FINAL Flashcards
Who can enter into a partnership
any legally capable person
can companies enter partnerships
yes
do any restrictions apply if the partnership name consists only of the partners surnames
no
where the CA applies, is it true that certain words or phrases forming part of the business name will require prior approval
yes
where must details about the partners appear
at the main place of business and on partnership stationery
any partnership that uses a business name must also comply with prescribed disclosure requirements under CA - true or false
true
who’s consent is needed to add a new partners
all the parties
who are the parties in a partnership
the partners
partnership commencement date - when does a partnership begin to exist
when the criteria in s1 PA are met
partnership - why is the nature of the business important
its important to the q of a partner’s authority and extent to which a partner may bind the partnership
unanimity is required by the partners in order to change the nature of the business - true or false
true
is it usual to specify the places at which the business will be carried on
yes
partnership duration
may run for specific venture or fixed term
a fixed term partnership that continues after expiry will be presumed to continue on terms that are consistent with a partnership at will otherwise…
it will be dissolved
what’s a partnership at will
a partnership where no specific duration or fixed term is set - most common type of partnership
for a partnership at will - who may determine (bring an end to) the partnership and when
any partner at any time
for a partnership at will, does the partner need to give notice before bringing the partnership to an end
yes
to bring a partnership at will to an end, is there a requirement for the notice to be written - if so in what circumstances
yes only if the partnership agreement was made by deed - s26(1) PA
provided a notice has been given, when will the partnership be dissolved
from the date specified in the notice
what if there’s no date in the notice for bringing a partnership to an end - when will it end
on the date of communication of the notice - s32 PA - technical dissolution
if there’s no date on the notice for which the partnership is going to end, is there potential for the dissolution to be immediate
yes because it will be the date of communication of the notice
is it usual to provide in the agreement that the partnership will continue despite the retirement, death, expulsion or bankruptcy of a partner
yes
partnerships agreements and PA - capital
is it important to specify what each partner is contributing to the business and how capital profits/losses will be shared between partners
yes
partnerships agreements and PA - capital
in the absence of express or implied agreement of how each partner is contributing to the business and how capital profit/losses will be shared between partners - what does the PA provide
capital profits and losses will be shared equally - s24(1)
although it may be implied that unequal contributions of capital result in the right to make unequal withdrawals of capital - formal written partnership agreement should make this clear
partnerships agreements and PA - capital
is there a right to interest on capital under the PA
(may be important where large capital contributions have been made)
no - the agreement may provide for interest to be paid on partners capital contributions
provision should be made for how future capital contributions will be made
partnerships agreements and PA - income
the agreement should specify how the income profits/losses of the business will be shared between the partners - in the absence of this, what does the PA say
income profits and losses are shared equally s24(1) PA
partnerships agreements and PA - income
the agreement should deal with the payment of salaries from profits before the final profit shares are divided - does the PA provide for salaries to be paid to partners
no - s24(6) - could be important where not all partners work full time for business
partnerships agreements and PA - income
what are drawings
the amounts that partners withdraw on account of profits
well drafted agreement should deal with how and when drawings are made and provide for repayment (with interest) if too much is taken
partnerships agreements and PA - partnership property
why is important for the assets belonging to the firm to be specified
so that they’re clearly distinguishable from the assets that belong to individual partners
eg a property may remain owned by a partner buy used for purposes pf business - failure to deal with this property can lead to disputes on dissolution and taxation problems
partnerships agreements and PA - management
who is entitled to take part in the management of the business
all partners - s24(5)
partnerships agreements and PA - management
all matters connected with the partnerships business may be decided by a minority or majority of partners?
majority of partners - s24(8) PA
except for changing nature of business - unanimity required
partnerships agreements and PA - management
note
- thought should be given to whether unanimity should be required for other decisions and whether majority decision should always be applicable (eg partners may wish for certain issues to be decided only by senior partners)
- authority of partners to bind partners is significant
- absences should be catered for (leave and illness)
partnerships agreements and PA - retirement
what is meant by retirement
leaving the partnership
partnerships agreements and PA - retirement
does the PA provide for the possibility of a partner leaving a partnership without the partnership being dissolved
no
partnerships agreements and PA - retirement
since the PA causes the partnership to dissolve if someone leaves - what should a partnership agreement include
should include a mechanism, for a partner to leave, following appropriate notice, and get what’s owing to them without dissolving the firm
partnerships agreements and PA - death and bankruptcy
unless there’s an agreement made by partners - what happens to the partnership after death/bankruptcy of any partner
partnership will be dissolved by death or bankruptcy of any partner - s33(1) PA
provision should be made in agreement for continuation of firm by surviving/solvent partners and for payment of deceases/bankrupt partners share
partnerships agreements and PA - expulsion
does the PA provide for a majority to expel any partner
no, under the PA, no majority may expel any partner s25PA - they must have consent of the one to be expelled - can either carry on in business or dissolve partnership
express power to expel a problem partner should be included in agreement, specifying grounds for expulsion and providing for payment of expelled partners share in partnership & there should be provision that partnership should continue as regard the remaining partners
partnerships agreements and PA - payment for outgoing partners share
specific provision should be made for…
- remaining partners to have option to purchase outgoing partners share
- valuation of outgoing partners share (eg preparation of partnership accounts, agreement on value, independent determination if agreement can’t be reached)
- payment of outgoing partners share (eg payment by instalments or in lump sum)
- dissolution if option to purchase isn’t exercised
partnerships agreements and PA - payment for outgoing partners share
on a full dissolution, the winding up will take place in accordance with..
provisions of the partnership agreement or s44 PA
partnerships agreements and PA - payment for outgoing partners share
under s44 of the PA, the proceeds of the sale are used to…
- repay third party creditors
- repay partner creditors
- repay partners capital entitlements
any balance is then divided between partners in accordance with their profit sharing ratios
partnerships agreements and PA - payment for outgoing partners share
partnership losses are met from…
- income profits
- capital
- contributions made by partners in same proportion as their profit sharing ratio
partnerships agreements and PA - restrictive covenants
consideration should be given as to whether there should be a restriction on ex partners competing with the partnership business, approaching employees or former clients or dealing with former clients - does the PA provide provision for such covenants
no - special provision must be made in the partnership agreement
goodwill of the business is a valuable and legitimate interest to protect - clause must be reasonable in scope (in terms of duration and area) - the more limited the clause, the more likely it will be upheld
partnerships agreements and PA - administrative provisions
the partnership agreement would need to contain sufficient administrative provisions to make it workable - eg definitions and interpretations, services of notices, costs and arbitration in event of disputes
partnerships - partners duties to each other
partners owe each other a duty of good faith and PA provides for three fiduciary duties - what are they
- duty to provide true accounts and full information on partnerships matters s28
- duty to account for profits derived from position as partner s29
- duty to account for profits from a competing business s30
other
- right to inspect partnership books s24(9)
- payment of 5% interest on loans made by partners s24(3)
partnerships - liability to third parties
s5 of the PA provides the starting point for determining whether a partnership is liable - based on law of agency - what does s5 provide
each partner is an agent of their fellow partners and a partner acting within their actual authority or apparent/ostensible authority will bind the partnership as a whole
partnerships - liability to third parties
actual authority meaning
partner is actually authorised to bind the partnership in the circumstances whether under any partnership agreement or through authority given outside of one (generally or through course of conduct)
partnerships - liability to third parties
apparent/ostensible authority meaning
it would appear to third party that transaction is authorised by partnership in the circumstances
partnerships - liability to third parties
what four qs does apparent authority ask
- is the transaction related to the partnerships business
- would a partner usually be expected to have authority to enter into the transaction
- does the third party know that the partner has no actual authority
- does the third party know that the partner concerned isn’t a partner of the firm or do they have suspicions that this is the case
partnerships - liability to third parties
if a partner has entered into a transaction with either actual or apparent authority - will the partnership be bound by that act
yes
partnerships - liability to third parties
if a partner has entered into a transaction with neither actual nor apparent authority - will the partnership be bound by that act
no, only the partner concerned will be fully liable
partnerships - liability to third parties
if a partner has entered into a transaction with only apparent authority, will he be liable to his fellow partners for breach of warranty of authority
yes - partnership will still be bound and third party contract won’t be affected, but individual partner will be liable personally to account to fellow partners for any loss to the partnership as a result of acting outside the scope of what he was actually authorised to do
partnerships - liability to third parties
partners are jointly and severally liable for the debts and obligations of the partnership without any limit - where a partnership is unable to pay its debts out of partnership assets, where will payment come from
a creditor is entitled to obtain payment from private assets of partners
partnerships - liability to third parties - change of partners
which debts is a partner liable for
the debts incurred while they’re a partner s9 PA
partnerships - liability to third parties - change of partners
is a new partner liable for debts incurred by the partnership before they were a partner
no s17(1) PA
partnerships - liability to third parties - change of partners
is a retiring partner released from debts incurred by the partnership while they were a partner
no s17(2) PA
partnerships - liability to third parties - change of partners
how may a retiring partner seek to protect themselves from liability for existing debts
through deed of release, novatopn agreement or indemnity
partnerships - liability to third parties - change of partners
deed of release
a release of the outgoing partner from any outstanding debt/liability - release of outgoing partner
partnerships - liability to third parties - change of partners
novation agreement from willing directors
a tripartite agreement between creditor, partnership as constituted before retirement and partnership as constituted following retirement - consideration or deed will be required for it to be valid/binding
newly constituted partnership stands in shoes of old one as regards the debt/liability
partnerships - liability to third parties - change of partners
indemnity from continuing partners
a bipartite arrangement between outgoing partner and continuing partners
not binding on third parties - outgoing partner still liable but will be able to seek indemnity from continuing partners
partnerships - liability to third parties - change of partners
is it true that a retired partner may be liable for debts incurred after their retirement (future debts) if they fail to comply with s36 and s14 of PA
yes true
partnerships - liability to third parties - change of partners
what’s s36 of the PA - a retiring partner must give notice to…
a retiring partner must give notice to third parties of their leaving of the partnership - because people who deal or have dealt with firm are entitled to assume there’s been no change in composition of partnership unless they have notice
partnerships - liability to third parties - change of partners
what are the two types of notice under s36
actual - 36(1) - notice to existing/former clients/customers by informing them directly (sending out standard letters)
constructive - 36(2) - notice to potential/future clients/customers by placing ad in London gazette (for partnerships in England and Wales)
partnerships - liability to third parties - change of partners
a retiring partner must avoid being held out as a partner under s14 PA - what does holding out involve
- doing something or allowing something to be done or represented that suggests one is a partner
- which is relied on by someone
- who gives credit to firm as a result
partnerships - liability to third parties - change of partners
steps for ascertaining liability for debts
- is the partnership liable (actual or apparent/ostensible authority)
- which partners are liable s9 and s17 PA
- liability for existing debts: release/novation/indemnity
- liability for future debts s36 and s14 pA
Limited Companies - company formation & constitution
what are the two ways to provide a business client with a company
- incorporating a new company (tailor made)
- acquiring a company that has already been incorporated but not traded
Limited Companies - company formation & constitution
what’s a shelf company
a company that’s already set up, often by solo or a company formation agent
- already live and has directors and shareholders (usually employees of solicitors/agent) that will need to be changed
- efficient way of providing a company to a client where time is of essence
Limited Companies - company formation & constitution
for a new company to be registered, what must be sent to CH
- application to register a company (form IN01)
- memorandum of association
- articles of association (in some circumstances)
- requisite fee
Limited Companies - company formation & constitution
does the application for a new company to be registered at CH need to be made via post or online
may be made by post or online and a same day incorporation service (with increased fee) is available
company formation agents may also incorporate companies using specialist software
Limited Companies - company formation & constitution
what details does form IN01 require
- company details
- proposed officers
- statement of capital and initial shareholdings
- statement of guarantee
- people with significant control
- election to keep info on public register
- consent to act
- statement about individual PSC particulars
- statement of compliance
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
what must the name for public and private limited companies end in
private - limited or ltd
public - public limited company or plc
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
which type of company names can’t be chosen
- same name as existing registered companies
- something that’s offensive or constitutes criminal offence in opinion of secretary of state
- includes words suggesting connection with gov or LA or particular sensitive words (unless previously approved)
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
if a name is chosen which is the same or similar to that of any existing business and the business is likely to be affected by the similarity, the company may be subject to a passing off action in tort - what is this an action against
this is an action against someone who’s misrepresenting themselves as being the same as/connected to another business
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
what resolution is required to change the company name and what docs must be filed at CH
special resolution
- form NM01
- copy of special resolution
- required fee
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
if a company has a separate trading name, does this need to be disclosed to CH
no - can be decided by directors (board resolution)
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
1) company type
2) principal business activity
3) situation of registered office and address
1) public or private, limited by shares or guarantee
2) CH provides list of code numbers to select from to define principal business activities
3) registered office is official correspondence address for comp and where key docs must usually be kept (eg mins and stat books)
form IN01 while state whether reg office is in England and wales, Wales, Scotland, Northern Ireland
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
once incorporated, if a comp wants to change their reg office, what form must be sent to CH and what resolution is required
- board resolution
- AD01
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
what are articles of association
the company’s internal rulebook dealing with directors, shareholders, meetings and key admin requirements
its a contract between shareholder and comp and shareholder and other shareholders
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
the CA provides for standard sets of articles known as model articles, what are they and is it compulsory to use them
standard sets of articles for diff types of company
not compulsory to use - can be used entirely, with specific amendments or a specifically drafted set of articles
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
if a company doesn’t want to adopt the MA in their entirety, what should they do
send a copy of their articles with the application
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
if a company comes up with their own articles - can the MA still apply
yes if they’re not specifically excluded or amended by the registered articles
popular amendments include deleting MA13 and MA14 and supplementing standard provisions on transfer and issue of shares
table a = basis for articles
Limited Companies - company formation & constitution - FORM IN01 PART 1 COMPANY DETAILS
which type of resolution is required to change model articles and what must be filed at CH
special resolution
- copy of special resolution and amended articles within 15 days
Limited Companies - company formation & constitution - FORM IN01 PART 2 PROPOSED OFFICERS
is it a requirement of the CA for a private limited company to have a company secretary
no but if there is one their name and address for service must be given
Limited Companies - company formation & constitution - FORM IN01 PART 2 PROPOSED OFFICERS
how many directors must a private company
at least one (public requires two)
must be at least 16, corporate directors are permitted but at least one director must be a natural person
Limited Companies - company formation & constitution - FORM IN01 PART 2 PROPOSED OFFICERS
is there a limit on the number of directors
no unless the articles provide for this
Limited Companies - company formation & constitution - FORM IN01 PART 2 PROPOSED OFFICERS
is it possible for the director to hold the position of comp secretary
yes
Limited Companies - company formation & constitution - FORM IN01 PART 2 PROPOSED OFFICERS
are any qualifications required to act as director for private limited company
no
Limited Companies - company formation & constitution - FORM IN01 PART 3 STATEMENT OF INITIAL CAPITAL AND INITIAL SHAREHOLDINGS
the statement of capital and initial shareholding show …
- initial share capital: number of shares of each type and their nominal value
- rights attaching to the diff types/classes of share: eg voting and dividends
- initial shareholdings: names and addresses of shareholders, details of their individual shareholdings and any amount unpaid on their shares
Limited Companies - company formation & constitution - FORM IN01 PART 3 STATEMENT OF INITIAL CAPITAL AND INITIAL SHAREHOLDINGS
what the min number of shareholders required
one
Limited Companies - company formation & constitution - FORM IN01 PART 4 STATEMENT OF GUARANTEE
what types of companies is this required for
companies limited by guarantee
Limited Companies - company formation & constitution - FORM IN01 PART 5 PEOPLE WITH SIG CONTROL
people with significant control must meet one of the following conditions
- hold more than 25% shares
- have more than 25% voting rights
- have right to appoint or remove majority of board
Limited Companies - company formation & constitution - FORM IN01 PART 3 STATEMENT OF INITIAL CAPITAL AND INITIAL SHAREHOLDINGS
what is the form to be sent to CH to appoint a new individual PSC
PSC01
Limited Companies - company formation & constitution - FORM IN01 PART 6 ELECTION TO KEEP INFO ON PUBLIC REGISTER
rather than maintaining stat books, subs can agree to keep info that would be on them solely on central registers held by CH - what registers do the stat books include that must usually be maintained by the company
- register of secretaries
- register for directors
register of directors residential addresses - register of members
- PSC register
Limited Companies - company formation & constitution - FORM IN01 PART 7 CONSENT TO ACT
what must subs make a statement for
they must make a statement that the proposed officers (directors and comp secretaries) have consented to act in the relevant role
Limited Companies - company formation & constitution - FORM IN01 PART 8 STATEMENT ABOUT INDIVIDUAL PSC PARTICULARS
what must the subs make a statement about
must make a statement that the PSCs know their details have been provided as part of application
Limited Companies - company formation & constitution - FORM IN01 PART 9 STATEMENT OF COMPLIANCE
what does this confirm
confirms that the requirements of the CA as to registration have been complied with
Limited Companies - company formation & constitution
what is the memo of association
a statement of intention of the subs to form a company and become shareholders taking at least one share each
Limited Companies - company formation & constitution
what does the certificate of incorporation include
- company name, number and date of incorporation
Limited Companies - company formation & constitution
can a comp enter contracts if the certificate of incorporation hasn’t been issued
no
Limited Companies - company formation & constitution
what details should comp stationary include
- name
- registered office
- number
Limited Companies - company formation & constitution
if a company doesn’t fix an accounting reference date (date unto which it must prepare its annual accounts) - when will it be
last day of the month of incorporation
- if they want to change this then form AA01 must be filed at CH
Limited Companies - company meetings and resolutions - board meetings
what is a board meeting
meetings of directors, who pass board resolutions to make decisions
Limited Companies - company meetings and resolutions - general meetings
what is a general meeting
meetings of members/shareholders, who pass ordinary resolutions and special resolutions to make decisions
Limited Companies - company meetings and resolutions - exercises of directors powers
what two ways might directors make decisions
generally directors make decisions at BMs by majority vote (MA7) or otherwise by unanimous decision of directors (MA8)
Limited Companies - company meetings and resolutions - exercises of directors powers
is it common to give directors the right to delegate any of their powers
yes - MA5
Limited Companies - company meetings and resolutions - exercises of directors powers
who may call a BM
any director may call BM at any time or require comp secretary to do so
Limited Companies - company meetings and resolutions - exercises of directors powers
how much notice must be given before holding BM
reasonable notice (not in writing unless articles provide)
Limited Companies - company meetings and resolutions - exercises of directors powers
who must be given notice of BM
all directors must be given notice, wherever they are
Limited Companies - company meetings and resolutions - exercises of directors powers
what must be included in the notice of a BM
- date
- time
- place
- means of communication
Limited Companies - company meetings and resolutions - exercises of directors powers
what are permitted means of communication
- telephone
- video calls
- text message
- instant messaging
Limited Companies - company meetings and resolutions - exercises of directors powers
can directors waive the right to notice re BM
yes
Limited Companies - company meetings and resolutions - exercises of directors powers
is an agenda a legal requirement for BM
No
Limited Companies - company meetings and resolutions - exercises of directors powers
implications of failure to give notice
new meeting can be demanded
Limited Companies - company meetings and resolutions - exercises of directors powers
what is the quorum (min number of people required to be present in order for valid decisions to be made)
two
Limited Companies - company meetings and resolutions - exercises of directors powers
voting in BM
show of hands or oral assent
chairpersons acting cote in event of deadlock
Limited Companies - company meetings and resolutions - exercises of directors powers
resolutions and majority - how much majority is requried
BRs - simple majority required (Deadlock if equality of votes and MA13 doesn’t apply)
Limited Companies - company meetings and resolutions - exercises of directors powers
what if the quorum isn’t sufficient
if the minimum number isn’t present, the meeting isn’t quorate and decisions can’t be made
Limited Companies - company meetings and resolutions - exercises of directors powers
conflicts of interest - what does MA14 prevent a director from doing
prevents a director from voting and counting towards the quorum on any decision they have a personal interest in
subject to limited exceptions (where a director subs for shares in the company)
MA14(3)(a) allows comp to suspend or relax the general applications of MA14 by OR
s177 and 182 CA require director declare a personal interest in a proposed or existing transaction or arrangement - this is subject to limited exceptions such as
where a directors service (Employment) contract is being considered
breach of s182 is criminal offence
the declaration of a conflict of interest under s177 and 182 is a separate and distinct requirement from the ability to vote and count towards the quorum under MA14 - true or false
true
Limited Companies - company meetings and resolutions - exercises of directors powers
how long do minutes of BMs need to be kept for
at least ten years - usually signed by chair of BM
Limited Companies - company meetings and resolutions - exercises of directors powers
MA8 provides a procedure for unanimous decision making may be used instead of holding BM - true or false
true
this enables directors to make decisions in writing or more informally, provided they all agree
Limited Companies - company meetings and resolutions - exercises of shareholders powers GMS
whats an AGM
Annual general meeting - private comp formed on or after 1 October 2006 doesn’t need to have AGM unless a specific article provides so
company formed before that date is required to unless articles have been amended
AGM can be useful if there are a number of shareholders who aren’t directors
Limited Companies - company meetings and resolutions - exercises of shareholders powers GMS
what’s and EGM
Any meeting of members other than AGM
Limited Companies - company meetings and resolutions - exercises of shareholders powers GMS
what’s an ordinary resolution
OR requires simple majority of shareholders attending and voting at GM
