Business Flashcards

Question

Who has to file accounts?

Answer 1

Directors job - accounts must give "true and fair view of the state of affairs" - prepare a directors report for a financial year - small co don't have to (net assets (total assets - total liabilities) of £5.1mill, turnover (yearly performance sheet) £10.2 mill and no more than 50 employees) Micro entity don't have to (balance sheet no more than £316,000, turnover not more than £632,000 and no more than 10 employees) Director distribute to SHs, debenture holder and anyone who gets notice of GM

Answer 2

9 months from the end of the accounting reference period for private, 6 months from the end of the accounting reference for a public co. Newly incorp can file the accounts and report 3 months after end of first period

Answer 3

Form CS01 within 14 days from confirmation date (anniversary of incorporation)

Answer 4

Directors, comp sec and auditor

Answer 5

Board res. 14 days. Register of secs

Answer 6

Small co and dormant co

Answer 7

The directors appoint the first auditor, and the SH appoint after that via ordinary res. Private co auditor usually reappointed auto

Answer 8

Ordinary res - SPECIAL NOTICE TO CO FOR PROPOSAL TO REMOVE AUDITOR. Auditor must deliver a statement to the company explaining the circumstances about why ceasing office. Useful if unethical behaviour in co

Answer 9

People who sign the memo of association as subscribers.

Answer 10

As soon as practicable and, as a long stop, within 2 months of the allotment

Answer 11

Statement to that affect on the ref of members. If kept at reg office or SAIL it must be availible for inspection to SH free of charge and to anyone else for a feww

Answer 12

SH - issue in 2 months of allotment of shares or within 2 months of a transfer of shares

Answer 13

Yes - only people with OVER 25% of Co shares need to be on PSC

Answer 14

Voting rights and right to share in the co's profits by receiving dividends

Answer 15

Often in SH agreement - give shareholder weighted voting rights when res under consideration to remove that SH from their office as director. Can't restrict directors from voting in a particular way because then D's wouldn't be acting in the best interest of a company.

Answer 16

Yes, i.e if meeting would be quorate

Answer 17

Yes if management is in deadlock and there is no way of resolving (IT IS JUST AND EQUITABE TO DO SO)

Answer 18

Yes to prohibit co from doing something prohibited by its constitution

Answer 19

Subsid (other co called holding co) 1. other co has a majority of the voting rights; 2. other co is a member of it and has the right to appoint or remove a majority of its board members 3. other co is a member of it and controls alone (via agreement) a majority of the voting rights 4. it is a subsid of a co if that is itself a subsid of that other co

Answer 20

If sahres are held jointly, need 2 names on reg of members but only one address

Answer 21

1. Cumuative = SH has to be paid any missed dividends from previous financial years. This right ranks before payment of dividends to ordinary SH in current FY 2. Non - SH loses right to that year's dividend if no paid

Answer 22

1. unfair prejudice petitions 2. derivative claims

Answer 23

- any SH applies to the court for an order for a remedy when they feel have been unfairly prejudiced as a SH. Bring claim on own on behalf. Grounds include: a. company's affairs have been conducted in a manner that is unfairly prejudicial to the interest of the members generally, or some part of its members (inc claimant) b. an actual or proposed act or omission of the co is or would be prejudicial. (ex - diverting opportunities to competing business in which majority SH holds an interest, award excessive pay to Ds, excluding SH from management where led to valued would be participating, removing audtor due to 'divergence of opinion' on accounting/audit procedure) Most common orders: 1. other SHs must buy back the unfairly prejudiced SH; or 2. co must buy back shares 3. restriction on the co altering its article without leave of court 4. order that C has permission to bring a derivative claim Test for unfair prejudice? OBJECTIVE 'hypothetical bystander would believe the act or omission to be unfair'

Answer 24

A derivative claim is a claim instigated by a shareholder for a wrong done to a company which has arisen from an act or omission of a director. Brought on behalf of co. The point of a derivative claim is to allow shareholders to instigate legal action instead of the board, because the board is neglecting to bring a claim or is refusing to do so. A derivative claim may only be brought in relation to a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director. - issue claim but need to apply for permission to continue - hearing - Court MUST REFUSE PERMISSION TO CONTINUE IF: * where the court is satisfied that a person acting in accordance with s 172 CA 2006 would not seek to continue the claim. In effect, this means that the court will not allow an individual who is not promoting the success of the company to continue the claim. A full explanation of this directors’ duty to promote the company’s success is at 3.16.2; * where the cause of action arises from an act or omission that has not yet occurred, but which has already been authorised by the company (see 3.16.5); or * when the act or omission has already occurred and was authorised before it occurred or has been ratified by the company (see 3.19) since it occurred - Court MUST take INTO ACCOUNT: * whether the shareholder is acting in good faith in seeking to continue the claim; the importance that someone acting in accordance with s 172 (somebody who is acting in good faith to promote the company’s success) would attach to continuing; * whether any past or future action or omission was authorised, or if not, would be likely to be ratified; * whether the company has decided not to pursue the claim; and * whether the act or omission gives rise to a cause of action that a member could pursue in their own right. * In particular, the court is obliged to have particular regard to any evidence showing the views of those shareholders with no personal interest in the matter. This is because these individuals can be seen to be objective. The legal costs of making an application to continue a derivative claim are met by the applicant shareholder if permission to continue is refused. If permission to continue is granted, the company will meet all of the legal costs of the claim, as well as the other party’s legal costs if the claim is unsuccessful

Answer 25

Specialist financial business, e.g investment funds and venture capitals

Answer 26

When individual has existing legal obligation which he has evaded or which he deliberately evades by using a company he controls. Can only piece the veil to to deprive individual or its controller of the advantage they would have received as a result of tbe company’s separate legal personality

Answer 27

1. Constitution must said it’s plc 2. Use plc abbreviation 3. Allowed Share capital minimum is £50k - atleast 1/4 of all shares need to be paid up on their nominal value, and all premiums paid

Answer 28

Date of incorporate on the certificate of incorporation

Answer 29

Companies and LLPs

Answer 30

1. Send IN01 to Co Ho 2. Send memo of association (and articles if not using model) 3. Pay fee 4. Apply electronically or paper and send to reg of co. 5. Co Ho will check (1. Correct fee paid, 2. Application is correct and 3. Register of disqualified directors)

Answer 31

Apply for reg online? Auto. Apply by paper? Reg in 3 months or starting to do business

Answer 32

Board - docs can still be send to old office 14 days after change

Answer 33

- registered office - first directors (name and service address) - first shareholders (name, addres, shareholding) - co sec name and address - statement of capital (no of shares; type; total nominal value; name and addresses of SH)

Answer 34

Special resolution - file at CH in 15 days of passing File amended articles 15 days after taking effect

Answer 35

1. Holds MORE THAN 25% shares 2. Holds MORE THAN 25% voting rights 3. Holds right to appoint or remove majority of the board

Answer 36

Issue resolvent docs (IN01, fee, memo of associating and articles), articles must be in plc format - there are the standard ones tailored, before trades needs to get a certificate of trading to show has met capital requirements and can trade and borrow. Can apply to CH for this (SH50)

Answer 37

1. Special res 2. App for reg (RR01) inc statement of compliance 3. Fee 4. Revised plc articles 5. Balance sheet, statement from auditors, valuation report for any shares for non non cash consideration between date of balance sheet and pass special res Don’t need a trading certificate!

Answer 38

A company’s constitution consists of its memorandum of association, articles of association, certificate of incorporation, current statement of capital, shareholder resolutions and agreements, court orders and legislation which affect the company’s constitution.

Answer 39

The shareholder can sue any of the other members of the company if his membership rights are infringed. The shareholder has been entered on the register of members of the company and so is a member of the company. The statutory contract imposes obligations upon the members when dealing with each other, so that means that the shareholder may bring an action for breach of contract against other members of the company where his rights have been infringed.

Answer 40

SH person who buys and holds shares in a co having share capital. He becomes a member once his name is officially entered on members reg. Many co limited by guarantee do not have share capital so their members aren't SH. Members - holding shares in physical form.

Answer 41

All partners

Answer 42

The Memorandum will state that the people (subscribers) wish to form the company and have agreed to subscribe for the Shares. The application for reg will include the name, details of SH, statement of capital

Answer 43

Selling them for the nominal value (not selling them for what you paid) - par value = nominal value

Answer 44

Public companies, as the name suggests, can offer their shares to the public. However, a public company will not be able to gain the exposure to potential investors which it needs unless it becomes a publicly traded company (i.e. has been admitted to a recognised stock exchange, e.g. the London Stock Exchange, or AIM (alternative investment market)).

Answer 45

Need special amendment in model articles

Answer 46

Certificate of incorporation - will be the individuals named as proposed officers on IN01

Answer 47

Ordinary res OR board res

Answer 48

Under MA 18, a person will cease to be a director if a bankruptcy order has been made against them or a doctor gives a written opinion to the company stating that they have become physically or mentally incapable of acting as a director, and may remain so for more than three months.

Answer 49

When a new director is appointed, the company must notify Companies House within 14 days of the appointment (s 167(1)(a) CA 2006), and this will be done by filing form AP01 (for the appointment of an individual director), or form AP02 (for the appointment of a corporate director). The company must also enter the director on its register of directors and register of directors’ residential addresses.

Answer 50

Actual authority arises where a director has consent from the other directors to act in a certain way, for example to spend money. It can be express actual authority or implied actual authority to enter into the contract. The authority may be set out in the director’s service contract, or it may have been given following a discussion between the board of directors. This is express actual authority. Implied actual authority arises where the board has not expressly permitted the director to act in a certain way, but the director has acted that way in the past and the board has not tried to stop the director or told them that they are not authorised to act in that way

Answer 51

Apparent authority is where the director acts without the company’s prior consent, whether express or implied, but still binds the company to the contract. Effectively the company is estopped from denying the director’s authority. Apparent authority is based on a representation, by the company to the third party, by words or conduct, that the director is acting with the company’s authority. It is important to note that it is not the director’s actions which are significant for the purposes of ascertaining whether apparent authority exists; it is the company’s actions or omissions which must be considered. The general theme of the recent case law on apparent authority centres around a director or other employee of the company having apparent authority in the absence of information from the company to correct this impression

Answer 52

If a director does not have actual or apparent authority, the director is personally liable to the third party and the company is not a party to the contract or liable to the third party

Answer 53

Fixed 2 year - ordinary res. 10 year guaranteed with 1 year notice period? Board If notice period 2 years this is the bit that would be void and would be terminable on 'reasonable notice'

Answer 54

Under s 188(5), when the board proposes an ordinary resolution under s 188, it must keep a copy of the memorandum setting out the terms of the proposed service contract at the registered office for 15 days prior to the general meeting, and at the general meeting itself. If the ordinary resolution is proposed by written resolution, a copy of the memorandum must be circulated to the shareholders along with the written resolution.

Answer 55

Directors’ service contracts (or a memorandum setting out their terms) must be available for inspection by the shareholders at the company’s registered office during their term and until a year after termination of the service contract (s 228 CA 2006). Shareholders have the right under s 229 CA 2006 to inspect them without charge and within seven days of requesting to see them.

Answer 56

The shareholders can remove a director by ordinary resolution passed at a general meeting (s 168 CA 2006). Special notice is required for a resolution to remove a director (s 168(2) 2006). Special notice is explained in s 312 CA 2006: his means that the ordinary resolution to remove the director is not effective unless notice of the intention to pass it has been given to the company at least 28 days before the general meeting at which the resolution is proposed. Once the company has received this special notice, it must inform the director in question forthwith, and, where practicable, give its shareholders notice of the resolution in the same manner and at the same time as it gives notice of the general meeting. Where this is not practicable, the company must give its shareholders notice at least 14 days before the general meeting, by advertisement in a newspaper having ‘an appropriate circulation’, or any other manner allowed by the company’s articles. The director in question is entitled to speak at the general meeting, and also to require the company to send copies of any written representations the director wishes to make to the shareholders (s 169 CA 2006). The director can use this as an opportunity to argue that they should not be removed. The legal advice they have obtained and the evidence collected during the 28 days or more between notification of the proposed resolution and the meeting itself will help them to do this effectively

Answer 57

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

Answer 58

Fiduciary duties: 1. Act wiithin powers (s171) - a. act in cos constitution and b. exercise powers for intended purpose 2. Duty to promote success of company (s172) - subjective test just need due regard to following factors a. consequences of decisions in lomg run. b. interest of co employees c. business relationships d. impact on community and environment e. reputation of co f. act fairly between members. 3. Duty to exercise independant judgment (s173) 4. Exercise reasonable skill and care (objective and subjective) 5. Avoid conflicts of interest (s. 175) - relates to contracts co not a party! Can be authorised by directors. Won't apply in quorum - EVEN IF MA14 EXCLUDED 6. Duty not to accept benefits from 3rd parties (s. 176) - stil breach even if don't give favourable terms 7. Duty to declare interest in transaction (s 177) - make disclosure before co enters transaction. Exceptions: directors are aware, don't give rise to conflict, Director isn't aware of arrangement, concerns terms of director's service contract (TRansaction WITH co) - duty to disclose even if MA14 disapplied!!!!!!!!!!!!

Answer 59

Same as equitable principles and one common law for neg - account for loss - equitable comp for loss - Recission - Injunction - Restoration of prop - s174 NEGGY DAMAGES - breach of skill and care

Answer 60

If director interested in a transaction the company has already entered into, need to declare AS SOON AS REASONABLY PRACTICAEBALE unless declared under s177. More formal than 177, must be at a board meeting, or by notice in writing if sent to all directors, or by general notice of interest at BM - same exceptions as 177 - crim offence

Answer 61

In a claim against a director for wrongful trading under s 214 IA 1986, the court may order a director to contribute to the company’s assets if: * the company has gone into insolvent liquidation or insolvent administration; * before commencement of the winding up of the company, the director knew or ought to have concluded there was no reasonable prospect that the company would avoid insolvent liquidation; and * that person was a director of the company at the time. There is a defence available to directors for wrongful trading: a director will not be liable for wrongful trading if they took every step with a view to minimising the potential loss to the company’s creditors as they ought to have taken. 2 party test: There is a two-part test to apply to ascertain whether the director’s conduct is caught by this defence. The test examines the facts that a director ought to have known or ascertained, the conclusions which they ought to have reached and the steps which they ought to have taken. The standard expected of a director is that of a reasonably diligent person having both: * the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company, and * the general knowledge, skill and experience that that director has.

Answer 62

* seek professional advice from solicitors and/or accountants at the first sign of problems; * limit spending; * check the company’s accounts regularly; * keep records of their own actions.

Answer 63

A director will be liable for fraudulent trading if, in the course of the company being wound up, it appears that the company’s business has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose. In such a case, the court may declare that any persons who were knowingly parties to the carrying on of the business in such a manner are liable to make such contributions (if any) to the company’s assets as the court thinks proper HARD TO PROVE INTENT, often bring wrongful trading and fraudulent trading together (liquidator). Potential crim conviction.

Answer 64

Breach of one of the director's duties - can be force to contribute.

Answer 65

Substantial property transactions are governed by ss 190–196 CA 2006. A substantial property transaction (‘SPT’) is where: * a director, in their personal capacity, or someone connected with a director * buys from or sells to the company * a non-cash asset * of substantial value. If the board wishes to enter into an SPT, the shareholders’ consent by way of ordinary resolution is required. NON CASH ASSET - LOAN IS DIFFERENT

Answer 66

- member of family (spouse, child/step child, parents, partner, child of partner) - company which director or connected person: a. owns at least 20% of body corp shares; or, entield to exercise control of MORE THAN 20% of voting power at GM

Answer 67

Auto if OVER £100k More than £5k AND more than 10% NET ASSETS VALUE (look at balance sheet) Don't need SH approval for wholly owned subsids/holding

Answer 68

Voidable - account for gain and indemnify co for loss or damage: 1. director of co or holding co with whom the company entered into the arrangement 2.any person connected with director invovled or its holding co 3. any director who authorised

Answer 69

Ordinary res - 15 days before GM, at reg office, memo setting out terms of loan. Written res? Memo sent out with written res

Answer 70

1. Expenditure on business - max £50k 2. proceedings re co 3. Defending regulatory proceedings 4. minor business transactions - £10k No ordinary res? VOIDABLE Director who loan and authorised, jointly and serably liable

Answer 71

Yes need ordinary res. 15 days before GM have terms of payment Written res? send with res

Answer 72

2 - 15 years 2 - breach of fiduicary duty & not filing 15 - seeking money from investors when insolvent Most common - unfit director of insolvent co

Answer 73

The girlfriend is a de jure director. She has been validly appointed, and the fact that she does not take part in the running of the company does not change this.

Answer 74

Shares are allotted when a person gets the unconditionla right to be registered on the reg of members. Issue happens when the person is subsequently registered

Answer 75

Articles always contained an upper limit (authorised share capital) - if the articles havent been amended since then can remove by ORDINARY RES - even though amending articles is usually special BUT THE ORDINAR RES MUST BE FILED AT CH

Answer 76

1 class of shares? Board. under s550 Pre Oct 2009 articles - need ordinary res to activated s550! The company’s articles of association may restrict the directors’ power to allot shares under s 550. Companies can remove this power by amending the articles by special resolution. s551: Public co, or private with multliple class of shares needs ordinary res: 1. state max number of shares for allotment; 2. expiry for allotment (can't exceed 5 years after res passed) the authority to allot must state the maximum amount of shares that may be allotted under the authorisation and the date on which the renewed authority will expire. Once the authority to allot has expired, it may be renewed by ordinary resolution of the company for a further period not exceeding five years. Instead of s 551, articles may contain powers but need max amount and expiry stated (no more than 5 years)

Answer 77

Co can't offer ordinary shares giving right to vote, or shares that can be converted to ordinary, without giving existing SH first right of refusal to keep voting power in same proportion. Must be equal AS FAR AS PRACTICABLE. Shares must be on same or more favourable terms

Answer 78

1. state date for acceptance 2. can't be LESS than 14 days; 3. can revoked before this time Don't apply to bonus shares Don't apply if consideration whole or part cash Don't apply if alloted / shared due to EMPLOYEE SHARE SCHEME

Answer 79

The CA 2006 allows private companies to exclude pre-emption rights by provisions contained in its articles, either generally or in relation to particular allotments (s 567 CA 2006). This will override the statutory provisions contained in s 561. So before advising a client on how to disapply pre-emption rights, it is important to check the company’s articles first, to check whether alternative provisions already exist. Any provisions in the company’s articles could be removed by special resolution if the company no longer wants them to be included. Note that there are no pre-emption rights in the Model Articles Depends on co type!

Answer 80

Under s 569 CA 2006, the shareholders of a private company which has only one class of shares may pass a special resolution disapplying the existing shareholders’ pre-emption rights. So companies which had authority to allot shares under s 550 can disapply any preemption rights by special resolution under s 569

Answer 81

When the company is a plc or has more than one class of shares, how pre-emption rights are disapplied will depend on the nature of those companies’ initial authority to allot shares. We saw in 4.3.2.2 that companies which do not have automatic authority to allot under s 550 will need to pass an ordinary resolution under s 551 CA 2006 to give the directors authority to allot shares. If the ordinary resolution gave a general authority to allot (rather than authority in relation to a specific allotment) then s 570 allows the company to remove the pre-emption rights just by passing a special resolution. Disapplication will last as long as the directors’ authority under s 551. If the authority to allot shares contained in the s 551 ordinary resolution was in relation to a specific allotment, s 571 also allows companies to disapply pre-emption rights by special resolution. However, the special resolution must be recommended by the directors of the company (s 570(5) CA 2006) and before proposing a special resolution. Under s 571(6) the directors must make a written statement setting out: * the reasons for making the recommendation; * the amount the purchaser will pay; and * the directors’ justification of that amount. The directors’ written statement must be circulated to the shareholders along with the notice of the general meeting, or, if the resolution is proposed as a written resolution, it must be sent out with the written resolution (s 571(7) CA 2006).

Answer 82

Pay for shares up front - can exclude

Answer 83

Put in premium account and becomes share capital

Answer 84

1. ALL SRs 2. Ordinary res: any ordinary resolution removing the authorised share capital in a pre-CA 2006 company Any ordinary resolution to activate s 550 in a pre-CA 2006 company Any s 551 ordinary resolution granting directors authority to allot

Answer 85

- Return of allotment and sttement of capital - new person with signficant control, change which band someone in, person ceasing to be SC

Answer 86

Within 2 months - own members and PSC if necessary

Answer 87

can't restrict someone selling shares but MA26 gives directors discretion not to admit someone on reg of memebers- would be beneficial owner - old owneer be paud dividends, and go to meeting so must vote in accordacne with new member and pay them dividends

Answer 88

If sale price over 1k - 0.5% (pound to nearest £5!) NOT PAYABLE IF GIFT Miniumum SD is £5

Answer 89

This principle has a number of consequences, which include: * dividends cannot be paid out of capital, just out of distributable profits; and * the company must not generally purchase its own shares. There are exceptions to these rules. They are: * a company can buy back its own shares as long as the correct procedure is followed (s 690); * a company can purchase its own shares under a court order made under s 994 CA 2006 to buy out an unfairly prejudiced minority shareholder; and * a company can return capital to shareholders, after payment of the company’s debts, in a winding up.

Answer 90

1. Firstly, the company’s articles must not forbid buyback (s 690(1)). 2. The shares must be fully paid (s 691(1)). 3. The company must pay for the shares at the time of purchase (s 691(2)). 4. The shares must usually be paid for out of distributable profits or the proceeds of a fresh issue of shares made for the purpose of financing the purchase (s 692(2)(a) CA 2006). What is meant by distributable profits is explained in s 830 CA 2006. They are the company’s accumulated, realised profits less its accumulated, realised losses. They are shown on the bottom half of the company’s balance sheet, under profit/loss reserve. Please see 12.9.4 for a full explanation of company balance sheets. 5. The shareholders must pass an ordinary resolution authorising the buyback contract (s 694 CA 2006). 6. A copy of the buyback contract, or a summary of it, must be available for inspection for at least 15 days before the general meeting and at the general meeting itself (or be sent with the proposed written resolution when or before it is circulated (s 696(2)). 7. Under s 702 CA 2006, a copy of the buyback contract, or, if the contract is not in writing, a written memorandum setting out its terms, must be made available for inspection at the company’s registered office or SAIL as soon the contract has been concluded, for a period of ten years starting with the date of the buyback

Answer 91

Need special res as well as ordinary, issue notice in gazette, local newspaper, or to creditors (in 7 days of being passed) Also need auditors report and statement of solvency! Pay between 5 -7 weeks after SR

Answer 92

Court will make an order for a director to contribute to co's assets if: 1. in insolvent liquidation/administration; 2. before winding up director knew, or ought to have known, no prospects of avoiding liquidation; 3. person was a director of a company at the time.

Answer 93

Under MA 30, it is the directors who decide whether or not to recommend that a dividend be paid and how much it should be. The shareholders must then pass an ordinary resolution in order for this to be approved (or ‘declared’

Answer 94

Stops company making any further charges in priority to the floating charge without charge holders permission. If subsequent lender has ACTUAL NOTICE of this clause then the fixed charge will be subordinate. Clause will be in certified copy of charge doc on CH. have to actually search CH to have actual knowledge. Will usually covenant (promise) there are no earlier charges

Answer 95

CHECK ARTICLES - not amended? At common law, all shares in the capital of a company will be treated as ranking pari passu unless any separate class rights are clearly documented. It is therefore important that the rights attached to the new class are recorded in a document to which the company and its shareholders are bound. Therefore, the Articles will need to be amended to reflect the rights attached to the preference shares. This is a constitutional change and requires a special resolution.

Answer 96

Option A is wrong because the preference shares are non-participating and therefore there is no right to participate in return of capital beyond repayment of the paid-up nominal value of the preference shares. No preemption rights

Answer 97

Legal mortgage is better and highest level of security

Answer 98

1. Do all individuals make decisions 2. Whose name on title deeds 3. How are profits split

Answer 99

All decisions made by majority accept: 1. Changing nature of business 2. Appointing new partner 3. Changing terms of partnership agreement

Answer 100

Income profits drawed down

Answer 101

Contrary to otherwise in the PA, need unanimous vote (not going to happen)

Answer 102

A partnership which continues indefinitely until notice is given under the PA 1890 is known as a partnership at will. Under the PA 1890, there is no requirement for the notice to be of a certain length of time, or for the notice to be in writing (unless the partnership agreement is a deed). The effect of this is that a partner can end the partnership with immediate effect by merely saying to the other partners that they wish the partnership to end. Also: 1. partner retires 2. expiry of fixed term 3. death / bankruptcy 4. nottice of dissolution who has, by order of the court, granted a charge over their hare of the prop for a debt owe ALONE. Can apply to the Court for dissolution. When this happens, assets sold and leaving partner gets share - can insist on busines being sold so other partners cant buy him out

Answer 103

5% per annum on the value of their partnership share until they receive their share from the other partners, or such sum as the court may order representing the share of profits made which is attributable to the use of their share

Answer 104

Goodwill can be described as a business’s reputation and the value of its clients and contacts. When a business is sold as a going concern, part of the purchase price will be for the business’s goodwill, because the business is up and running and can continue as before, retaining its clients and reputation. Goodwill is difficult to value, but commonly, two years’ profit is taken as the value for goodwill.

Answer 105

1. creditors (pay from private assets if not enough) 2. partners who lent money to firm 3. partnersh's capital entitled 4. surplus shared between partners in accordance with agreement

Answer 106

1. open with eachther re relevant info re partnership 2. account for private profits earned without consent 3. do not compete with firm - if does need to account for profits and pay over 4.bear share for any loss 5. indemnify partners who have borne more than their share

Answer 107

Entered into with express or implied authority. Entered into with apparent authority and the following apply: 1. relates to business carried out - objective 2. one partners in firm would usually have authority to carry out - objective 3. one party did not know the other did not have authority - subjective 4. other person dealing with a person they know or believe to be a partner - subjective

Answer 108

In a novation agreement, a retiring partner will be released from an existing debt, by entering into a contract with the creditor and the other partners, and possibly an incoming partner. Under this contract of novation, the creditor will release the original partners from their liability under the contract and instead the firm as newly constituted will take over the liability. It may be that a partner retires and no new partner joins. In this case, in order to ensure that the novation is contractually binding, either there must be consideration for the creditor’s promise to release the retiring partner from the liability or the contract must be executed as a deed. Such agreements are rare since they reduce the number of people the creditor can sue if the partnership does not pay the debt, so the creditor will only agree to it if it benefits them in some other way.

Answer 109

If the reason for ceasing to be a partner is death or bankruptcy (rather than retirement or expulsion), no notice of the event is required. The estate of the deceased or bankrupt partner is not liable for partnership liabilities incurred after the death or bankruptcy.

Answer 110

6.11 Insolvency Although a partnership is not a legal person in its own right, an insolvent partnership can be wound up as an unregistered company or may use the rescue procedures available to companies, such as a voluntary arrangement with creditors or an administration order of the court. The individual partners may be made bankrupt if an obligation is enforced against their personal assets and there is still not enough to meet the partners’ liabilities.

Answer 111

Carries on for ore than 6 months? Perosn jointly and severably liable for LLPs debts incurred after 6 months

Answer 112

GPs - fixed charge. LLPs - fixed, floating and debentures Limited liability partnerships must keep a register of charges, along with a copy of every charge requiring registration, at its registered office. The register should include all charges affecting the LLP’s property and floating charges. Any creditor or member of the LLP must be allowed to inspect the register without paying a fee. Limited liability partnerships are required to register charges with the Registrar of Companies, and which form to use depends on the nature of the charge

Answer 113

There is no LLP equivalent to the Model Articles provided for companies – members of an LLP have a blank slate as far as management structure and rules are concerned, and there is no distinction between owner (shareholder) and manager (director) as with companies

Answer 114

Under the LLP Regulations 2001, members can leave the LLP by giving reasonable notice to the other members. Members cannot be expelled, so, if the members wish there to be a right of expulsion, this must be included in the LLP agreement. If the members wish the bankruptcy of one of their number to automatically cause termination of that person’s membership of the LLP, they must stipulate this in the LLP agreement. Legislation does not provide for this otherwise

Answer 115

Chargeable receipts LESS deductible expenditure LESS capital allowances = trading profit/loss Capital allowances - full expense cost on new items, or AIA on second hand/refurb. WDA of 18% on pool Applies to sole tarders/partners/companies. However, co pay corp tax and are entield to certain trading reliefs

Answer 116

Chose which one to claim, if baalnce of loss remaining can claim partially under another. Partners decide individually. Must apply for relief. 1. start up loss (early trading loss) - suffers loss in first 4 years, carried back against TOTAL income in the 3 years prior to set up - i.e income from former employer. Earlier years before later. CAP GREATER OF £50k or 25% OF TAX PAYERS INCOME - cap is only from sources other than trade 2. Carry across/one-year cary back - a. set against total income from the same tax year; or b. set against total income from the tax year preceding the tax year of the loss. Can choose which first but set against total loss! LOSE PERSONAL ALLOWANCE 3. Set off against capital gains - same tax year - used when CARRY ACROSS relief used but not all absorbed Earlier years before later. CAP GREATER OF £50k or 25% OF TAX PAYERS INCOME - cap is only from sources other than trade 4. Carry-forward - if business makes profit in subsequent years, don't PERSONAL ALLOWANCE, notify HMRC if your intention in FOUR YEARS SINCE LOSS. carry forward indefinitely 5. Carry back of terminal tradign loss - FINAL 12 MONTHS OF TRADING, set against trading profits in final year, carried back against profits in THREE YEARS precedeing year of loss. Can use in first year profits that aren't of trade. No cap, Could get tax rebate. 4 years after enf od tax year to claim! 6. Carry forward relief on incorp - If a taxpayer incorporates their business by transferring it to a company wholly or mainly in return for shares, any trading losses which have not been relieved can be carried forward and set against any income they receive from the company, such as their salary or dividends. To be classed as ‘wholly or mainly in return for shares’, 80% or more of the consideration for the business transferred must be shares in the company. Order of income you chose

Answer 117

Supply of resi land, postal services, education and health services

Answer 118

books, certain food and water

Answer 119

Certain income is not chargeable to income tax, including interest on damages for personal injuries or death, interest on savings certificates, certain state benefits, premium bond winnings and income from investment in an individual savings account (ISA).

Answer 120

(a) trading income: profits of trade, profession or vocation. This applies to sole traders, trading partnerships, sole practitioners and professional partnerships; (b) property income: rents and other receipts from land in the UK; (c) savings and investment income: interest, annuities and dividends; (d) employment and pensions income, including social security payments such as sick pay and maternity pay; an

Answer 121

What is allowable relief? To benefit from this relief, interest must be payable on a ‘qualifying loan’, including: * a loan to buy a share in a partnership, or to contribute capital or make a loan to a partnership; * a loan to invest in a close trading company; and * a loan to personal representatives to pay inheritance tax

Answer 122

£12,570 and applied in following order: 1. NSNDI 2. Savings 3. Dividend Reduces by £1 for every £2 over 100k Can trasnfer £1,260 of personal allowance to spouse if don't use Blind person allowance - £2,870 Where individuals are in receipt of gross property income or gross trading income below £1,000, the income will not be subject to income tax

Answer 123

savings income - first £1,000 will be tax free if the income band is £0-£37700 (not inc personal allowance) £500 tax free - £125,140. £125,140+? None

Answer 124

£1k - all are allowed

Answer 125

Although the PSA and dividen allowance are described as allowances, HMRC does not regard these as exemptions in the same way as the personal allowance. Instead, the PSA and dividend allowance reduce the rate of tax applied to these types of income to 0% (‘nil rate’). The result is that the PSA and dividend allowance are not used at this stage with the personal allowance to reduce taxable income. Only the personal allowance is deducted when calculating taxable income. If the PSA and dividend allowance apply, it just means that savings and dividend income will be taxed at 0%. This will become clearer when you consider the calculation in the example at

Answer 126

Bottom first - NSNDI Middle slice - Savings income Top slice - Dividends

Answer 127

Basic tax payer (not includiing PA) = £0 - £37,700 Higher = £37,700 - £125,140 Additional = £125,140+ NSNDI (bottom slice) = basic, 20, higher, 40, additional, 45% Savings income (middle) = starting: 0 (up to £5,000), basic rate: 20%, higher: 40%, additional 45% Dividends (top slice) basic = 8.75%, upper = 33.75%, additional = 39.35%

Answer 128

Something not in the course of business, clietn entertainment

Answer 129

Provided that the loan is made to a participator other than in the ordinary course of the company’s business (here it is a retail trading company, not a money-lending business), and that loan is over £15,000 (here it is £20,000), the company must pay corporation tax at a rate of 32.5% (s455 Corporation Tax Act 2010). This tax will be repaid to the company if the loan is later repaid (or if it is written off).

Answer 130

Basic - 10%, additional 20% Resi: not main reisdence? 8% surgcharge on above Business asset disposal relief = 10% Gains by PRS and Trustees = 20%, or 28 for resi prop Annual exemption 6k

Answer 131

roll over relief, CGT postponed, buy more assets, bought 1 year before or 3 after, applied in 4 years from end of tax year

Answer 132

CGT postponed, sell interest in partnership/sole trader to a company, CGT is rolled over into the shares received - same business new owner, need to sell with all assetsn - LOSE ANNUAL EXEMPTION AN HMRC APPLIES AUTO

Answer 133

Relief on gift on some business assets, if sell gift giftee pays gain (must be assets used in giftees tarde, shares in trading co, shares in personal trading) If giftee is co dont count

Answer 134

flat rate 10%, , business disposed as going concern, business must have been owned for 2 years prior to disposal, mmust be assets used in businesss and not investments Co shares - co is trading, 5% of ordinary shares, entitled to 5% of profits, disposer is an employee 2 years before disposal INVETSMENT CO NO - lifetime cap 1mill

Answer 135

No - losses can only be carried forward

Answer 136

tax in four instalments during the accounting period. The first payment is due two months and 13 days after the start of the accounting period and the remaining instalments at three monthly intervals thereafter.

Answer 137

Where a close company lends money to a participator for a sum over £15,000 (so no exceptions apply) as here the company must pay HMRC a sum equivalent to 32.5% of the loan.

Answer 138

Rol over elief on gift of business asset

Answer 139

f they had not chosen to apply hold-over relief, so that the father would have to pay CGT, the dates of payment stated are wrong; CGT would need to be paid by 31 January following the end of the tax year or 30 days after making an assessment if later.

Answer 140

When an individual claims the relief the annual exemption cannot be set against the gain before it is rolled over.

Answer 141

only use from same trade, carry forward, can use personal allowance from income for different trade

Answer 142

must be applied until income is 0 so can't keep PA

Answer 143

(1) any initial expenditure (including the acquisition cost and any incidental costs of acquisition, such as legal fees); (2) any subsequent expenditure incurred to enhance the value of an asset (such as the building of an extension); and (3) any incidental costs of disposal, such as legal fees. However, you cannot deduct the costs of any normal maintenance or repair. This means the cost of repairing the roof cannot be deducted.

Answer 144

60 - 90 days (custody officer), further extensions from inspector to 6 months, sI to 9 months then mag then mag up to a year and bwyond

Answer 145

3 hour pause for breach of pre charge bail

Answer 146

D get IDPC all offences and triggered on charge

Answer 147

Application asap after decision, if P wants to appeal then notify CC at once- hear appeal no later than business day after served reasonabl p

Answer 148

Sentence 6 months

Answer 149

Young offenders institute

Answer 150

Basis of plea - instigated by d usually

Answer 151

12-17, legal rep, 14 years, absconding, protect for serious personal injury

Answer 152

At least 4 months but not exceeding 24 months youth court