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Sqe1 Prep Flashcards > Contract Law > Flashcards

Contract Law Flashcards

1
Q

What is the main distinction between a incorporated business and unincorporated business?

A
  • incorporated business exists as a separate entity from its owners and managers (example limited company)
  • unincorporated business are run by individuals who have not set up a separate business (example sole trader)
  • key distinction being unincorporated business means full personal liability
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2
Q

What are the types of unincorporated businesses?

A
  • sole traders (owned by one person has full personal liability )
  • partnerships (owned by two or more people owners share liability)
  • limited partnerships (owned by two or more owners each partner with limited personal liability)
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3
Q

When is a partnership created?

A

-When two or more people carry on a business together with the view of making profit (this is definition of partnership provided under PA 1980)

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4
Q

What is the requirement for a limited partnerships?

A
  • there must be at least two partners
  • one partner must have unlimited liability
    -while one partner can have limited liability based on their initial investment
  • (limited liability act 1907 governs the operation of such business models)
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5
Q

What conditions must a partner of a limited partnership with limited liability adhere to?

A
  • must not control or manage the lp
    -must not have the power to take binding decisions on behalf of the business
  • must not remove the contribution from the Lp for as long as they are partner

(If breached partner will lose protection and have unlimited liability)

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6
Q

How is a company formed?

A
  • company is formed by registering relevant documents with the registrar of companies in line with the companies act 2006

(Sole traders and partnerships and begin. To trade straight away)

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7
Q

What are the benefits of a private company limited by shares?

A
  • a company has a separate legal personality Salomon v A Salomon 1897
  • if sued the defendant will be the company and not its owners
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8
Q

Main Difference between a public company limited by shares and private company limited by shares?

A
  • Ability to Sell Shares
    • Public Company: Can offer shares to the public on a stock exchange.
    • Private Company: Cannot offer shares to the public; shares are privately held.
  • Minimum Share Capital
    • Public Company: Often required to have a minimum share capital (e.g., £50,000 in the UK).• Private Company: No minimum share capital requirement.
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9
Q

What are the requirements for a company to registered as a public company limited by shares PLC?

A
  • must comply with requirements set out under CA 2006
  • company constitution must state it is a plc
  • the words public or the abbreviation PLC must be included at the the company name
  • the allotted share capital must be at least £50,000
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10
Q

What are the features of a limited liability partnership and how it is formed?

A
  • two more individuals carrying on business in common with a view of making profit
  • must file a series of documents at the companies house paying the fee
  • key feature: partners benefit from limited liability like a company
  • PA 1980 provides default contract
  • partners must be registered as self employed
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11
Q

What is the date of incorporation?

A

The date of incorporation is the official date a company is legally registered and begins its existence as a separate legal entity.

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12
Q

What information must be made public for unincorporated businesses?

A
  • sole traders and partnerships must disclose the identity if the sole trader and all partners
  • an address for service documents must be available
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13
Q

What information must be made public for incorporated businesses?

A
  • Company Name and Registration Number
  • Registered Office Address -Names of Directors and Company Secretary
  • Financial Statements and Annual Reports
  • Shareholder Information and Share Capital
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14
Q

What is a floating charge and which business model can access it?

A

A floating charge is a security over changing assets, like inventory, which incorporated businesses and LLPs can use to secure loans. If the business fails, it becomes a fixed charge on those assets.

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15
Q

How to incorporate a new company?

A

Prepare Key Documents:
- Memorandum of Association: Confirms the company’s formation.

  • Articles of Association: Sets out the rules for running the company.
  • Complete Form IN01 – Include details of the company name, registered office, directors, shareholders, and share structure.
  • Register with the Relevant Authority – Submit the documents and Form IN01 to the Companies House in the UK and pay the registration fee.
  • Receive Certificate of
    Incorporation – Once approved, you’ll receive a certificate confirming the company’s legal status.
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16
Q

How can a company amend its
Companies articles?

A
  • shareholders can ammend companies articles by way of special resolution
  • special resolution is only passed with a majority of 75% of the shareholders agreeing
17
Q

What decisions do only shareholders make in a company?

A
  • changing company name
  • Amending the company’s articles of association
    (These are special resolutions) (ss 21 and 77 of CA 2006)
18
Q

What are other types of decisions shareholders make?

A
  • give permission for directors to enter into certain types of contracts
19
Q

What is a board meeting and what is the requirement for it to be valid?

A
  • board meetings are decisions taken in meetings with directors
  • rule (MA 9) states when a director holds a board meeting all directors must be notified providing reasonable notice
  • rule MA 11 a quorum of two directors must be present at all times during board meetings
  • MA 17: a director may not count in the quorum if they have personal interest in the business matter and must also state if they do not
20
Q

By what voting majority for a board resolution to be passed?

A
  • Rule MA 7 states boarding meetings must be past by simple majority so over half directors voting in favour
21
Q

Aside from a board meeting what other way can directors make decisions?

A
  • written resolutions
22
Q

What resolutions are reserved only for shareholders?

A
  • Special resolutions (needs 75% voting majority to pass)
  • ordinary resolutions (over half the votes cast must be in favour)
23
Q

Why are general meetings held?

A
  • they are called by directors in board meetings when they need shareholders to pass a shareholder resolution
24
Q

What is the required notice for general meetings?

A

14 clear days (clear meaning the day notice is given and the day of the meeting do not count)

25
Q

What are poll votes in general meetings held by shareholders?

A

A voting method where each shareholder’s vote is weighted based on the number of shares they hold.

26
Q

How long do shareholders have to respond to written resolutions?

A

Shareholders typically have 28 days to respond to written resolutions, unless a different time frame is specified in the company’s articles of association. (S297 CA 2006)

27
Q

What resolutions must companies house be notified of?

A
  • Special Resolutions: Such as changes to the company’s name, amendments to articles of association, or reduction of share capital.
  • Certain Ordinary Resolutions: Including decisions on director authority to allot shares or approve significant transactions.

-Written Resolutions (for private companies): When they pass a resolution without holding a general meeting.

28
Q

Are private companies required to have a company secretary?

A
  • no only public companies
29
Q

What is the PSC register?

A
  • a register recording any person with significant control any shareholder with more than 25% of shares
  • (this needs to be recorded by all private. Companies or non public traded companies (meaning they don’t publicly advertise shares) must keep a register or this and complete on form IN01
30
Q

What rights do shareholders have?

A
  • Voting Rights: To vote on major company decisions, such as electing directors or approving mergers.
  • Dividend Rights: To receive a share of profits if dividends are declared.
  • Inspection Rights: To access certain company records and financial information.
  • Rights to Attend and Call General Meetings: To be informed about company matters, participate in discussions, and request meetings if specific conditions are met.
  • Rights on Winding Up: To receive a share of remaining assets if the company is dissolved.
31
Q

Requirement for general meeting at short notice to be held?

A
  • a majority number of shareholders
  • who between them own at least 90% of shares

-95% for public companies

32
Q

What is the minimum number of directors a company should have?

A
  • 1
  • public companies 2
33
Q

Minimum age of a director?

A
  • 16 national working age

Sqe1 Prep Flashcards (2 decks)

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