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GDL Company > Business Models > Flashcards

Business Models Flashcards

1
Q

Sole traders characteristics

A
  • no set up costs
  • not separate legal entity
  • unlimited personal liability
  • no formal structure
  • no procedural requirements/filing
  • privacy
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2
Q

Partnership characteristics

A
  • no set up costs
  • not separate legal entity
  • unlimited personal liability
  • no procedural requirements/filing
  • privacy
  • governed by the Partnership Act 1890
  • consists of 2 (or more) people working together with a view to profiting
  • either partner can dissolve it by giving notice
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3
Q

Partnership Formation

A

PA 1890 to consider the existence of partership:
* are profits and/or losses shared
* is a loan made from one partner to another
* is property held jointly

Northern Sales Limited v Ministry of National Revenue: if there is an agreement to share losses and profits it is likely a partership

Walker v Hirsch: If a person is not ‘held out’ as a partner, existence is less likely.

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4
Q

Terms of partnership

A

default terms PA 1890
* profits/losses shared equally
* partners not entitled to salary
* decisions on ordinary courses of biz - majority
* decisions that change the nature of biz - unanimity
* a partner cannot be expelled by majority vote unless all partners have expressly agreed a majority can do so

varying agreements PA:
* partners rights and obligations can be varied at any time by their unanimous consent

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5
Q

Limited Partnership characteristics

A

two types of partners
* limited partners: limited liability + not involved in management
* general partners: unlimited liability + run the biz

other
* governed by the Limited Partnership Act 1907
* must be registered at Companies House
* no requirement to file accounts

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6
Q

Limited Liability Partnership characteristics

A
  • introduced by the Limited Liability Partnership Act 2000
  • separate legal personality
  • treated as partnership for tax
  • LLPA - 2 or more persons can incorporate an LLP (person can be company)
  • partners have limited liability
  • registered at Companies House and must file annual accounts and other info
  • organisational structure decided by either (a) Members’ Agreement, or (b) default provisions from the Limited Partnerships Regulations 2001
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7
Q

LLP default provisions (Limited Partnerships Regulations 2001)

A

Regulations 7 and 8:
* members share equally in capital and profits
* LLP must indemnify members for personal payments/liabilities relating to the ordinary course of biz
* no member is entitled to remuneration for management
* no person can become a member or assign their membership without consent of all members
* ordinary decision making - majority
* changes to nature of biz - unanimity
* no implied power of expulsion by majority

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8
Q

Company characteristics

A
  • separate legal entity
  • limited liability (to amount unpaid on shares)
  • governed by CA 2006
  • do not need to hold AGM’s or submit Annual Returns (annual Confirmation Statement)
  • private companies can pass shareholder resolutions in writing
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9
Q

Types of stakeholder in companies

A
  • shareholders (members)
  • directors
  • subscribers (first shareholders)
  • persons with significant control (those with over 25% of shares + details provided to CH)
  • employees
  • creditors
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10
Q

Types of private company

A
  1. Private companies limited by shares (Ltd)
    * no minimum share capital requirement
    * cannot offer shares to public
    * can be formed by one person
  2. private companies limited by guarantee
    * no share capital
    * liability limited to amount members agreed to contribute (winding up)
    * membership non-transferrable
  3. unlimited companies
    * unlimited liability of members
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11
Q

types of public companies

A
  1. Public companies limited by shares (Plc)
    * can offer shares to public
    * minimum 2 directors
    * minimum share capital of £50k
    * requires trading certificate to trade
    2.listed companies
    * only public companies can be listed on a regulated investment exchange
    * not all public companies are listed
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12
Q

CA 2006 - Private limited company definition

A
  • any company which is not a public company
  • names end with ‘limited’ or ‘ltd’
  • most companies are private
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13
Q

CA 2006 - public limited company definition

A
  • certificate of incorporation states it is a public company
  • name ends with ‘Public limited company’ or ‘Plc’
  • can offer shares to the public
  • more restrictions than private companies
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14
Q

CA 2006 - listed company definition

A
  • after converting to a ‘plc’ a company may list shares on an exchange to raise money
  • only public companies can list on an exchange but not all public companies have their shares listed
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15
Q

Company’s constitution (overview)

A
  • The Articles of Association
  • companies incorporated under CA 2006 have unrestricted objects
  • provisions in memorandums for companies incorporated under CA 1985 are treated as provisions of the Articles (CA 2006)

note: the Memorandum used to be constitutional but is now only used to register at Companies House

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16
Q

The Articles of Association

A
  • s18 CA 2006 - all companies require Articles
  • it regulates the relationship between the shareholders, directors, and company
  • the Articles must comply with the minimum provisions of CA 2006 (legality test) (i.e provisions can be more, but not less, onerous)
  • some CA 2006 provisions override anything in the Articles
  • certain provisions in CA 2006 are subject to the articles (e.g. power of a private company to issue redeemable shares)
17
Q

Form of the Articles

A

1. Model Articles (MA)/Table A
* MA prescribed for different types of company (s19 CA 2006)
* if a new company doesn’t provide articles, the relevant MA will act in default
2. Amended MA
* MA is adopted but certain provisions are excluded/modified
3. Tailor made Articles
* solicitors instructed to draft articles

18
Q

Amending the Articles

A
  • the Articles can be amended by special resolution (s21 CA 2006)
  • s22 CA 2006 allows the entrenchment of specific provisions in the articles (i.e. provisions can be amended if specific conditions are met)

Courts:
* alterations to the Articles must be made in the interests of the company as a whole (Allen v Gold Reefs)
* this is tested via objective reasonableness (Shuttleworth v Cox)

19
Q

Case law: amending articles

A

Sidebotton v Kershaw
* articles altered via a provision giving the directors power to require shareholder’s who entered into competition to sell their shares to the company at a fair price
* found reasonable and in bona fide interests of company

Re Charterhouse Capital
* articles amended to permit the shares of a minority shareholder to be compulsorarily acquired under takeover offer
* found valid due to consistency with shareholder agreement

20
Q

legal effect of articles

A
  • provisions bind company and members as if they were covenants (i.e. they are binding and enforceable)
  • the articles are a contract (Hickman v Kent)
  • company/members can enforce the articles upon eachother (when acting in the relevant capacity)
  • courts have been willing to grant injunctions to prevent infringement of rights
21
Q

Types of company formation

A
  1. incorporation from scratch
    * deliver memorandum + articles to the Registrar of Companies at CH (s9 CA 2006)
    * pay the fee and wait (5 days unless extra payment for 1 day)
    * submit form IN01
    * Certificate of Incorporation received: includes name, registered number, date of incorporation
  2. shelf company conversion
22
Q

Contents of IN01

A
  • statement of capital and initial shareholders
  • statement of proposed officers
  • if the company is to be limited by guarantee, details of the guarantee
  • statement of compliance (of CA 2006)
23
Q

nominal (or par) value of shares

A
  • shares in a limited company must have a fixed nominal value
  • i.e. the minimum subscription price
  • it represents a unit of ownership, not the actual value of a share
  • shares cannot be issued at a discount to this value, but can be issued above it (premium)
24
Q

Issued, paid-up and called up shares

A
  • total amount in value (nominal and premium) of all shares = issued share capital
  • amount paid up on shares = paid-up share capital
25
Q

number and nature of directors

A

s 154 CA 2006
* private company = minimum 1 director
* public company = minimum 2 directors

at least one director must be a natural person + minimum age of 16

26
Q

quorum of board meetings and director decision making

A
  • Art 11 MA: a quorum is necessary for BMs
  • Art 11 (2) MA: quorum may be fixed but must never be less than 2, and if not fixed is 2
  • Art 8 MA: directors may unanimously make decisions without a BM
27
Q

Board meeting procedure

A

Art 9 MA gived directors flexibility in regulating their meetings, providing that any director can call a BM or get the company secretary to do so at any time
* reasonable notice (what is usual) is necessary (Browne v La Trinidad)
* Art 11 (2) a quorum of minimum 2 directors is necessary
* board resolutions are passed by majority vote on a show of hands
* chairman may have a casting vote subject to the articles

28
Q

shareholder meeting sequence

A
  1. The board covene a GM, deciding when and where it is to take place via notice
  2. the board provide a notice (minimums prescribed by CA, e.g. 14 clear days notice for proviate companies)
  3. The quorum is generally two shareholders, but one for single member companies
  4. Shareholders vote in the GM
  5. A second BM is held so directors can implement the matter
  6. Post Meeting Matters are carried out by the company secretary (or director if not applicable), documents filed at CH (within 15 days of constitutional resolutions being passed), and internal records are updated

GDL Company (4 decks)

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