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SQE 2 (MINE) > Business Law > Flashcards

Business Law Flashcards

1
Q

Detention of a partnership

A

carrying on a business in common with a view to profit

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2
Q

What impact does alloting new shares have?

A
  1. Diluted others shares
  2. May amend right to block/ pass SR and OR
  3. Entitled to share in divide t
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3
Q

Pros and cons of fixed interest bearing loan

A

+
1. No diluting shareholding
2. No risk of removal as director( if over 50%)
3. Payment on loan is tax deduct able
4. If company increases in value dont pay via loan

-
1. Repaid in full irrespective of profit
2. Can be assigend to 3rd p

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4
Q

When can the corporate veil be pierced?

A
  1. Legal obligation deliberately evades
  2. Fraud
  3. Deliberate concealment

“Impropriety”

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5
Q

What is required for a public company?

A
  1. Say it is a public company
  2. Plc at the end
  3. Invest specified minimum
  • prestigious and can raise money by selling shares to public and can join UK market
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6
Q

Benefits of LLP

A
  1. Separate legal personality but protected(limited) in debt
  2. Informality and flexibility of partnership
  3. Taxed like partnership
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7
Q

LLP formalities?

A
  1. Register at CH - issued cert of incorporation
  2. Appoint auditor
  3. Minimum 2 “designated” members
  4. Prepare accounts
  5. Annual returns at CH
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8
Q

Rules for company names

A
  1. Private company must end in LTD
  2. Public = plc
  3. Some parts of name need approval eg “british”, “university”
  4. Cannot exceed 160 characters
  5. Cant be offensive
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9
Q

Requirements for special and ordinary resolution?

A

Special - 75% or more
Ordinary -more than 50%

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10
Q

What resolution need to amend articles?

A

Special resolution

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11
Q

What form to indicate amended or unamended articles?

A

1N01

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12
Q

Requirements to convert company yo public company?

A
  1. Special resolution
  2. Form RR01+ fee
  3. Registration fee
  4. Amend articles
  5. Balance sheet
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13
Q

What sections of partnership act cant be amended

A
  1. S1-2 (how exist) and s5-18 (debt liability
    - all partners are agents of the firm
    - contracts made by partners bind themselves, the firm, and other partners
    -
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14
Q

What is s39 partnership act?

A

Partnership can insist on being sold

  • advisable to include partial dissolution clause
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15
Q

When selling partnership, what is “goodwill”?

A

Reputation is added to purchase price - usually 2 years profit

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16
Q

What decisions unanimous and what majority in partnership?

A

All decisions majority bar following must be unanimous
1. Changing nature of business
2. Introduce new partner
3. Change term

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17
Q

When is a partner liable for debts when leaves?

A
  1. Must give actual notice to previous customers
  2. Post in gazette
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18
Q

When must someone register for vat

A

If taxable supply in last 12M was £85k+

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19
Q

3 types of income?

A
  1. Non saving, no dividend
  2. saving
  3. Dividend
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20
Q

What is rate for VAT?

A

20%

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21
Q

What is VAT exempt?

A
  1. Residential land
  2. Post
  3. Education
  4. Health
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22
Q

What is test for apparent authority?

A
  1. Related to type of business?
  2. Would single partner usually have authority?
  3. Other party knows no authority?
  4. Knows / believes?

Any not met then not bound

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23
Q

Requirements for notice of a board meeting

A
  1. Reasonable
  2. Time date place included
  3. Quorum of at least 2
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24
Q

What is rule 177 of CA 2006

A

If Director has personal interest must declare it

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25
Q

How votes usually done in board meeting

A

Show of hands

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26
Q

Difference between board meeting and general meeting

A

BM: meeting of directors

GM: gathering of company shareholders or members

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27
Q

Requirements to call a general meeting?

A
  1. Notice with day, time, nature
  2. If special resolution given option of a proxy
  3. 14 clear days notice (if given gia post or email then assumed received 48hrs later)
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28
Q

Who can demand gm as a poll vote?

A
  1. Persons not less than 10% voting rights
  2. Director
  3. Chairman
  4. Any 2 shareholders
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29
Q

How to agree short notice of meeting?

A

If private comany: 90% must agree
Public: 95%

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30
Q

Who can request written resolution!

A

5% shareholdings
- can amend articles to reduce but cant increase

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31
Q

Unless stated otherwise how long to respond to written resolution?

A

28 days

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32
Q

How does percentage of written resolution work

A

Via members shares

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33
Q

What company can use written resolution

A

Only private companies

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34
Q

What percentage for PSC

A

25%

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35
Q

What form to allocate PSC on CH?

A

PC01 //remove= PC07

36
Q

Ordinary vs preference shares?

A

Preference- priority of liquidation and dividend, less input to strategy and often dont have voting right
-less risky than ordinary

37
Q

Types of equity finance

A

1.Allotment
2.transfer
3. Buy-back

38
Q

How to allot new shares?

A
  1. If restriction on amount OR to remove limit/ SR to adopt new articles
  2. Directors authority? If not pass OR
  3. Preemption rights? SR to disapply
  4. BM1 - check restrictions, authority. Pass BM to call GM
  5. GM - pass (OR)
  6. BM2 - allot shares
39
Q

Administration after allotting new shares?

A

Issue SH01 with Registrar or Companies within 2 months

File OR/SR at CH

Keep record of decision for 10 years

40
Q

What is required to draft to transfer shares?

A

Stock transfer form and fee

41
Q

Types of debt finance

A
  1. Loans
  2. Debt securities
42
Q

When is a company deemed insolvent?

A
  1. Creditor request £750 and not received in 21 days
  2. Creditor obtained a judgement
  3. Proven in court unable to pay OR company liability exceeds assets
43
Q

Order of priority for liquidation?

A
  1. Chargeholder
  2. Liquidator fee
  3. Secured creditor
  4. Preferential creditor
  5. Unsecured creditor
  6. Shareholder
44
Q

Steps to allot new shares

A
  1. Restriction on amount allotted? And directors have authority to allot? - OR to remove (if private company D can allot)
  2. Preemption rights? - SR to disapply
  3. BM1 - discuss restrictions, authority, pass BR to call GM
  4. SH pass
  5. BM2 - board allot shares
45
Q

Admin after allowing new shares

A
  1. Register them at CH within 2 months
  2. File allotment return/ OR/SR needed
46
Q

When can a floating charge be set aside?

A
  1. Created within 1 year of insolvency (2 if connected person)
  2. Insolvent when granted

// not if fresh consideration given at the time

47
Q

How long to register fixed/floating charge at CH?

A

21 days

48
Q

What is preference in liquidation?

A

When D “positively wish to put in better position”
- 2 years from onset of liquidation or if unconnected person 6M
Eg paying them first

49
Q

Order of priority in liquidation?

A
  1. Chargeholder
  2. Liquidator fees
  3. Secured creditor (fixed charge, mortgage, floating)
  4. Preferential creditor eg employee
  5. Unsecured creditor
  6. Shareholder
50
Q

Process for a loan to director?

A

Must be approved by OR unless:
1. Loans under £10k
2. Credit transactions (instalments for goods and services) up to £15k
3. Up to £50k if in defence of proceedings

51
Q

When must a service contract be approved by SH?

A
  • When for fixed term over 2 years.
  • approved by OR
  • If fails then just not fixed term
52
Q

What constituted wrongful dismissal

A
  1. 2 years
  2. Actually dismissed
  3. Unreasonable
53
Q

Difference between LP and LLP?

A

LP- general partner has full liability and unlimited control / limited partner limited to contribution

LLP- all partners limited to contribution, LLP responsible for debts not partners, shared management control

54
Q

Directors duties?

A

S171- act within company constitution
S172- promote company success
S173- independent judgement
S174- care, skill and diligence
S175- avoid conflict of interest
S176- not accept benefit from third party
S177- declare interest in transaction

55
Q

What is the test for promoting company success?

A

Subjective - in good faith with regard to long term consequences, fairness and reputation

56
Q

When can D accept benefit from third party?

A

Corporate hospitality

57
Q

When does D not need to declare interest in transaction?

A
  1. Not reasonable conflict
  2. Other directors aware or ought to be
  3. Involves Ds service contract
58
Q

How can D make notice of a conflict of interest?

A

Notice in writing or at BM

59
Q

Remedies for directors breach?

A
  1. Account for profits
  2. Return property
  3. Pay equitable compensation
  4. Recession
  5. Injunction

+ if s174(care skill diligence) then general damages for negligence

60
Q

What is test for breach s174 CA 2006?

A

Objective test - reasonably expected of someone in that position

61
Q

How can D avoid liability? (Once breach occurred)

A
  1. Shareholders ratify - OR
  2. Court relief - D acted honestly and reasonably
  3. Insurance
62
Q

Steps to make a substantial property transaction to D?

A
  1. Transaction between D(or connected person) and Company
  2. OR needed if
    a. Exceeds 10% of assets and is over £5k or exceeds £100k
    b. Not cash eg shares, land ect
  • if no OR then those involved must indemnity of any losses
63
Q

What are the exceptions to OR for substantial property transaction?

A
  1. D acting in capacity of a shareholder eg subscribing shares
  2. Between holding company and subsidiary
  3. Company in administration

THEN just a BR at BM

64
Q

Ways to remove D?

A
  1. Resignation
  2. Disqualification
  3. Removal
65
Q

How to remove D?

A

At GM by OR
1. Special notice 28 clear days before GM

66
Q

How to remove D?

A

At GM by OR
1. Special notice 28 clear days before GM

67
Q

Directors rights during removal?

A
  1. Can make written resolution
  2. Speak at GM
  3. Must be given special notice immediately
68
Q

What can every shareholder do?

A
  1. Vote
  2. Receive dividends
  3. Receive notice of GM
69
Q

What are rights of 5% shareholders

A
  1. Can circulate written resolution
  2. Request GM
  3. Circulate written statement
70
Q

What can a 10% shareholder do?

A

Demand poll vote

71
Q

What are the steps of a general meeting?

A
  1. Called by D at BR or SH with 5% shares
  2. Notice given to all SH+D via hardcopy, email or website
  3. 14 clear days notice

Notice includes:
1. Company name
2. Time date place
3. Nature of meeting
4. Right to appoint proxy
5. Words of Resolution proposed

72
Q

What happens if fail to give adequate notice for GM?

A

Resolution will be invalid

73
Q

When can you not use a written resolution?

A
  1. Dismiss D
  2. Dismiss auditor
  3. Public company
74
Q

How to change a company name?

A

General meeting or written resolution
OR

75
Q

What is a novation agreement?

A

Bank persuaded to release from liability in partnership (usually only if swapped for another partner)

76
Q

What is a board meeting sandwich?

A

If shareholders make decision - D call BM1 to call a GM, SH pass as GM then BM 2 where Ds implement

77
Q

How are board meetings called?

A

Chairman or D
Reasonable time (usually 1 week)
- meeting date, time, location

78
Q

How is a GM called?

A

Board of directors call it (or shareholders of 5%)

14 days notice (if public company then 21)

79
Q

How do Ds vote at board meeting?

A

1 hand vote, majority

80
Q

Quickest means to pass a resolution?

A

Written resolution (no board meeting needed)

81
Q

Form for changing business name and procedure

A

BM
GM - SR
BM

  • file form NM01 at CH in 15 days
82
Q

How to appoint a director?

A

BR or WR by OR

Form AP01 (or AP02 if corporate body)

83
Q

What percentage to agree to short notice meeting?

A

90% or 95% if public company

84
Q

Process for removing a director?

A

BM (14 clear days)
GM - by OR (show of hands unless poll demanded)
BM

D can speak at GM and had special notice

85
Q

What is difference between shares and loans

A

Shares= equity finance, make capital available for expansion

Loans = debt finance, loan from bank ect usually more expensive as interest

86
Q

How long must service contract be for it to be approved by SH

A

2+ years

SQE 2 (MINE) (5 decks)

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