Business Law Flashcards
When is a partnership formed?
When two or more people carry on a business in common with a view of profit.
What must a partner do if they carry on a competing business without consent?
They must account to the partnership for all profits made, but profits are held on trust only if the Partnership Act 1890 is breached.
Can a partner keep profits from competing business activities?
Yes, if they fully disclose and receive consent from the other partners.
How are losses shared on dissolution if profits are shared unequally?
Losses are paid in proportion to the partners’ entitlement to share profits.
What decisions require unanimity in a partnership unless otherwise stated?
The introduction of a new partner, changes to the partnership business, altering the partnership agreement, or expelling a partner.
What types of authority can partners have to act?
Express actual authority, implied actual authority, or apparent authority.
Who can demand a poll in a company?
Five shareholders or shareholders with at least 10% of voting rights or paid-up capital.
How is a dividend declared under the model articles of association?
The board must recommend it, and shareholders must declare it by ordinary resolution.
When can a board meeting notice period be shortened?
If 90% of the shareholders by number agree.
What does ‘non-cumulative preference shares’ mean?
They provide a fixed sum before ordinary shareholders but do not accumulate unpaid dividends.
When is special notice required?
To remove a director or auditor from office (28 days).
How can directors be appointed in a company with Model Articles?
Either by the board or by an ordinary resolution of the members.
What is the rule for service contracts exceeding two years?
They must be approved by an ordinary resolution of the members.
What is the statutory notice period for an annual general meeting?
21 clear days, regardless of whether resolutions are ordinary or special.
Can the burden of a contract be assigned?
No, only the benefit can be assigned, not the obligation to pay.
Who is bound by an IVA?
Ordinary unsecured creditors, but not secured creditors unless they agree.
What is pre-emption in share allotment?
Existing shareholders have a right to purchase shares to maintain proportional ownership if issued for cash.
What is the order of fund distribution in bankruptcy?
(1) Bankruptcy costs, (2) Preferential debts, (3) Ordinary unsecured creditors, (4) Postponed creditors.
How can a creditor prove insolvency for a winding-up petition?
By serving an unpaid statutory demand of £750+ for 21 days or obtaining an unsatisfied judgment.
When is a floating charge invalid?
If it was granted within 12 months of insolvency without fresh consideration.
What is the relevant time for a preference during insolvency?
Six months before insolvency or two years if made to a connected person.
What happens when a company allots ordinary shares?
Existing ordinary shareholders have pre-emption rights to maintain proportional ownership if shares are issued for cash.
How do fixed charges rank compared to floating charges?
Fixed charges rank ahead of floating charges, provided they are validly registered within 21 days.
What is a transaction at undervalue?
Selling property for less than market value when insolvent.
Do partners have an automatic right to expel another partner?
No, expulsion requires an agreement in the partnership terms.
What is the effect of an indemnity agreement between partners?
It does not affect the retiring partner’s liability to third parties unless agreed by the third party.
What decisions require unanimity in partnerships?
Introducing a new partner, changing the business nature, altering the agreement, or expelling a partner.
How is personal allowance reduced for incomes above £100,000?
£1 is lost for every £2 above £100,000.
What is the personal savings allowance?
£1,000 for basic rate taxpayers and £500 for higher rate taxpayers.
Who must register for income tax self-assessment?
Sole traders, partners, directors, and those with income exceeding tax-free thresholds.
How are payments on account calculated?
50% of the prior year’s income tax payable.
What is the tax point for payments made before goods are supplied?
The earlier of payment or invoice date.
What is the standard VAT rate?
20%.
When must businesses register for VAT?
If turnover exceeds £85,000, based on historic or future tests.
How are corporation tax payments scheduled?
For small companies, due nine months and one day after the end of the accounting period.
What happens with unpaid dividends for cumulative preference shares?
They accumulate and must be paid in a profitable year before ordinary dividends are declared.
Do preference shares have voting rights?
No, preference shares generally do not have voting rights.
When can directors allot shares?
If the company has only one class of shares, directors can allot shares without shareholder approval.
Are amounts in the share capital or premium accounts available for dividends?
No, they are non-distributable reserves and cannot be returned to shareholders.
When is a floating charge invalid during insolvency?
If granted within 12 months without fresh consideration and the company was insolvent at the time or became insolvent as a result.
What notice is required to remove a director or auditor under the Companies Act 2006?
28 days’ special notice is required, and the director/auditor must be allowed to attend the meeting.
How can a general meeting be held on short notice?
If agreed by 90% of shareholders by number.
When are tax payments required in the first year of trading?
No payments are required. Tax and returns are due by 31 January following the end of the tax year.
How are capital gains or losses calculated?
Gains minus losses, subtracting the £12,300 annual exemption and then losses carried forward if the result is negative.
What are exempt assets for capital gains tax?
Wasting chattels, government stock, and cars.
Are companies taxed on dividend income?
No, dividend income is usually exempt from corporation tax.
When must corporation tax returns be submitted?
Within 12 months after the end of the accounting period.
Can VAT be recovered on business entertainment expenses?
No, VAT on business entertainment cannot be recovered.
What happens if a close company makes a loan to a participator?
It must pay 32.5% of the loan to HMRC within nine months and one day after the accounting period ends.
Which shares have pre emptive rights?
Only Equity, not preferred
Can a trade loss can be carried forward and used against future total profits?
Yes, including gains
What is The relevant time period for a transaction at an undervalue?
Within two years of a company’s insolvency
When following the issue of preference shares the company should file a Return of Allotment of Shares form?
within one month of the issue of shares.
How many shareholders are needed to request a general shareholders meeting?
5% of the paid-up voting capital shares
Can an annual meeting be held on a shorter notice than 14 clear days?
Yes, if agreed by 90% of the shareholders
How many shareholders are needed for a poll vote?
Either: 1. 5 Shareholders 2. 10% of the shareholders with voting rights 3. 10% of the paid-up share capital of the company
How many Shareholders are needed to require a written resolution to be circulated by the board?
5% of the total voting rights
What is the % required to approve an IVA and by whom?
75% of the UNSECURED creditors
Who can submit a petition for bankruptcy order?
Unsecured creditors owed more than 5k
What are insolvency options for companies/LLPs?
- Receiverships
- Restructing Plan
- Administration
- CVA
- Liquidation
