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OSCE > Business law > Flashcards

Business law Flashcards

1
Q

What are non-equity shares

A

Shares with a meaningful restriction on them, such as entitlement to profits on winding up

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2
Q

What are the differences between a partnership and a LLP

A
  1. separate entity
  2. liability limited as per written agreement
  3. similar to partnership in that no directors
  4. partner liability for insolvency offences
  5. taxed as partnership, liable for own share of profits
  6. unlimited capacity, informal management structure and meetings, agreement is not public document, member is agent, no capital rules
  7. debts are treated as its own
  8. personal assets not at risk
  9. normally no third party liability
  10. accounts available for inspection
  11. must follow rules on membership and filing of accounts
  12. time consuming to form
  13. name subject to registrar approval
  14. insolvency risk
  15. property belongs to LLP
  16. formation registration
  17. minimum 2 people
  18. accounts and annual return
  19. register of charges must be kept
  20. must have registered office
  21. everyone participate
  22. not as easy to get capital
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3
Q

Problems with director

A 
Breach of fiduciary duty
Duty to promote success of company
Duty to avoid conflicts of interest
Duty to avoid 3rd party benefits
Service contract
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4
Q

Removal of director

A 
Statutory procedure if not in AoA
Ordinary resolution of shareholders
Special notice and general meeting - 28 days
Members approval
Right to be heard at meeting to remove
May have compensation rights
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5
Q

Board.Members - To enter into a lease who makes resolution?

A

Board Meeting/Written resolution

Authorise someone to execute the lease

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6
Q

What resolution to change articles of association?

A

Special resolution of members - 75%

General Meeting

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7
Q

What is Short notice

A

Dispenses with 14 days normal notice

Remember form of consent for short notice

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8
Q

Board Meeting Minutes Structure - new articles

A

Company number
Date
In attendance - everyone else
Present - taking part in meeting
Location
Commencement - chair declared quorate and open
Business of the meeting - resolutions to be voted on, and documents tabled
The Board considered the proposed resolution
After discussion, it was resolved that
The directors confirmed compliance with s171-177 CAA 2006 (prior resolution ideal esp if issue)
Adjournment to General Meeting
Reconvened - Board noted new articles
Secretary instructed to send to CH - special resolution, new articles, update minute book, record of resolutions, send resolutions to all shareholders

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9
Q

Board Meeting Minutes structure

A 
Company Number
Name 'The Company'
Minutes of a meeting of the Board of Directors of the Company held at on 
Present
In attendance
  1. Preliminary
    The chair noted that a quorum of two was present in accordance with the AoA and declared the meeting open.
  2. Change in accounting reference date
    After due and careful consideration it was resolved that the accoutning reference date of the company be changed to X and that the registrar of companies be notified of this chance

Closing

Signed - chairman

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10
Q

Model articles - change of accounting date - shareholders?

A

No - directors ordinary resolution

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11
Q

Model articles - change of directors

A

No - directors ordinary resolution

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12
Q

What is the compliance section for minutes

A

The directors confirmed compliance with s171-177 CAA 2006 (prior resolution ideal esp if issue)

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13
Q

How should the attending solicitor be on the minutes?

A

IN ATTENDANCE

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14
Q

Minutes for signing lease

A

Purpose is to approve and sign a contract for the purchase of X for £X

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15
Q

Provision in minutes for resolutions

A

Resolve in the interests of the company
Approve the contract
‘Any two directors be authorised to sign on behalf of the company’

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16
Q

Do members have to approve substantial asset

A

Yes - if greater 100k or >10% of company asset value IF connected person - not brother, yes spouse or child

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17
Q

Does the company number have to be in minutes?

A

Not board minutes

Yes shareholder resolutions

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18
Q

Example wording to purchase lease

A

approve and sign a contract for the purchase of

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19
Q

How to declare a nature and extent of iterest

A

The following director declared the nature and extent of her interest int he proposed transaction

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20
Q

Direct or indirect interest with company transaction

A

must be declared.

Exception: aware of interest, not reasonably give rise to conflict

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21
Q

When to shareholders have to declare

A

Share allotment

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22
Q

Minutes for if there is a directors conflict

A

It was noted that the director interested would not vote or count as part of a quorum on any matters in which she was interested and that nevertheless there would be a quorum for all items

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23
Q

Do conflicts of interest affect shareholder votes

A

No

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24
Q

Wording for members resolution to purchase lease

A

That the proposed contract between X for the purchase of X be and is hereby approved. Identify the contract precisely. APPROVE the contract as it is the directors who enter into it

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25
Q

What conflicts arise with shareholder agreements?

A

Directors have fiduciary duty to company which may conflict with shareholders

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26
Q

What issues arise with a service contract?

A

Members approval of length if over 2 years

If not granted contract term is void and terminable on notice

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27
Q

Can a director vote on their service contract

A

No - must declare interest and not vote

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28
Q

Conflicts ppointing director

A

Cannot advise director and ccmpany as conflict of interest

29
Q

Can a company agree to fetter its statutory powers

A

No

30
Q

Can shareholders agree to act in a particular way

A

Yes

31
Q

Essentials for board minutes (7)

A
  1. Present/attendance/capacity (inc. Chair)
  2. Quorum
  3. Compliance with directors duties
  4. Conflicts of interest
  5. Identify documents
  6. Signature of chair
  7. Actions (CH and minute book)
32
Q

Directors compliance

A

Directors declared compliance with s171-177 CA

33
Q

What is required for a Board Meeting for share allotment

A

Directors statement of approval of the disapplication of pre-emption rights
The Approval of Members is required
Agree a general meeting for the purpose of proposing ordinary/special resolutions
Declaration of interest ‘there was placed before the meeting and duly noted’ a statement given declaring an interest’
Resolve to approve the allotment of shares and disapplication of statutory preemption rights
Authorisation of GM notice and immediate instruction to sent
Ordinary resolution: for Directors to exercise powers of the company to allot up to X shares at a par value of X and X shares, such authority to expire on. This replaces previous authority.
Special resolution: powers be given power to allot equity securities as if the pre-emption provisions do not apply
Amendment AoA

34
Q

Meeting notice periods

A

Private: 14 days; consent to short notice can be given by majority of members 90% of shares

35
Q

Partnership name

A

Not restricted but disclosure if not in names of all partners

36
Q

Partnership remuneration

A

Partners are entitled to share of profits. No partner is entitled to a salary. Salary is also a share of the profits. Can be drawn at any time of year but need a mechanism if mid year
Under PA, share equally
Partnership capital is the amount contributed to business. Capital profits is the value of assets above the capital contributed by the partners. Capital profits are shared equally, even if contributed unequally, but there is an implied agreement can withdraw as per contribution

37
Q

What if a partner is made bankrupt

A

Automatic dissolution - better to have expulsion clause

38
Q

What about partners with competing businesses

A

Duty not to work in competing business

If uses partnership property/business connection - account for profits

39
Q

What do you include in a deed of variation

A

DEED OF VARIATION
This DoV is dated and made between [parties]
Background
NOW IT IS AGREED THAT the supply agreement shall be amended

40
Q

Company restructuring key issues

A
  1. conflicts - directors - family
  2. Directors must declare conflicts BEFORE enters into transactions - Board meeting or in writing.
  3. Can argue others aware/inconsequential
  4. Effect: not voting/quorate
41
Q

What is the process to issue new shares

A

Create any new shares eg. preference shares (fixed dividend)
Directors will require authority to allot new shares (normally from shareholders
Resolution must give date authority will expire
Pre-emption rights - CA/MoA, can be dispensed with
Once authority, Board should resolve to allow the shares
Secretary - issue share certificates, complete CH registration, and file ordinary resolution / special resolution re: authority/pre-emption
Amend company register of shareholders

42
Q

Buy back of shares

A

Reduces the net assets for the increased value of the shares
Paid up capital is reduced by the original value of the shares
Distributable profits are reduced by the increased value - must buy from profits
The original value must be transferred to the capital redemption reserve

43
Q

Partnership Act position

A
  1. Profits and losses shared equally
  2. Not entitled to interest on capital
  3. All partners entitled to manage
  4. Not entitled to remuneration
  5. No new partners without consent of all
  6. Ordinary matters - majority, change in business requires all
44
Q

Names of partnerships

A

If not in name of all partners, must state name of all partners and service address on business letter, written order for goods/services, invoice and receipt, written demand payment debt, prominent position place of business

45
Q

What if partners give unequal capital

A

In absence of agreement, capital is shared equally, but courts will readily imply agreement if unequal contribution

46
Q

Remember in partnerships to distinguish between income and capital profits

A

Income - trading

Capital - eg. land

47
Q

What does the PA say about competing business

A

Not allowed. Cannot use partnership property - duty to account for profits

48
Q

Companies Act re names

A

Need permission if connected to public authority.

Sensitive names eg. offensive

49
Q

How to expel a partner

A

Meeting to expel if breach of contract; give chance to remedy, notice in writing
Partners are to be given reasonable notice of breach and chance to respond
Leaving partner - entitled to capital contribution plus interest

50
Q

Partnership - without agreement

A 
Equal shares/profits
Voting by majority on issues
All can bind the firm
Each liable for torts
Right to interest on loan 5%
Right to salary
No new partners without consent of all
Right to see books
Right to management
Right to expel partners
51
Q

Interview

A

Include costs and timeframe
Empathy
Active listening

52
Q

Balance sheet vs P&N

A

Balance sheet is at a specific point in time
P&N is over a year, or quarter. P&N shows if company is profitable; Balance sheet shows what it owns/owes at any one time ie. solvency

53
Q

Whats in balance sheet

A

A balance sheet reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time

54
Q

FORMULA FOR RETURN ON CAPITAL

A

Net operating profit/Employed capital ‘balance on capital account’ or ‘capital’. Express as 100 for percentage. %%%

Ie. is the profit satisfactory compared to amount of capital invested, compare to bank interest. How much profit given how much put in?

55
Q

NET PROFIT PERCENTAGE FORMULA

A

Profit/Sales*100

Amount of profit on each item sold, ie. profit as a proportion of sales. Should be %

56
Q

CURRENT RATIO FORMULA

A

Assets/liabilities:1

Should be at least 1.5:1

57
Q

ACID TEST FORMULA

A

Cash + cash equivalent + marketable securities + current accounts receivables Ie. liquid assets/ liabilities:1.

Must be 1:1 or more - more liquid assets than liabilities.

NO stock, not or (normally)prepayments. YES debtors, not cash

58
Q

What is in PNL

A

Payment may not be received - so could be misleading if profits, assumes will receive

59
Q

Presentation skills

A

Have a good structure

60
Q

Balance sheet - PNL - what not shown

A

Reputation, labour relations, declining market

61
Q

Board minutes to appoint a director

A

After discussion IT WAS RESOLVED: to approve the appointment of X as a director

62
Q

Board minutes to issue new shares

A

After discussion IT WAS RESOLVED to issue Z new shares to ZZ subject to shareholder approval

63
Q

Board minutes to get written resolution of shareholders

A

After discussion IT WAS RESOLVED that the Resolution be circulated immediately to the shareholders

64
Q

Board minutes to authorise contract

A

After discussion IT WAS RESOLVED to authorise X and X to sign the service contract on behalf of the Company

65
Q

Members approval to issue shares?

A

Yes

66
Q

Members approval to appoint director

A

No

67
Q

Minutes to provide shareholders with written resolution

A

The Chair tabled a form of shareholders written resolution containing the following resolution to be passed as an ordinary resolution: that the directors of the Company be hereby authorised to issue X new shares to Z.

After consideration, IT WAS RESOLVED to approve the Resolution an the Secretary was instructed to issue the Resolution immediately to the shareholders

68
Q

Minutes for adjournment

A

The Board meeting was adjourned for the Resolution to be circulated to the shareholders for singing. The board meeting was reconvened immediately thereafter

OUTCOME OF CIRCULATION OF RESOLUTION

The Chair reported that the Resolution had been signed by all the shareholders and therefore had been duly passed.

OSCE (11 decks)

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