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Corporate Law > Chapter 2 - Legal Structures Of Business Organisations > Flashcards

Chapter 2 - Legal Structures Of Business Organisations Flashcards

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1
Q

What are the two principal legal structures of unincorporated business entities?

A

Sole proprietorships

Partnerships

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2
Q

Is it possible for a sole trader to conduct his or her business through a registered company?

A

Yes

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3
Q

What is the definition of a partnership and where can it be found?

A

Partnership Act 1890: partnership is the relation which subsists between persons carrying on a business in common with a view of profit. (s1(1))

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4
Q

What happens automatically as a matter of law when a partner retires from a partnership?

A

The partnership is dissolved

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5
Q

What is a limited partnership?

A

Partneships with at least one partner and one or more limited partners.

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6
Q

What are the benefits and drawbacks of sole proprietorships?

A
  • no limited liability
  • no limit to tax liability
  • easy to set up
  • affairs are private
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7
Q

What are the benefits and drawbacks of a partnership?

A
  • no separate legal personality
  • no limited liability
  • partners are agents of one another
  • all partners are jointly liable
  • no need for public disclosure
  • change of partner causes dissolution
  • limited transferability
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8
Q

Which statute sets out limited partnerships?

A

Limited Partnerships Act 1907

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9
Q

How is a limited partnership created?

A

By registration with Companies House

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10
Q

What is the difference between a limited and unlimited company?

A

Members of an unlimited company are required to contribute sums to the company sufficient for payments of its debts and liabilities (IA s74). Limited company members are only liable for their unpaid share amounts.

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11
Q

In what circumstances are overseas companies required to register in the UK?

A

Within one month of opening a UK establishment (CA 2006 s1046).

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12
Q

What is a corporate group?

A

A corporate group exists where a parent company owns or controls subsidiary companies.

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13
Q

Is a parent company the same as a holding company?

A

No, a holding company must hold a majority of voting rights, or the right to appoint or remove a majority of directors (s1159).

A parent company merely has the right to exert dominant influence.

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14
Q

Is it necessary for all shares of a subsidiary to be held by its holding company?

A

No, only a majority of voting rights is required. (s. 1159)

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15
Q

What is the test for subsidiary company status?

A

s. 1159 CA:
- holds a majority of voting rights or
- is a member of an has the right to appoint or remove a majority of directors or
- is a member and controls alone a majority of voting rights

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16
Q

In what two ways may an unregistered company be created?

A

Royal Charter

Act of Parliament

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17
Q

What particulars must be delivered to the registrar on registering an overseas company in the UK?

A
  • Form OS IN01
  • registration fee
  • certified copy of the company’s constitutional documents
  • latest set of accounts
18
Q

Identify 12 key differences between public and private companies.

A
  • Ltd cannot offer shares to public (s755)
  • Ltd can have one director, plc needs two (s154)
  • plc must have £50,000 allotted share value, £12,500 paid up (s763)
  • plc needs a trading certificate prior to doing business (s761)
  • different model articles (s19)
  • Ltd need not hold AGMs, and only needs meetings to remove directors (s168)
  • Ltd need not have a Company Secretary (s270)
  • Ltd can pass written resolutions (s288-300)
  • Ltd can give financial assistance for the purchase of shares
  • Ltd can purchase and redeem shares out of capital (s710)
  • Ltd can reduce share capital without court approval by special resolution and solvency certificate (s 641-643)
  • Ltd can sometimes qualify for small company regime for accounts and report and exemption from audit (s 381 & 477).
19
Q

Which difference between public and private companies is most important?

A

Public companies may offer their shares to the public at large (s755 CA)

20
Q

What is a quoted company?

A

A registered company with shares traded on a UK or other EEA regulated market, or a well-known US market (s385).

21
Q

What does the term listed security mean, and where is it defined?

A

A company with any class of securities listed, although this is not defined in statute.

22
Q

Describe 5 key characteristics of a registered limited company.

A
  • separate legal personality
  • limited liability
  • transferability of shares
  • legal framework that pre-empts separation of ownership and control issues
  • asset shielding.
23
Q

What does the term asset shielding mean and why is it important to company shareholders and creditors?

A

Company assets are shielded from claims of personal creditors of members, protecting the assets of the company from member bankruptcy.

24
Q

What does the term asset shielding mean and why is it important to company shareholders and creditors?

A

Company assets are shielded from claims of personal creditors of members, protecting the assets of the company from member bankruptcy.

25
Q

What is the difference between a limited partnership and an LLP?

A

A LLP provides limited liability and is incorporated.

26
Q

What is meant by “tax-transparent”?

A

HMRC treats the profits of the LLP business as those of the individual partners for tax purposes.

27
Q

Name two key attractions of an LLP.

A
  • separate legal personality

- asset shielding

28
Q

In what circumstances is an LLP not available for use to run a business, but a company is?

A

Where ownership is regularly changing hands, as it can be difficult to arrange for transfer of ownership in an LLP.

29
Q

Why would an entrepreneur choose to structure a business as an LLP rather than as a registered private company?

A

Tax transparency coupled with asset shielding and limited liability make LLPs very attractive.

30
Q

What is an unincorporated association and in what circumstances does it usually exist?

A

Defined in Conservative & Unionist Central Office v Burrell as:
“two or more persons bound together for one or more common purposes, not being business purposes, by mutual undertakings, each having mutual duties and obligations, in an organisation which has rules which identify in whom control of it and its funds rests and upon what terms and which can be joined or left at will.”

31
Q

What type of registered company is typically used by charities?

A

Company limited by guarantee

32
Q

What are the three key additional regulatory requirements for a registered company to be a community interest company?

A
  • must be carried on for the benefit of the community
  • subject o an asset lock
  • must file community interest annual reports which are publicly available.
33
Q

Name 4 different types of organisations that fall into the category of a UK mutual organisation.

A
  • cooperative societies and community benefit societies
  • friendly societies
  • credit unions
  • building societies
34
Q

Can an unincorporated association enter into a contract?

A

No, as it is not a separate legal entity. It is the members that enter the contract.

35
Q

Under which law is a Charitable Incorporated Organisation available?

A

Charities Act 2011`

36
Q

What is a mutual organisation?

A

An organisation run for the benefit of its members, who are also its customers.

37
Q

How is a building society incorporated?

A

By registering and receiving a certificate of incorporation under the Building Societies Act 1986.

38
Q

What is an EEIG?

A

European Economic Interest Grouping, available to those carrying out business across member states, similar to a joint venture.

39
Q

Describe the Societas Privata Europaea.

A

A proposed company structure which would assist groups seeking to operate in more than one member state.

40
Q

What is the current status of proposals for the Societas Privata Europaea?

A

Proposals are on hold following rejection by the European Economic and Social Committee in 2014.

41
Q

How does an SCE differ from an SE?

A

Societas Cooperativa Europaea must be for satisfaction of its members needs, rather than for profit,

Corporate Law (19 decks)

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