. service contracts)
18
Q
PMM re allotment
A
- OR, SR & Articles to CH within 15 days
- SH01 (return of allotment) & statement of capital to CH within 1 month
- Relevant PSC forms if changed (PSC01 etc.) to CH within 1 month
- Update register of members within 2 months
- Update PSC register if needed
- Share certificates sent to new shareholders within 2 months
19
Q
PMM re buyback out of profits / capital
A
- File return, notice of cancellation & statement of capital within 28 days (SH03 & SH06)
- Keep copy of contract & minutes for 10 years
- Cancel shares
- Update register of members (and PSC register if applicable)
20
Q
Buyback out of capital - post GM/WR
A
- Place notices in Gazette and national newspaper, and file DS and AR at CH within 7 days
-
File SR at CH within 15 days
3. For 5 weeks after SR, creditors and shareholders have right to object - DSS and AR must be available for inspection at registered office
21
Q
SH01
A
Return on allotment
22
Q
SH03
A
Buyback notice
23
Q
SH06
A
Share cancellation
24
Q
Which business structures can grant fixed and floating charges
A
Company and LLP
25
Which businesses can grant fixed charges
All
26
Effect of legal personality
* The company owns its own property
* The company enters into its own contracts
* The company sues and is sued on its own liabilities
* The company can separate out different elements of the business
27
Regulation of equity finance vs debt finance
Equity finance subject to far heavier regulation
28
When is investment repaid re equity and debt finance
* Equity - usually on sale / termination
* Debt - under terms of agreement
29
Return on investment re equity finance
* Dividends *if profits*
* Capital value may decrease or increase
* Share issue may reduce both dividends and value of shares (dilution)
30
Return on investment re loan finance
* Interest paid under contract terms
* Capital value remains constant
* Security may be taken to protect lender
31
Preference shares
* Preference as to payment of dividends / return of capital on winding up
* If preference to dividend, this is paid before other SHs
* Amount is usually expressed as percentage of nominal value of share
* Normally non-voting
* Presumed cumulative
32
Participating preference shares
* Rights to surplus profits available for distribution after receiving their own fixed preferred dividend
* Rights to surplus assets on winding up
33
How to vary class rights
1. In accordance with **articles**, or
2. If articles don’t provide, **consent in writing of at least 75% of holders of issued shares of that class**, or
3. **SPECIAL resolution** passed at a separate GM of holders of that class
NOTE: SH holding **15%** of relevant shares can apply to court **within 21 days** of resolution to have variation cancelled (as long as they voted against variation)
* Variation then does not take effect UNLESS and UNTIL court confirms
34
4 key points re fixed charges
1. borrower retains possession AND legal ownership
2. normally over 'fixed assets' e.g. machinery
3. lender can control what borrower does with asset
4. borrower can still use asset in ordinary course of business
35
4 key points re floating charges
1. borrower retains possession AND legal ownership
2. normally over 'fluctuating assets' e.g. stock
3. lender cannot control what borrower does with asset until crystallisation
4. until crystallisation, borrower free to dispose
36
charge vs mortgage
mortgage - lender retains legal title until debt satisfied!
37
Mortgage - key features
* lender retains ownership until debt repaid
* lender has **immediate right to possession**
38
AA01
Change accounting ref date
39
Filing requirements for companies
* directors file accounts each F/Y with CH (offence if not)
* directors prepare financial report each F/Y
* confirmation statement (CS01) wfiled within 14 days of anniversary of co's incorporation (offence if not)
*NB: small companies exempt re accounts / financial report*
40
Partnership duties to each other
Good faith duties:
* honest + full disclosure
* account for unauthorised profit (without consent)
* account for profits from competing business
41
When can a partner bind the partnership re apparent authority?
1. The transaction relates to the **business carried out by firm**
2. The partner would **usually be expected to have authority** to enter into such a transaction
3. The 3rd party **DID NOT KNOW the partner had no authority** to act, AND
4. The 3rd party **knows or believes them to be a partner**.
*EVEN IF expressly / impliedly limited authority*
42
Consequence of partner acting with only apparent authority
Personally liable to fellow partners for breach of warranty of authority (but partnership still bound and contract unaffected)
43
Which contracts do the rules re partner contracts NOT apply to
Contracts between partners - must be between partner & 3rd party
44
Partnership liability
Joint + several
45
When will a partnership automatically dissolved under PA
1. Retirement of partner
2. Expiry of fixed term
3. Death or bankruptcy of partner
4. Partners giving notice (partnership at will)
5. Partnership become unlawful (cannot be disapplied - automatic)
6. By the court at last resort
46
What must directors do before CVL and MVL
* CVL - agree by majority that co is insolvent and needs to be placed into liquidation
* MVL - make statutory declaration of solvency
47
Advantages of IVA
* Avoids bankruptcy: Less stigma and fewer legal restrictions.
* Customisable: Payments tailored to the debtor’s income and circumstances.
* Creditor protection: Moratorium possible (via interim court order), which halts legal actions.
* Binding agreement: Once approved by 75% (by value) of voting creditors, all unsecured creditors are bound—even those who voted against.
48
Disadvantages of IVAs
* Not guaranteed: Creditors can reject the proposal.
* Longer than bankruptcy: Often lasts 3–5 years compared to bankruptcy’s typical 1-year discharge.
* Limited scope: Doesn’t bind secured or preferential creditors without their consent.
* Costs: Can be expensive due to professional fees.
* Risk of failure: If the debtor defaults, bankruptcy can still be initiated.
49
Advantages of bankruptcy
* Quick discharge: Usually ends in 1 year, releasing the debtor from most debts.
* No repayment plan: Debts are written off (subject to available assets).
* Relieves pressure: Stops creditor enforcement once the order is made.
* Court protection: Provides legal finality and fairness in asset distribution.
50
Disadvantages of bankruptcy
* Severe consequences: Loss of most assets, including property (except essentials).
* Legal restrictions: Can’t act as a company director or get credit over £500 without disclosure.
* Public stigma: Bankruptcy is public and carries reputational impact.
* Restrictions may continue: BROs (Bankruptcy Restriction Orders) can extend limitations for 2–15 years for misconduct.
* Voidable transactions risk: Trustee may challenge past financial dealings (e.g., gifts or preferential payments).
51
Administration advantages
* Moratorium Protection: Provides a breathing space for the company, preventing creditors from taking legal action during the administration.
* Preservation of Business: Aims to rescue the company as a going concern, which could be beneficial for employees, customers, and suppliers.
* Potential for Rescue: Aimed at achieving better returns for creditors than liquidation by continuing operations or restructuring.
* Control by Professionals: Administered by a licensed insolvency practitioner, who brings expertise in restructuring and debt management.
52
Disadvantages of administration
* Cost: Administration can be expensive, with fees paid to the administrator, reducing funds available for creditors.
* Loss of Control: Directors lose control of the business during administration, and the administrator takes over.
* Uncertainty: The outcome can be uncertain, as administration may not always result in business rescue and could end in liquidation.
* Limited Time: The administration process is time-limited (usually up to 12 months), after which further action is required, and the company may still face liquidation.
53
Advantages of receivership
* Quick Action: Receivers can be appointed quickly by secured creditors to protect their interests.
* Targeted for Secured Creditors: Specifically benefits secured creditors, as they have the ability to take control of and sell assets.
* No Court Involvement (in some cases): For fixed charge receivership, the process may not involve the court, making it quicker and simpler.
* Enforcement of Secured Debt: Provides a method for secured creditors to enforce their rights if a company defaults on secured debt.
54
Disadvantages of receivership
* Limited Scope: Does not address the company’s overall debt issues, focusing only on secured creditors and their assets.
* No Rescue Option: Receivership generally does not aim to rescue the business as a going concern, often leading to asset liquidation.
* Loss of Control: The company's management loses control of assets, which are managed by the receiver.
* Conflict with Unsecured Creditors: Can cause tension with unsecured creditors, who are not involved in the process and may not receive any repayment.
55
Advantages of CVAs
* Flexibility: CVAs allow for bespoke repayment terms, giving the company time to recover and pay off creditors at a manageable pace.
* Creditor Protection: Once a CVA is proposed and agreed, creditors cannot take legal action against the company.
* Avoids Liquidation: Provides a chance for the company to survive and restructure, avoiding the costly and damaging process of liquidation.
* Control Retained: Unlike administration, the company’s directors retain control of the business during the CVA, under the supervision of the insolvency practitioner.
56
Disadvantages of CVAs
* Approval Required: A CVA requires the approval of 75% of creditors (by value), which can be difficult to achieve, especially if there are dissenting creditors.
* Stigma: Although less damaging than liquidation, a CVA still carries the stigma of being in financial distress, which can affect relationships with suppliers, customers, and employees.
* Supervision Costs: There are costs involved in hiring an insolvency practitioner to supervise the CVA process, which may reduce the funds available to creditors.
* Limited Outcome: If the company cannot stick to the terms of the CVA, it may still end up in liquidation.
57
Advantages of liquidation
* Clear Resolution: Liquidation provides a clear, final solution to an insolvent company, bringing an end to its operations and debts.
* Creditor Distribution: In the case of a creditors’ voluntary liquidation (CVL), creditors are paid in a clear, transparent manner according to their priority.
* Debt Relief: Once liquidation is complete, directors are generally free from liability for the company’s debts, except in cases of fraud or wrongful trading.
* No further liability for unpaid debts: In a voluntary liquidation, creditors generally can’t pursue debts once the liquidation process is complete.
58
Disadvantages of liquidation
* Business Closure: Liquidation ends the company’s operations, often resulting in loss of jobs, loss of customers, and closure of business.
* Loss of Control: Directors lose control over the business once liquidation starts, and a liquidator is appointed.
* No Further Value: If assets are insufficient, creditors may receive little or no repayment, especially if there are many unsecured creditors.
* Stigma and Reputation Damage: Being liquidated is often seen as a failure and can damage the reputation of the company and its directors.
59
Advantages of informal arrangement w creditors
* Flexibility: Informal arrangements allow the company to negotiate with creditors on terms that are specifically suited to their situation, providing a tailored solution.
* Lower Cost: No formal legal fees or court involvement, making this a cost-effective way to manage debt issues.
* No Stigma of Formal Insolvency: Informal arrangements avoid the public stigma associated with formal insolvency procedures, allowing the company to avoid some of the negative perceptions.
* Quick Process: Because there are no court hearings or formal steps involved, the arrangement can be made relatively quickly.
60
61
Disadvantages of informal arrangement w creditor
* No Formal Protection: Creditors are not legally bound to the arrangement and could pursue legal action at any time, leaving the company vulnerable.
* Uncertain Outcome: The success of informal arrangements depends on the willingness of creditors to cooperate, and there is no guarantee they will agree to the terms.
* Potential for Conflict: Without the legal framework of a formal insolvency procedure, disagreements between creditors and the company may arise, leading to stalled negotiations.
* Limited to Certain Situations: Informal arrangements are generally more suited to companies with temporary cash flow issues, rather than long-term insolvency, and may not be effective for more complex situations.
62
Procedure re special notice if board is agreeable
1) SPECIAL NOTICE served by company on board (28 clear days’ notice of removal resolution)
2) If board agrees to place removal resolution on GM agenda – 14 clear days’ notice to shareholders
* If not practical - advertisement or newspaper (same notice period)
* NB: serve on all SH because not all will know about special notice
3) GM takes place to allow shareholders to vote on removal resolution
* ORDINARY resolution
* Directors who are ALSO shareholders can vote in their capacity as shareholders on resolution to remove them
63
Procedure re special notice where board are not agreeable
1) SPECIAL NOTICE served by company on board (28 clear days’ notice of removal resolution)
2) If board uncooperative, may need to requisition a GM (s 303 request)
* Shareholders can serve notice requiring Board to call GM (if they together have at least 5%+ paid up voting share capital)
i. Board must call the GM within 21 days of request, and
ii. To be held within 28 days of calling GM
3) If directors fail to call GM, shareholders can call themselves on normal notice (s 305)
* If all the shareholders who submitted the request or those holding more than 50% of the voting rights in that group
* GM must then be called no less than 14 clear days’ notice and within 3 months of s 303 request
* NOTE: shareholders can recover reasonable expenses for calling GM themselves
i. Can retain such sums from defaulting directors’ remuneration
64
Derivative claim process
1. Prima facie case (may dismiss on **absolute bars** OR **factors**)
2. If prima facie case - will consider evidence as to views of members who have **no personal interest** in matter
3. Case proceeds to trial or adjourns
65
Absolute bars to derivative claim
1. Court is satisfied that a person trying to **promote the success of the company** would NOT seek to continue claim, or
2. Cause of action arises from an act / omission that has not yet occurred, but is **already authorised** by the company, or
3. Act / omission already occurred and **authorised before** it occurred OR **ratified since** it occurred
66
Which factors MUST be taken into account re derivative claim
1. Whether member is acting in **good faith** in seeking to continue claim
2. Whether the act / omission is **likely to be ratified** by company
67
Test re unfair prejudice
Reasonable bystander (no need to show bad faith)
68
Examples of prejudicial conduct
* Granting of excessive remuneration to directors
* Directors’ dealing with associated persons
* Non-payment of dividends
* Exclusion of management (where shareholder had legitimate expectation)
* Diverting opportunities to competing business in which majority shareholder holds interest
69
Can MA14 be excluded re duty to avoid conflict of interest
No
70
71
Exceptions to duty to avoid conflict of interest
* Does NOT apply to conflict arising in relation to transaction/arrangement with the company
* No breach if situation cannot reasonably be regarded as likely to give rise to conflict
* Duty is NOT infringed if matter authorised by directors
72
Exceptions to duty to declare interest in proposed / existing transaction
* Concerns terms of director’s service contract
* Director is unaware of interest / transaction (& ought not to be aware)
* Interest cannot be reasonably regarded as likely to give rise to conflict
* If or to extent other directors aware of it already (or ought to be)
73
Main difference between duty to declare interest in existing / proposed transaction
Existing - failure to is an offence punishable by fine!
74
Consequence of breach of prohibition of FA
It is an **offence**
* Company can be fined
* Officers of company can face fine / imprisonment
* FA transaction would be VOID, and wider transaction may be void too
75
Defences to SPT
* If shareholders **affirm** transaction within reasonable period
* Director / connected person shows they had **no knowledge** of circumstances constituting breach
76
SPT exceptions
* Transactions between holding company & wholly owned subsidiary
* Company = wholly owned subsidiary of any other
* Transaction between company + person in capacity as shareholder
* Transaction between 2 wholly owned subsidiaries of same holding company
77
Conseuences of SPT
Transaction is **VOIDABLE**
Directors / connected persons involved **liable to indemnify** company for any loss
78
Defences re loans to directors
* Director took **all reasonable steps** to ensure company complied
* **No knowledge** of circumstances constituting contravention
* Arrangement can be **affirmed** by company (or holding company if they failed to obtain OR) by passing ORDINARY resolution
79
Consequence of loan to director without approval
VOIDABLE unless:
* Restitution no longer possible
* Company has been indemnified for loss / damage suffered
* Rights acquired in good faith by parties would be affected by avoidance
*RIG*
Directors involved / connected persons LIABLE
80
What order can be given re preferences
| Corporate
Court has discretion to make an order to restore the position as if the company had not given the preference
81
Defence to corporate preference
* If buyer was acting in **good faith** and for value
Rebuttable presumption buyer was NOT acting in good faith where:
* They had NOTICE of circumstances, or
* Connected with company
82
What is a preference
## Footnote
Corporate
The company does anything or allows to be done anything which has the effect of **putting that person in a better position in the event of the company going into insolvent liquidation than they would otherwise have been in**
83
Defence to corporate TUVs
* Company entered into transaction in **good faith** and for the **purposes of carrying on its business**, AND
* At the time, there were **reasonable grounds** for believing that the transaction would **benefit** the company
Above is for D to raise
NB: same buyer defence above!
84
Creditor's petition grounds for bankruptcy
a) At the time of petition, debtor **appears unable to pay or has no real prospect of paying**
b) Debt owed is for an unsecured liquidated sum **exceeding £5k**
85
Debtor's petition grounds for bankruptcy
a) **Unable to pay debts** (must be accompanied by statement of affairs, criminal offence if not)
86
Grounds re court procedure - admin
Company is or is likely to become unable to pay its debts
87
Grounds re out of court procedure - admin
Creditor **must not have commenced winding up proceedings**
*Thus, if winding up proceedings have started, court procedure only option (but otherwise normally done out of court)*
88
Compulsory liquidation grounds
a) Company is **unable to pay** its debts, AND
b) It is **just and equitable** for the company to be wound up
89
IVA procedure
1. Debtor **appoints** nominee
2. Debtor drafts **proposal for compromise** AND **statement of affairs**
3. Nominee submits report to court stating whether they think proposal has a **reasonable prospect of approval** & whether creditors should be asked to vote
4. Debtor can apply to court for **interim order** (if so, *moratorium* obtained)
5. Must be **approved** to become binding
| APsRIA
90
CVA procedure
1. Directors draft CVA proposal + **appoint** nominee
2. Directors submit **proposal** + **statement** of company affairs to nominee
3. Nominee **considers** CVA proposal and *within 28 days* must **report** to court whether creditors / SH should be asked to vote
4. Nominee allows *at least 14 days* to **vote** on CVA proposal (SH meeting *within 5 days* of creditors’ decision)
5. **Vote**
6. Nominee reports to court that CVA is **approved**
| ASCAVR
91
Court procedure - admin
a) Apply to court
b) Interim moratorium comes into effect lasting until admin order made / app dismissed
c) Hearing and order
92
Out of court procedure by directors/company - admin
1) **Serve NOI** on QFC holders / anyone entitled to appoint admin receiver
*Wait at least 5 business days*
2) **File NOI** + stat dec at court
*Wait at least 10 business days*
3) **File NOA** + stat dec at court
= appointed
93
Out of court procedure by 1st ranking QFCH - admin
1. Directors **serve NOI** on QFC holders / anyone entitled to appoint admin receiver
2. *Within 5 business days*, **appoint own administrator** (if not, directors file NOA in usual way)
3. QFC holder must first **enforce security**
4. **File NOA** + stat dec at court
*NOTE: where more than 1 QFC holder, must first give 2 business days’ notice to priority QFC holders – can only proceed if they consent*
94
CVL procedure
1. Members pass **SPECIAL resolution** to place company into CVL
2. *Within 14 days* of SR, directors ask creditors to **approve nominated liquidator** or put forward own choice (creditor’s takes precedence)
3. Members pass **ORDINARY resolution** to appoint nominated liquidator
4. Directors draw up **statement of company’s affairs** & send to creditors
| SAOS
95
MVL procedure
1. Directors swear **declaration of solvency** that company will be able to repay creditors in full + interest within 12 months (must contain statement of company assets + made with reasonable grounds)
2. Members pass **SPECIAL resolution** to place company into MVL
3. Members pass **ORDINARY resolution** to appoint nominated liquidator
| DSO
96
97
Compulsory liquidation procedure
Creditor presents winding up petition to court
NB: if company says it can pay sum due within reasonable period - court may adjourn
98
IVA voting procedure
Creditors holding at least 75% (in value) of total debt owed
Of which at least 50% (in value) are not associated with debtor
99
CVA voting procedure
1) Creditors holding at least 75% (in value) of total debt owed (excluding secured creditors)
* Of which at least 50% (in value) are not associated with debtor
2) Simple majority (more than 50%) of SH vote in favour
100
Admin - voting procedure
Passed by:
a) Majority in value of creditors present + voting
Will NOT be passed if more than 50% in value unconnected (independent) vote against it
101
On what grounds can a creditor challenge a CVA and by when
* Within 28 days
* On grounds on **unfair prejudice** (*material irregularity* to approval procedure)
102
3 aims of admin
a) Rescue company as a going concern (if not, then…)
b) Achieve a better result for company’s creditors as a whole than would be likely if company was wound up (if not, then…)
c) Realise the company’s property in order to make a distribution to 1 or more secured or preferential creditors
103
