Company Law Flashcards
What is a sole trader?
An individual in business under their own legal identity. No formal requirements as to formation of the business. Unlimited personal liability.
What is a partnership?
Multiple people doing buiness together. No formal requirements for formation, but cannot have more than 20 partners. Unlimited personal liability for all partners. Each partner liable for the acts of the others.
Not a seperate legal entity, so all partners must may income tax and capital gains tax on their share of the profits.
What is a limited partnership?
A partnership with at least one general partner and at least one limited partner.
A general partner manages the business and has unlimited personal liability.
A limited partner does not manage the business and is only liable for debts up to the amount of their contribution. They cannot remove their original contribution.
Must be formed with an application and fee at the Companies House.
What is a limited liability partnership?
Like a limited partnership except there are no general partners, and all limited partners can manage the business.
An LLP must be registered at Companies House. It must have a Memorandum and Articles of Association, like a limited company. It is a separate legal entity, but is still taxed like a partnership.
What are limited companies?
A limited company is separate legal entity. It has members (i.e., shareholders) who own the company and directors who manage it. The two are conceptually unrelated although someone may be both.
Members are only liable up to the value of their share.
Companies pay corporation tax and there is no tax-free allowance on profits.
Limited companies can be private or public. A private limited company can manage their own shares as they see fit. A public limited company (PLC) must put at least 25% of their shares on the stock exchance.
They are formed with a Memorandum of Association, Articles of Association, and form IN01.
What are the Memorandum of Association, Articles of Association, and form IN01?
The Memorandum states that the subscribers wish to form a company under the Companies Act, that they agree to become members, and that they each take at least one share each.
The Articles set out the internal regulations of the company and the powers of directions and shareholders.
The company’s name is submitted with form IN01, along with the names of the directors and company secretary, and other details.
A limited company must have all three of these whereas an LLP must have only the Momorandum and Articles (which I imagine will be paternship-specific versions).
What does it mean for a limited company or LLP to be a separate legal entity?
The company/LLP can own property, make contracts, sue and be sued and continue to exist even if the ownership changes.
What is “goodwill” in a company name?
The attractive force that bring in custom.
Summarise s69 of the Companies Act 2006.
Someone can object to a company’s registered name on the grounds that it is the same or too similar to a name in which he has goodwill.
The objection must be made in an application to the company names adjudicator.
The company does not have to change it’s name if it can show that one of the following applies:
1. their name was registered before the applicant’s activities;
2. the company is operating under the name or has incurred substantial startup costs in preparing to do so;
3. the name was registered in the normal course of a company formation business (i..e, the company is a shelf company), and the applicant can buy the company if he wants;
4. the name was adopted in good faith; or
5. the interests of the applicant are not seriously effected.
Even if one of these is shown, the objection shall be upheld if the applicant shows that the name was registered either to stop him registering the name himself or to get some money or other consideration out of him.
What are fixed and floating charges?
Both are security for loans (called “debentures” in a company context).
A fixed charge is secured on particular items of property. The item cannot be sold without the lender’s consent,
A floating charge is on all the company’s assets or on a class of assets (i.e., their IP portfolio). The company can manage the assets as they wish but the charge crystallises upon default of the debt and is fixed to the assets as they are at that time.
