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UNI > business law > Flashcards

business law Flashcards

1
Q

what are the 2 available business structures?

A
  • unincorporated entities
  • incorporated entities
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2
Q

examples of unincorporated entities

A
  • sole trader
  • partnership
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3
Q

examples of incorporated entities

A
  • private limited companies
  • unlisted public limited companies
  • lips
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4
Q

sole traders - key info

A
  • individual owns the business and makes all decisions
  • few registration formalities
  • unincorporated entity- no seperation between individual and business
  • unlimited liability- personal assets at risk
  • business ceases upon death or retirement
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5
Q

general partnerships key info

A
  • partnership act 1890 provides default rules
  • 2 or more people carrying on a business in common with a view to a profit
    individual partners own and manage the business (self-employed)
    unincorporated entity (no separation between individual and business)
  • unlimited liability - personal assets at risk
  • needs to be trust- if one leaves, the other will be left with the debt
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6
Q

definition of general partnership

A

2 or more people carrying on a business in common with a view to a profit

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7
Q

limited partnerships- key info

A
  • limited partnership act 1907
  • not widely used
  • must have at least one general partner with unlimited liability for partnership debts
  • other partner’s liability is limited and conditional on not being in control (ie managing the partnership)
  • must register with companies house
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8
Q

exceptions to general rule that if no partnership agreement than a unanimous vote will prevail

A
  • if you want to bring in a new partner
  • or if you want to expel a partner (they still need to agree)
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9
Q

what is the veil of incorporation?

A

company and its members are separate from each other
they are separate legal entities

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10
Q

private companies limited by shares

A
  • companies act 2006
  • widely used to benefit from limited liability
  • incorporation formalities and ongoing (public) filing requirements at companies house
  • mandatory constitutional documents
  • directors manage the business, shareholders own the business
  • debt or equity finance
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11
Q

unlisted public companies limited by shares- key info

A
  • similar to private limited companies but shares can be issued to the public if SHARE CAPITAL REQUIREMENTS are met:
    – the aggregate nominal value of all shares issued is at least £50k and
    – each share is at least one quarter paid up
  • may apply to list shares on public exchange such as London stock exchange
  • more heavily regulated, so less attractive
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12
Q

limited liability companies- key info

A

LLP act 2000 default rules- express LLP agreement advisable
- hybrid between partnership and limited companies
- incorporation formalities and ongoing public filing requirements at companies house
- partners manage and own the business
- finances by capital injection/loan from partners or bank loans

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13
Q

professional conduct and ethical issues - duty to avoid conflicts of interest

A
  • who is your client? - the business or the individual?
  • you can act if there is a substantially common interest AND
    – clients give informed consent
    – safeguards to protect confidential info are put in place and
    – you are satisfied its reasonable to act
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14
Q

prof conduct and ethics- duty of confidentiality

A
  • duty extends to current and former clients
  • cant disclose unless permitted by law or client consents
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15
Q

prof conduct and ethics- money laundering

A
  • what checks do you need to do on clients?
  • what transactions might indicate money laundering activity?- geographic inconsistencies and cash structuring, use of third parties, secrecy
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16
Q

default rules for general partnerships (gp)

A
  • ordinary matters decided by majority, by unanimity needed to change nature of partnership
  • loans from partners carry interest at 5%
  • partners have joint liability for debts incurred while partner- profits and losses shared equally
17
Q

partner duties (gp)

A
  • duty to provide true accounts and full info
  • duty to account for secret profits
  • duty not to compete
18
Q

finances- money in (gp)

A

partners inject capital to cover initial operating costs
- capital can be cash or other assets
- partnership agreement should set out capital contributions made and any obligations to contribute capital in future
- partnership agt may also offer interest on capital contributions

  • partners can lend money to the partnership and will receive 5% interest
19
Q

Finances- money out (gp)

A

partnership agreement can modify the partnership act 1890 that says
- partners share capital and income equally
- partners receive “drawings”- partnership art should specify amount

20
Q

dealings with third parties (gp) - 3 types of authority

A
  • express actual authority- express permission or instruction to do something
  • implied actual authority- implied by regular course of dealing to which partners haven’t objected
  • apparent authority- partner appears to third party to have authority, but dont have it
21
Q

apparent authority (gp) - when is a partnership liable to a third party

A
  • transaction relates to the business of the kind carried out by the partnership
  • transaction if one for which a partner in such a firm would usually be expected to have authority
  • other party didn’t know partner didn’t have authority subjective
  • other party deals with a person they know or believe is a partner subjective
22
Q

dissolving a general partnership- how?

A
  • by notice from any partner in a partnership at will
  • automatically on expiry of fixed term/purpose, death, bankruptcy, or charging order
  • automatically on business becoming illegal (can’t be disapplied)
  • by the court in certain circs
23
Q

dissolution by notice/agreement (gp)

A
  • default position in a partnership at will- dissolution by any partner at any time
  • this is impractical and makes partnership at the whim of a disgruntled partner
  • recommendations for partnership agreement
    – specify notice period
    – notice must be given in writing
24
Q

automatic dissolution- expiry of fixed term/purpose

A

Default position: a partnership will dissolve automatically
on the expiry of a fixed term or conclusion of a fixed
purpose (s.32)
- if business continues after expiry it is a partnership at will

25
Q

expulsion of a partner

A

default position is no majority can expel a partner unless the PA permits it
- would have to be dissolved and start again

26
Q

dissolution by the court- when?

A
  • Partners can apply to the court for dissolution in certain
    circumstances (s.35):
  • Partner permanently incapable of performing duties
  • Partner’s conduct is prejudicial to business
  • Persistent breach of Partnership Agreement
  • Business can only be carried on at a loss
  • When it’s just and equitable
27
Q

consequences of dissolution

A

realise partnership assets
- sell assets or
- sell business as a going concern
distribute proceeds
- creditors paid in full
- partners loans repaid plus interest
- partners capital entitlements
- surplus shares in accordance with PA

28
Q

ownership of partnership assets

A
  • PA should specify which belong to partnership and which belong to partners personally
  • ownership depends on intention of partners
  • property owned by a partner but used by the partnership doesnt automatically become partnership property
29
Q

the process of incorporating a private limited company

A

file documents
- memorandum
- form IN01
- articles
- fee (£50)

certificate of incorporation issued
- registrar of companies issues certificate and placed notice in The Gazette
- LIMITED LIABILITY EXISTS FROM THIS DATE

-post incorporation formations
- directors meeting to sort operating formalities
- disclosure requirements (name, number, office etc)

30
Q

What is a memorandum of association?

A

MOA states
- intention of subscribers to form a company and
- subscribers will become members and own at least one share each

31
Q

what is included in form IN01

A
  • name
  • registered office location
  • limited liability
  • public or private
  • statement of share capital and initial shareholdings
  • details of PSC (own over 25% shares)
  • officers
  • statement of compliance by subscribers
32
Q

when one partner wants to leave the partnership without agreement of other partners- what do they need to do?

A
  • apply to court for an order dissolving the partnership under s35 PA 1890
33
Q
A

UNI (17 decks)

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