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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
How votes usually done in board meeting
Show of hands
26
Difference between board meeting and general meeting
BM: meeting of directors GM: gathering of company shareholders or members
27
Requirements to call a general meeting?
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)
28
Who can demand gm as a poll vote?
1. Persons not less than 10% voting rights 2. Director 3. Chairman 4. Any 2 shareholders
29
How to agree short notice of meeting?
If private comany: 90% must agree Public: 95%
30
Who can request written resolution!
5% shareholdings - can amend articles to reduce but cant increase
31
Unless stated otherwise how long to respond to written resolution?
28 days
32
How does percentage of written resolution work
Via members shares
33
What company can use written resolution
Only private companies
34
What percentage for PSC
25%
35
What form to allocate PSC on CH?
PC01 //remove= PC07
36
Ordinary vs preference shares?
Preference- priority of liquidation and dividend, less input to strategy and often dont have voting right -less risky than ordinary
37
Types of equity finance
1.Allotment 2.transfer 3. Buy-back
38
How to allot new shares?
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
Administration after allotting new shares?
Issue SH01 with Registrar or Companies within 2 months File OR/SR at CH Keep record of decision for 10 years
40
What is required to draft to transfer shares?
Stock transfer form and fee
41
Types of debt finance
1. Loans 2. Debt securities
42
When is a company deemed insolvent?
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
Order of priority for liquidation?
1. Chargeholder 2. Liquidator fee 3. Secured creditor 4. Preferential creditor 5. Unsecured creditor 6. Shareholder
44
Steps to allot new shares
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
Admin after allowing new shares
1. Register them at CH within 2 months 2. File allotment return/ OR/SR needed
46
When can a floating charge be set aside?
1. Created within 1 year of insolvency (2 if connected person) 2. Insolvent when granted // not if fresh consideration given at the time
47
How long to register fixed/floating charge at CH?
21 days
48
What is preference in liquidation?
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
Order of priority in liquidation?
1. Chargeholder 2. Liquidator fees 3. Secured creditor (fixed charge, mortgage, floating) 4. Preferential creditor eg employee 5. Unsecured creditor 6. Shareholder
50
Process for a loan to director?
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
When must a service contract be approved by SH?
- When for fixed term over 2 years. - approved by OR - If fails then just not fixed term
52
What constituted wrongful dismissal
1. 2 years 2. Actually dismissed 3. Unreasonable
53
Difference between LP and LLP?
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
Directors duties?
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
What is the test for promoting company success?
Subjective - in good faith with regard to long term consequences, fairness and reputation
56
When can D accept benefit from third party?
Corporate hospitality
57
When does D not need to declare interest in transaction?
1. Not reasonable conflict 2. Other directors aware or ought to be 3. Involves Ds service contract
58
How can D make notice of a conflict of interest?
Notice in writing or at BM
59
Remedies for directors breach?
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
What is test for breach s174 CA 2006?
Objective test - reasonably expected of someone in that position
61
How can D avoid liability? (Once breach occurred)
1. Shareholders ratify - OR 2. Court relief - D acted honestly and reasonably 3. Insurance
62
Steps to make a substantial property transaction to D?
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
What are the exceptions to OR for substantial property transaction?
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
Ways to remove D?
1. Resignation 2. Disqualification 3. Removal
65
How to remove D?
At GM by OR 1. Special notice 28 clear days before GM
66
How to remove D?
At GM by OR 1. Special notice 28 clear days before GM
67
Directors rights during removal?
1. Can make written resolution 2. Speak at GM 3. Must be given special notice immediately
68
What can every shareholder do?
1. Vote 2. Receive dividends 3. Receive notice of GM
69
What are rights of 5% shareholders
1. Can circulate written resolution 2. Request GM 3. Circulate written statement
70
What can a 10% shareholder do?
Demand poll vote
71
What are the steps of a general meeting?
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
What happens if fail to give adequate notice for GM?
Resolution will be invalid
73
When can you not use a written resolution?
1. Dismiss D 2. Dismiss auditor 3. Public company
74
How to change a company name?
General meeting or written resolution OR
75
What is a novation agreement?
Bank persuaded to release from liability in partnership (usually only if swapped for another partner)
76
What is a board meeting sandwich?
If shareholders make decision - D call BM1 to call a GM, SH pass as GM then BM 2 where Ds implement
77
How are board meetings called?
Chairman or D Reasonable time (usually 1 week) - meeting date, time, location
78
How is a GM called?
Board of directors call it (or shareholders of 5%) 14 days notice (if public company then 21)
79
How do Ds vote at board meeting?
1 hand vote, majority
80
Quickest means to pass a resolution?
Written resolution (no board meeting needed)
81
Form for changing business name and procedure
BM GM - SR BM - file form NM01 at CH in 15 days
82
How to appoint a director?
BR or WR by OR Form AP01 (or AP02 if corporate body)
83
What percentage to agree to short notice meeting?
90% or 95% if public company
84
Process for removing a director?
BM (14 clear days) GM - by OR (show of hands unless poll demanded) BM D can speak at GM and had special notice
85
What is difference between shares and loans
Shares= equity finance, make capital available for expansion Loans = debt finance, loan from bank ect usually more expensive as interest
86
How long must service contract be for it to be approved by SH
2+ years

SQE 2 (MINE) (5 decks)

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