Business Flashcards
1
Q
Allotting shares: Step 1
A
Check the articles of association for any limit on the number of shares that can be allotted. If there are restrictions. Model articles don’t contain a restriction but one exists, pass a special resolution.
2
Q
Allotment of shares: step 2
A
Check board have authority:
1) Single class of shares, board can approve without shareholder approval.
2) More than one class of shares or proposal for more, shareholder OR needed with no. of shares and expiry date of authority (not more than 5 years). Employee share schemes don’t count
3
Q
Allotting shares: step 3 (and options)
A
Disapply statutory pre emption rights (if ordinary, paid fully in cash and not excluded or disapplied), by passing a shareholder special resolution (GM or WR), asking for waiver letters from all shareholders, or making an offer to existing shareholders (at least 14 days) on favourable terms.
4
Q
Allotting shares: step 4
A
1) BR (meeting or WR) requesting shareholder approval to allot, as well as disapply pre emotion rights.
2) Notice of GM or circulation of a WR
3) Allotment of shares: OR. Disapply pre emption rights: SR
4) Board resolution (meeting or WR) to report to shareholder resolutions and arrange for filings
5
Q
Allotting shares: step 5
A
Share certificates issued to allottee (within 2 months)
Update register of members (within 2 months) and PSC if affected
Shareholder resolution filed at CH within 15 days
File Form SH01 within 1 month
6
Q
What are the post completion matters after incorporating a company
A
1) hold first board meeting, formation of company, approval of costs, plus bank account, auditors etc
2) members resolutions / GM minutes - held for 10 years and kept at registered office
Board minutes and resolutions - kept for 10 years, don’t need to be held at registered office
3) registers like PsC, members, directors, secretaries etc
7
Q
Share capital requirement for being listed
A
Share capital must be at least 50k and at least 25% paid up
8
Q
Shareholder power - 5%
A
Force general meetings (ask directors, do it themselves, or ask court), right to circulate written resolutions
9
Q
Shareholder power - over 10%
A
Block consent to short notice of a general meeting
10
Q
Shareholder power - 10%
A
Can demand vote to be held on poll instead of show of hand
11
Q
Shareholder power - over 25%
A
Able to block special resolutions
12
Q
Shareholder power - 50%
A
Able to block ordinary resolutions
13
Q
Shareholder power - over 50%
A
Able to force through ordinary resolutions
14
Q
Shareholder power - 75%
A
Able to force through special resolutions
15
Q
What does MA4 allow shareholders to do?
A
They can give directions to the directors to take or refrain from taking an action - by special resolution
16
Q
Unfair prejudice claim - purpose and common grounds
A
Used when minority shareholder feels prejudiced against from other shareholders (e.g. failure to pay dividend or director/shareholder remuneration)
17
Q
Unfair prejudice claim - requirements for court to act
A
Actual or proposed act is causing (1) prejudice or harm to the petitioner, or (2) such prejudice is unfair - court considers seriousness of conduct and interests of members
18
Q
Unfair prejudice claim - bars to relief
A
Refusal by petitioner of a fair offer to purchase shares / misconduct or delay
19
Q
Unfair prejudice - remedies ordered by the court
A
Most likely court can order company to purchase minority shareholder shares
Can force company to pay a dividend
Refrain from carrying out act
20
Q
Derivative claim - grounds and purpose
A
Where shareholders believe the company has been wronged can bring a claim against the directors for negligence or breach of duties on behalf of the company.
USUALLY USED WHERE COMPANY HAS BEEN BARRED FROM BRINGING THE CLAIM BY THE ACTIONS OF THE MAJORITY
21
Q
Derivative claim - requirements and bars to relief
A
Shareholder must apply to court and the court will only grant relief if:
1) Claim must promote the success of the company (court will consider why the company has not pursued the claim itself)
2) Shareholders acting in good faith
3) Directors breach of duty has not been ratified by the company’s board or shareholders (
22
Q
Derivative claim - relief
A
Literally just to continue to pursue the claim on behalf of the company - compensation from directors / third parties paid directly to company.
23
Q
Unfair prejudice v derivative - why is one easier than the other?
A
Unfair prejudice easier to claim because 1) don’t need court permission, 2) ratification not a bar, and 3) causes of action are clear (notably harm to shareholder, not to the company)
24
Q
Forcing board meeting to be called by shareholders - process
A
1) Make s.303 request to the board (5% of voting rights)
2) Board must call a GM within 21 days - once called, GM must be held within 28 days of the notice of the GM (not 14)
3) If no notice after 21 days of 303, can call the meeting yourself (need more than half of the 5% to agree) to be held within 3 months of 303 request) OR apply to court
25
Forcing board to circulate written resolution - process, number, and how is this different to a 303 request?
Board must circulate 21 days from the 292 request, different because shareholders cannot take into own hands - however it is a criminal offence for defaulting officers not to circulate.
26
Allotting shares - difference between one share class and multiple
Directors have power to allot shares under the model articles when one share class, but when multiple you need an ordinary resolution
27
How do you ensure pre emption is effective as a shareholder?
1) amend articles to include provision to need special or unanimous consent to allot
2) amend articles to remove exceptions to pre emption (statutory pre emption right is limited by non cash consideration, bonus scheme)
28
Declaring dividend - resolutions needed
Board resolution (recommendation to distribute), followed by ordinary resolution
29
What are the two rules to be satisfied prior to declaring dividend what do directors need to be aware of?
1) profits must be available
2) Distribution justified by relevant accounts
3) Directors must have regard for duties: promote success of company, exercise reasonable care, skill and diligence, common law duty to safeguard assets
30
Consequences of unlawful distribution of dividends
Members - liable to pay back distribution if known or had reasonable grounds to know it was unlawful \
Directors - personally liable to repay (jointly and severally if group) if known or ought to have known the payment was unlawful
Or if director knew the facts that established the impropriety of the payments (no criminal liability)
31
Can shareholder force a dividends to be paid, and what are their options ?
No because you need the board recommendation to pass the ordinary resolution - without this you’d need to consider preference shares with dividend preference, or a shareholders agreement with a dividend policy
32
How do you go about appointing a director?
Either by ordinary resolution or by board resolution
33
How do you go about approving a 2 year or more director service contract and timing
Ordinary resolution - members need to see a copy of the contract for 15 days prior in a memo. For written resolution, memo circulated before or at circulation
Needs to be available for inspection at registered office or sail.
34
What are private company director’s 7 duties and qualifications (if relevant)
1) Duty to act within powers (set out in articles, SRs etc)
2) Duty to promote success of company in good faith (NB: duty is to shareholders in insolvency)
3) Duty to exercise independent judgment (but can rely on advice)
4) Duty to exercise reasonable care, skill, diligence (objective and subjective test)
5) Duty to avoid conflicts of interest (potential or actual, however can be ratified by members (interested member can vote) or directors (quorum and vote without interested director)
6) Duty not to accept gifts (not infringed if no likely conflict)
7) Duty to declare interest in proposed transaction (no need to declare if cannot reasonably be regarded as giving rise to conflict, the other directors are aware, if concerned with service contract, director is not aware)
35
Options for shareholders where directors are in breach of duty
1) Remove director
2) Apply for disqualification order (can ban them for 2 - 15 years)
3) Civil action against director - need to prove causation with expect to company losses
4) Derivative / unfair prejudice claim
36
What is a Bushell v Faith clause?
Confers enhanced voting power on a member/director voting on a resolution to remove him/he from office.
Good idea to include provision in Articles to confer weighted voting rights on any provisions (such as passing special resolution to change articles) to other resolutions which could remove this power
37
How to protect shareholder / director from being removed as a director?
1) Insert Bushell v Faith clause
2) Shareholders agreement (cannot override Articles of CA and so more discouraging other members from breaching agreement with breach of contract claim)
3) Amend Articles to make removal of Bushell v Faith impossible
4) Amend Model Articles (e.g. dis apply MA 14)
38
Notice needed for board meeting?
Reasonable notice must be given
39
How do you deal with quorum and interested directors?
Directors cannot count at part of quorum and cannot vote on resolutions in which they are interested - this can be suspended by an ordinary resolution of members if needed or removed from articles.
40
How do you count “clear days”?
Do not count the day the notice is given and the day of the meeting.
Also account for extra 2 days to be deemed recieved by email or post
Meeting held on the 15th day after notice is given
41
What are the requirements for short notice?
1) majority in number of shareholders must agree
2) majority in number must also hold at least 90% of the voting share capital
Cannot be used for removal of directors
42
What is the process for ratifying director breaches and things to look out for in terms of voting
Takes place by Ordinary Resolution - watch out for shareholder / directors and connected persons:
- Cannot vote on ratification (WR)
- Can count towards quorum but cannot be counted towards voting
43
Who can demand a poll vote?
1) Chairperson of GM
2) The directors via board resolution
3) Any two shareholders
4) Shareholders holding 10% of the voting shares
44
When can the written resolution procedure not be used?
To remove a director / auditor
45
Lapse date for passing a written resolution?
28 days (not clear) from circulation date (unless Articles provide otherwise)
46
Lapse period of a written resolution (shareholders)
28 days
47
How are non votes treated in written resolutions for shareholders
Treated as if voted against resolution
48
Under the PA 1890, what decisions require unanimity?
Introduction of new partner, amendment to partnership agreement, and change in partnership’s business
49
What is actual authority?
Express - in partnership agreement
Implied - where partners have given partner authority to undertake transactions generally or they are conducting standard day to day transactions
50
What is apparent authority and when is the partnership bound?
Partner acting outside of the partnership’s authority, however:
- contract relates to the same type of business (objective)
- contract would usually be entered into by a partner of the firm with authority (objective)
- counterparty did not know partner was acting outside of authority (subjective)
- counterparty knows / believes individual to be a partner (subjective)
51
What’s best option for creditors trying to sue for losses against partnership?
Sueing the partnership in the firm’s name is best as it means you can go after partnership assets and individual partners.
Can also pursue individually the partners who were there when debt was incurred, partner whom the creditor entered into a contract with under privity of contract, or retired partners who have been holding out
52
What are partners’ main duties under Partnership Act 1890? (6)
Duty to render provide accurate information about partnership affairs to other partners
Duty to account for profits
Duty not to be involved with competing business
Duty to act with skill and care
Duty to act in good faith and with honesty
Duty to indemnify the partnership for any liability incurred through wrongful acts
53
What terms are commonly included in a partnership agreement?
1) Decision making procedures
2) Capital contributions
3) Dispute resolution
4) Admission and expulsion of partners
5) Responsbilities and duties.
6) Restrictions on authority
54
Can partners be expellled from a partnership?
No, not in the partnership act 1890 unless express provision
55
What must partners do if they are involved in a competing business?
Account to the partnership for any profits made from the competing business
56
How is partnership property dealt with post-dissolution?
Partnership property must be used to settle the partnership’s debts first, before distibuted amongst the partners based on their respective shares
57
What are the requirements for a statutory demand for debt?
1) Debt must be in excess of £750
2) Must wait three weeks to see if company will pay
3) After three weeks, can apply to the court to put company into liquidation
58
Explain the process of compulsory liquidation
1) Petition for company to be placed in compulsory liquidation as unable to pay debts
2) Official receiver of the court appointed unless creditors appoint liquidator
3) London Gazette - petition placed
4) Statement of affairs prepared by directors
5) Final return filed with registrar and court
6) Company dissolved in 3 momths
59
Explain process of a creditor voluntary liquidation (CVL)
1) Directors agree by majority than company is insolvent and will be liquidated
2) Members pass special resolution to liquidate
3) Directors’ powers cease and resolution put in Gazette
4) Directors must produce statement in a prescribed form on company’s affairs and send to creditors within 7 day period after special resolution
5) Creditors asked to nominate liquidator and this is advertised in London Gazette / Registrar notified
6) Liquidator carries out duties distributing to creditors
7) Return sent to creditors which is filed with Registrar
8) Company dissolved after 3 months
60
What are the “cascading” list of duties of an administrator?
1) To rescue company as a going concern
2) Get better result for creditors as a whole
3) Sell company property to make a distribution to secured or preferential creditors (unsecured not possible without court order)
61
Explain the process involved with administration (court route)
1) Application to court made by directors or creditors, then a hearing
2) Court decides if administrator should be appointed
3) Once administrator is appointed, moratorium comes into effect
4) Administrator’s proposals approved by majority in value of creditors and voting must approve
5) Proposals approved, directors cease powers and administrator runs company
62
Explain process of administration commenced by non-court route (look at cheat sheet)
1) Administrator appointed by company / directors or holders of a qualifying floating charge over company assets
2) Notice of intention filed at court, moratorium comes into effect
3) Appointment filed at court
4) Administrator’s proposals approved by majority in value of creditors and voting must approve
5) Proposals approved, directors cease powers and administrator runs company
63
What is a company voluntary agreement
Creditors Voluntary Agreement is a written agreement binding on all parties where it is agree to delay repayment of their debt or accept part payment of their debt
64
Explain the process for a CVA
1) Directors draft proposals and appoint nominee
2) Report submitted on proposals and statement of affairs to nominee
2) Proposal voted on by unsecured creditors (75% or more in value, 50% or more “non-connected” unsecured creditors)
3) Nominee reports to court on approval and becomes CVA supervisors
4) Members meeting convened, copy of proposal filed with court but no active involvement from court
5) All creditors bound, directors run company but supervised by nominee supervisor
65
Explain what is meant by fixed asset receivership
Used where company is not complying with the terms of the loan
1) Fixed charge holder appoints receiver under the terms of the charging document
2) Receiver sells fixed charge assets or manage received income, and only owes duties to the fixed charge creditor
3) Receiver controls assets subject to arrangement, directors in control of other areas
4) Unsecured claim on balance if less than debt, where surplus returned to debtor
Good alternative to insolvency rescue mechanisms
66
Explain how a creditors can set aside transactions prior to insolvency (preference)
1) Pay or grant a preference to a creditor that puts him in a better position
2) Intention to prefer must be present, which is presumed if it’s with an “associate” (meaning spouse/partner, relatives, business partner or business partner’s relatives)
3) Within 6 months before petition or application (2 years if associate)
4) Insolvent at the time / became insolvent as a result (no presumption where associated person)
67
Explain how creditors can set aside transactions prior to insolvency (undervalue)
1) Transferred at an undervalue
2) 5 years before petition (individual), 2 years before petition (company)
3) Insolvent at the time / became insolvent as a result (presumed if associated person or if two years 2 years before bankruptcy petition)
68
How do creditors set aside transactions at an undervalue (defrauding creditors)
1) Undervalue transaction
2) Purpose of transaction to put assets beyond reach of a creditor so as to frustrate an actual or potential claim
3) No requirement to be insolvent
69
When can liquidators / administrators set aside a floating charge
1) Creditor was given a floating charge in connection with an existing loan for no fresh consideration
2) Liquidator / administrator look 12 months prior to insolvency (2 years if connected person)
3) Company was insolvent / became insolvent as a result (no need to show this if connected person)
4) Automatically invalid
70
Explain how directors can be guilty of wrongful trading
Directors continue to trade after the company is insolvent (personally liable)
1) Liquidator / administrator can apply but assign the right to others
Need to satisfy:
1) Directors of insolvent company continue to trade
2) Directors knew / ought to have known no reasonable prospect to avoid insolvent liquidation - special knowledge of directors accounted for
3) Personally liable + disqualification
71
How can directors be liable for fraudulent trading?
1) Liquidator or administrator or assignees
2) Any person must have been carrying on business to defraud creditors
3) That person was knowingly a party (need to provide dishonesty of objective standards of reasonable people + subjective state of knowledge)
4) Can be personally liable, criminal offence and/or disqualification
72
How to MA14 and s.177 apply when appointing a director as regards service contracts
- s.177 declaring interest in transaction does not apply to service contracts but it’s good practice to note it
- MA14 means appointed director cannot count in quorum or vote to approve his own contract
73
15 days
Filing of minutes / updated register with CH
74
14 days
To hold general meeting once resolved to be called
75
Exceptions to MA14
1) Unlikely to give rise to a conflict of interest
2) Restriction disapplied by OR
3) Interest is for a share subscription
4) Benefits available to employers / directors
5) Guarantee of obligation incurred by or on behalf of company
76
What does MA14 prevent
Interested directors cannot count towards the quorum or vote on a decision that concerns an actual or proposed transaction / arrangement
77
What is roll over relief?
Defers tax on the sale of a business asset where matched by the replacement of a new business asset within 3 years of the old one.
You “roll” the gain the cost of the replacement asset
78
How do you calculate corporation tax?
Take income receipts (minus deductible expenditure, capital allowances, trading losses) to get trading profits
Add that to:
Sale proceeds (less allowable expenditure, indexation, capital / trading losses) to get chargeable gains
= Total taxable profits
79
What is the full expensing capital allowance
You can deduct the full cost of new machinery kept within the business from your tax bill - using the annual investment allowance of £1 million
80
What is the First Year Allowance and what is the writing-down allowance?
Used by a company which has used up the AIA, you can deduct half the costs of things like renewable energy capital from profit in the first year of purchase
The writing down allowance allows you to take 6% of the remaining value of the asset, and deduct the amount from half-balance every year until it hits £0
81
What is the writing down allowance on normal machinery covered by the AIA
Deduct 18% of the value of the asset(s) from income receipts each year.
Reducing balance basis means you take 18% of the remainder each year.
82
Requirements for circulating a written resolution (shareholders)
Must be sent to each member entitled to vote, statement on how to signify agreement, and a lapse date specified.
83
Written resolutions - benefits v disadvantages
Avoid notice requirements, no need to be present / cannot remove directors or auditors
84
Who can a poll vote be demanded by?
1) two or more persons having right to vote, 2) persons representing 10% plus of voting rights, 3) chair of BM, 4) directors
85
Rules on voting on written resolutions
1 vote per share, non-votes count against resolution.
86
28 days
Special notice required for proposing a resolution to remove a director.
Maximum time frame within which a general meeting must be held once the board has called it following a requisition by shareholders.
Requisitioning a general meeting: If shareholders holding at least 5% of the voting rights requisition a meeting, the board must ensure it is held within 28 days of issuing the notice.
Filing updates at Companies House: Certain changes, like amending the Articles of Association, may require filings to be completed within 28 days.
87
What is a s.177 declaration
Directors must declare nature and extent of any direct / indirect interest in a proposed transaction with the company before it enters into it
88
Difference between a shareholder notice of a GM - ordinary v special
You need the full text of the special resolution on the notice, whereas you don’t for an ordinary. Failure to do so invalidates it.
Date, time, place, proxy notice and nature of business also needed
89
What happens when a shareholder doesn’t vote on a written resolution
Non votes count as a vote against the written resolution
90
What is the rule regarding a single partner binding the partnership
Must be (1) for the purpose of the partnership, (2) for carrying on in the usual way of business and (3) in relation to business of the kind carried on by the firm
91
Examples of acts not incidental to firm’s business
1) Authorisation for use of firm’s name
2) Giving guarantee
3) Pledging firm’s credit
92
In what circumstances is actual authority not present?
1) Where partner acting outside of the firm’s scope of business activities or no sufficient connection
2) Where express limitation is included in a particular area in partnership agreement
93
Partnerships: where act not for carrying on usual business of the kind the firm carries out
Partnership is not bound unless the partners held out the partner as being authorised
94
Partnerships: if act is for carrying on usual business of the kind carried on by the firm
Act will be binding unless i) person knows of the lack of authority, 2) does not know or believe they’re a partner
95
Partnerships: third party with actual or imputed knowledge of lack of authority
Act will not bind the firm and other partners
96
Partnerships: third party did not really think dealing with parter
Act will not bind the firm and other partners
97
What does Business Asset Disposal Relief do
Business owners can reduce the CGT payable on business assets to 10% up to a lifetime limit of £1 million
98
What is Enterprise Investment Scheme relief
Reinvested gains in newly issued eligible shares in unquoted companies (fewer than 250 employees, gross assets not exceeding £15 million)
99
What is hold over relief
Giving away an asset or selling at an undervalue - chargeable gain not taxed (instead it is held over until disposal of the asset of its new owner)
100
What is investor’s relief
When non-management people dispose of unquoted trading companies you can 10% relief
101
What are the tests for insolvency?
1) Statutory demand test
2) Unsatisfied court judgment against creditor
3) Cash flow insolvency - unable to pay debts as they fall due
4) Balance sheet insolvency - liabilities in excess of assets
102
What should directors do once a aware of probability of insolvency
1) Keep creditor’s interests in ind
2) Pursue debtors
3) Do not take on more debts
4) Take professional advice
5) Be alert to possibility of statutory demands
6) Keep board updated w/ regular discussions
7) Keep full minuets and update accounts
103
How do disqualification proceedings work?
Brought by the department of Business and Trade (DBT), “unfit to be concerned in the management” - banned from acting as director between 2 years and 15 years.
Criminal offence if they do.
104
Purpose of administration
Rescue company to achieve better result for creditors as a whole / realise assets to distribute to one or more preferential creditors
105
Administration: test
Company is or is likely not be able to pay debts (unless application by QFCH), administration likely to achieve purpose
106
Which is better administration outside of court or through court route
Out of court route offers quick and flexible option that is less costly and don’t need court hearing
107
How long can an administrator be appointed
1 year, subject to extension with creditor consent
108
Company voluntary arrangement v administration
Both rescue company but CVAs:
- are less costly as no involvement from courts
- do not need to demonstrate insolvency on application
- no automatic moratorium but binding on all creditors
- no time limits subject to terms of CVA
109
Partnership tax - how to calculate
Income - allowable expenses
110
Partnership - deductible expenses
Must be of income nature, wholly & exclusively for purpose of trade, and not be disallowed by law
E.g.
Interest of business loans
Salaries
Rent
111
Costs / Benefits of CVA
Benefits:
Provides legal protection and debt repayment certainty
Allows business to continue
Managed by insolvency practitioner
Disadvantages:
High approval threshold (75% shareholders)
Costs needed for insolvency practitioner
Non compliance risks compulsory liquidation
112
Administration - costs / benefits
Benefits:
Provides moratorium on creditor actions
Allows potential recovery / prioritising secured creditors
Disadvantages:
Management with admin.
Significant costs impacting creditor returns
Uncertain outcome - liquidation still possible
113
Benefits / costs to CVL
Benefits: structured approach, relieves directors from ongoing management, preserves reputation
Limitations: Limited returns for shareholders + professional fees reduce returns
114
Directors - protection from liability
1) D & O insurance
2) Indemnity from company
115
Directors - relief from liability
1) Ratification (OR from shareholders, cannot vote or count in quorum)
2) Court relief, if acted honestly and reasonably, and ought to be fairly excused
116
Statute and authority needed to remove director
s.168 CA, OR
117
Options for shareholders if other members being favoured
Claim for breach of articles, bring unfair prejudice or derivative claim, disqualification order or if they have over 50% force through or to remove
118
If member deliberately doesn’t turn up to GM to prevent quorum, what are your options
1) Pass a written resolution
2) Apply to court for an order under section.306
119
When does pre emption not apply
Non cash consideration, bonus shares, and employee share scheme
120
What is an unlawful dividend
Either if process not been followed (OR by recommendation of board) or no available profits
121
Dividends and unfair prejudice claims
Generally not possible as this is a commercial decision however if it is found decision wasn’t taken in best interests of company, could he scope for a claim (depends on circumstances)
Look for bad practices in fact pattern
122
What are the two rights offered by preference shares
1) preferential right to dividend fixed in advance and paid out ahead of others
2) preferential right to repayment of capital on winding up
123
Steps in share transfer
1) Check if any restrictions in Articles
2) Recommend enter in a share purchase agreement
3) Complete and sign a stock transfer form and give to transferee along with share certificates
4) Buyer sends form to HMRC, and pays any SD if more than £1000 (30 days)
5) Send these documents to company
6) Directors need to register transfer but may refuse with reasons - where no reasons given, entitled to be registered after 2 months
7) Update registers, issue new share certs
124
Remedies for company not registering share transfer and effect
Effect is only hold beneficial title.
Remedies are to request further information, or apply to court to rectify register of members if directors misused their powers
125
What partnership decisions require unanimous consent
Changes in nature of partnership business
Changes in mutual rights and duties (amend partnership agreement)
Introducing and expelling partners
126
What are partners main rights
1) share in capital and profits equally
2) entitled to true accounts / full information
3) be indemnified by the firm for payments made and liabilities incurred
4) take part in management
5) Inspect books
127
Are partners entitled to remuneration?
No not unless expressly set out
128
Is there an obligation to spend time on the partnership?
No, but provisions are commonly added
129
Actual and apparent authority wording
Every partner is an agent of the firm and other partners for the purpose of the business. Any partner who does any act for carrying on, in the usual way, business of the kind carried on by the firm, binds the firm and the partners UNLESS the partner in fact has no authority to act in that matter and the person he is dealing with knows that he has no authority or does not know or believe his to be a partner
130
When do partners remain remain liable after they have exited the partnership?
When they hold out as a partner (ie represented himself, or knowingly allows themselves to be represented as a partner)
131
What are the rules surrounding partnership property?
Presumed partnership property if bought with partnership money and must be used exclusively for partnership purposes
132
Ways of dissolving a partnership
1) giving notice with partnership at will
2) unanimous consent
3) expiration of term
4) court order
5) occurrence of an event in the PA
133
Effect of partners death
Automatically dissolves partnership unless agreed otherwise
134
Measures to protect outgoing partner
Actual notice to those who the firm has dealt with
Publish a notice in London gazette
Remove name etc from stationary
Negotiate indemnity with partners
135
Creditor asset distribution
1) Holders of fixed charges
2) Fees and expenses of liquidator
3) Preferential debts e.g. employee wages and taxes to hmrc
4) Holders of floating charges
5) Unsecured creditors
6) Interest on debts
7) Deferred debts
136
Preference transactions
1) pay or grant a preference to a creditor that puts them in a better position
2) intention to prefer
3) 6 months before petition, 2 years if connected person
4) insolvent at the time / became insolvent as a result
137
Alternatives to insolvency
1) enter formal negotiations to restructure debt
2) fixed asset receivership
138
Bankruptcy application - Creditors petition - prior to appointment of trustee in bankruptcy
1) Debt for at least £5000
2) Unable to pay the debt / no reasonable prospect
3) Petition debt is unsecured
4) No outstanding application to set aside statuary demand
Only made where court considers remains unpaid or no prospect of being paid
139
Bankruptcy application - individuals
Can apply yourself if
1) Debtor unable to pay debts
2) no bankrupt petition is pending
3) no BO been made for same debt
140
What forms part of the bankruptcy estate?
Property in which they had an interest at time of order (tangible and intangible), plus finance arrangements for assets (things in action)
Does not include domestic or household items , tools of trade, items or equipment, pension, property held in trust for benefit of another
Income can be retained for reasonable financial means
141
Bankruptcy - statutory order of distribution
1) Secured creditors
2) Bankruptcy costs and expenses
3) Preferential debts
4) Ordinary unsecured debts
5) Interest on preferential debts
6) Debts to a spouse / CP
7) Interest on spouse debts
142
Bankruptcy - undervalue transactions
1) Transferred at an undervalue
2) 5 years before bankruptcy petition if insolvent
2) 2 years irrespective of insolvency
143
Transaction defrauding creditors
1) Undervalue transaction
2) Purpose to put assets beyond reach of a creditor to frustrate potential or actual claim
144
Buy back procedure - step 1
Board meeting to approve the buy back and convene GM / circulate written resolution
145
Buy back shares - step 2
Circulate proposed written resolutions and buyback agreement to all members and auditors
Or
Send notice of the GM to all members, directors and auditor with agreement available for inspection form 15 days
146
Is short notice possible when buying back shares?
No
147
Buy back shares - step 3
Pass an ordinary resolution to approve contract
148
Can shareholders whose shares are being bought back vote?
They can on a reso tabled at a general meeting but must be able to be passed without their vote
They cannot on a written resolution
149
Buy back shares - step 4
Execute buyback agreement and repurchase the shares
150
Buy back shares - step 5
Cancel the shares and transfer nominal value to capital reserve account
151
Buy back shares - step 6
File resos (15 days) a notice of purchase of own shares (SH03) in 28 days and pay any stamp duty
File notice of cancellation of shares with statement of capital within 28 days
Buyback agreement, resolutions and minutes kept for 10 years
152
How do you finance a share buy back
Distributable profits, proceeds of fresh issue, capital (separate process), unless small amounts lower than 15,000 (de minimis exception)
153
General rule re director loans
Must be authorised by an ordinary resolution
154
Exceptions to the rule that director loan needs ordinary resolution
Small up to £10,000
Business purposes - up to £50,000 to meet expenditure for purpose of enabling director to properly perform his duties as an officer
Defence - if defending himself in criminal or civil proceedings
Intra group - made to associated body corporate
If made to director connected person
155
Key step between board meeting and members meeting in terms of approving director loan
Memorandum must be circulated including nature of transaction, amount, purpose and company liabilities at least 15 days prior to the GM or with WR
156
What is a substantial property transaction?
An arrangement to acquire, sell, or transfer a substantial non cash asset :
exceeding 100,000
or 10% of company’s net assets
And is more than £5000
And
Is more than £5000
To or from its director or director of its holding company / connected person
157
Connected person definition for SPTs
Family not including sisters or brothers, body corps with interest of control above 20% ,
158
Substantial property transactions - exceptions
1) value up to £5000
2) transaction with a person in his character as member
3) transaction between group companies
4) transaction related to entitlement under directors’ service contract
159
S 190 CA
Substantial property transaction
160
S 197
Loan to a director
161
Failing to obtain members approval - SPT or loan to director
1) Transaction is voidable unless: 1) restitution is impossible 2) company indemnified for loss 3) third party acquired rights in good faith for value without notice or 4) it has been affirmed
Not complete
2) Liability to account and indemnify
