business law and practice (week 1-5)

Question 1

what resolutions are needed from shareholders to approve the buyback of shares and to approve this payment out of capital?

Answer 1

ordinary resolution to approve the buyback of shares
special resolution to approve a payment out of capital

Question 2

if there is a partnership and one partner signs a contract but the other partners didn’t give authority for them to sign - is the partnership bound by the contract?

Answer 2

yes they are because the contract was for carrying on a business of the kind carried on by the firm and in the usual way

(therefore, express authority is not required if act is within the usual course of business)

Question 3

what is a personal guarantee?

Answer 3

a personal guarantee is a legal commitment by an individual to repay a debt if the primary obligor defaults.

therefore, if partner gives personal guarantee then they are personally liable even if the partnership defaults on a loan.

Question 4

what is an exception to the limited liability rule for LLPs?

Answer 4

personal guarantee - if partner gives one then the partner is personally liable

Question 5

if a partner leaves a partnership but publishes in the London gazette they are leaving - are they liable for debt from third parties who they have not had direct dealings with after they leave the partnership?

Answer 5

if former partner’s departure is published in London gazette, this provides constructive notice to 3rd parties who have not had direct dealings with the former partner. therefore, partner is not liable for debt incurred after their departure

Question 6

if a person holds themselves out as a partner can they be personally liable for partnership debt even if they aren’t a partner?

Answer 6

yes = a person who represents themselves as a partner, or knowingly allows themselves to be represented as such, can be held liable for partnership debts incurred as a result.

Question 7

how are partners taxed in an LLP?

Answer 7

they are taxed as individuals and taxed on their hare of the LLP’s profits and gains. therefore, get their share of profits and then pay income tax on their share of the profits

Question 8

how are partners in a traditional partnership taxed?

Answer 8

they pay income tax on their share of the profits and also charged CGT on their chargeable gains

Question 9

how is a deed executed for a company? (what formalities)

Answer 9

signed by authorised signatories (must be directors, or if companies has one, a company secretary);
if its common seal is used
signed by single director in presence of a witness

Question 10

how is a deed properly executed for a partnership?

Answer 10

partner can only execute deed on behalf of partnership is have authority. deed should therefore, be executed by all partners unless one or more partners is given a power of attorney to execute deeds on behalf of the partnership. signature of partners should also be witnessed

Question 11

what is a de jure director?

Answer 11

they have been properly appointed at companies house

Question 12

what is the minimum number of directors for a private company?

Answer 12

1 director

Question 13

what is the minimum number of directors for a public company?

Answer 13

at least 2 directors

Question 14

what is a de facto director?

Answer 14

not appointed but acting like a director (not been validly appointed but acts like one)

Question 15

what is a shadow director?

Answer 15

they act behind the scene and are like a director

Question 16

what are the 4 different ways a partnership can be dissolved?

Answer 16

• by automatic dissolution [expiry of fixed term/ completion of specific venture / death or bankruptcy of any partner]
• dissolution by partnership notice
• dissolution of partnership if partnership business has become unlawful
• partnership by court

Question 17

what things need to be sent to companies house to register an LLP?

Answer 17

Form LL IN01 with the relevant fee

Question 18

what does the form LL IN01 form state (doc that LLPs need to send to companies house)?

Answer 18

name of LLP
registered office’s address
registered email address (for members that are designated)

Question 19

what things need to be send to companies house if a company is incorporating from scratch?

Answer 19

1) memorandum
2) articles (if dont have model articles)
3) fee
4) application form for registration IN01

Question 20

what does the application form IN01 (form that is for companies incorporating) have detailed in it?

Answer 20

• company proposed name
• private or public
• appropriate email adress
• if companies is limited by shares
• statement of compliance
• lawful purpose statement
• statement of capital and initial shareholdings

Question 21

what type of company can pass written resolutions?

Answer 21

only private companies

Question 22

what are the 2 decisions that cannot be passed by a written resolution?

Answer 22

the removal of a director and the removal of an auditor

Question 23

what forms need to be filed at companies house if purchase a shelf company and want to change company name, registered office and amend articles?

Answer 23

Form MN01 for changing company name
Form AD01 changing registered office
special resolution along with amended articles for changing articles

Question 24

what resolution is needed to amend articles of a company?

Answer 24

special resolution of shareholders with majority of at least 75% in favour of amendment.

Question 25

what should a client do if they receive notification they cannot register their company name as it is too similar to an existing company name = if they want to keep the name what should they do?

Answer 25

modify the company name to include a unique identifier

as company name must not be the same or too similar to an existing name on index of company names

Question 26

how does a company validly call a general meeting on short notice?

Answer 26

require agreement of majority in number of shareholders who hold shares with nominal value of not less than 90% of total nominal value of shares

Question 27

what is an executive director?

Answer 27

director who has been appointed to executive office - will be both an employee of their company and an officer

Question 28

what is an alternate director?

Answer 28

usually either a fellow director of the company or someone who has been approved by a resolution of the board of directors

Question 29

what type of resolution is needed to remove a director?

Answer 29

ordinary resolution

Question 30

who does a director owe their general duties to?

Answer 30

to the company

Question 31

what are the general duties of a director?

Answer 31

duty to act within powers
duty to promote success of the company for the benefit of the members
duty to exercise independent judgment
duty to exercise reasonable care, skill and diligence
duty to avoid conflicts of interest
duty not to accept benefits from third parties
duty to declare nay interest in proposed transaction