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SQE1 (FLK1 + 2) > FLK1 BLP Types of Businesses > Flashcards

FLK1 BLP Types of Businesses Flashcards

1
Q

Difference between incorporated and unincorporated businesses?

A

Incorporated = SLP/SLE = owners NOT liable.

UNincorporated = No SLP/SLE = owners personally liable.

Unincorporated: “UNfortunately, you will have to personally pay the suppliers”.

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2
Q

What feature do Limited Partnerships have? (Unincorporated)

A

They have to have 1 general partner who has unlimited liability + 1 limited partner whose liability is limited to the amount they initially invested in the biz.

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3
Q

Who are the owners and who are the managers of a business?

A

Owners = shareholders
vs
Managers = directors.

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4
Q

What does it mean to ‘pierce the corporate veil’?

A

Looking behind the company + impose liability on individuals who run/own the company.

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5
Q

When does the LLP legally come into existence?

A

On the date of incorporation on the certificate that the Registrar issues, NOT when filed.

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6
Q

Which rules govern what default contract/agreement the Partnerships and LLP’s have to follow?

A

Partnerships: Partnership Act 1890.

LLP: LLP Regulations 2001.

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7
Q

What is the difference in liability for shareholders and partners?

A

Shareholders: Limited liability for the company’s debts.

Partners: Personally liable for partnership debts.

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8
Q

What are examples of an UNincorporated biz?

A

ST’s
Partnerships

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9
Q

What are examples of an incorporated biz?

A

Companies
LLP’s

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10
Q

What factors are used to consider what type of business medium is the best for the client?

A
  1. Finance
  2. Status
  3. Publicity of info
  4. Costs
  5. Formalities
  6. Tax
  7. Liability
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11
Q

What is a floating charge and is it available for incorporated or unincorporated companies?

A

A floating charge is a security for loans. It is a charge over all the biz assets.

Only available for incorporated biz.

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12
Q

How does an applicant incorporate a new company?

A

Complete CH form IN01
+
Memo of association
+
Company’s articles of association +
Pay applicable fee.

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13
Q

Who makes the application to companies’ house?

A

Either the individual themselves, or solicitor, accountant or company formation agents who are paid for their services.

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14
Q

Under s15 CA 2006, what should the certificate of incorporation state?

A
  1. Name + registered no. of company
  2. Date of incorporation
  3. Whether it is a limited or unlimited company. If limited, whether by shares or guarantee
  4. Whether it is a private or public company
  5. Whether company’s registered office is in E&W, Scotland or Northern Ireland.
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15
Q

As a company, what type of tax do they pay?

A

Companies must all be registered with HMRC for corporation tax.

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16
Q

Rules on application to HMRC for corporation tax based on the way the person made the application?

A

Filled out online? Automatically registered for corp tax.

Made by post or software? Applicant need to make separate app to HMRC within 3 months of starting to do biz.

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17
Q

True or false: even if a company does not look the same (like 2 not two or £ not pound), it still cannot be used if the name sounds the same?

A

True.

‘Easy Electrics For You Limited’ is the same as ‘EZ Electrix 4U Limited’.

18
Q

When can a new company use the same name as an existing one?

A

Same name allowed only if new company will be part of the same group as the company or LLP with existing name + applicant has written confirmation that the company or LLP has no objection to applicant using name.

Eg of two companies in the same group with ‘same as’ names is Web Services Limited and Web Services UK Limited.

19
Q

Which names are prohibited forming a company and which ones require permission?

A
  1. Can’t use company which Sec of State would constitute crim offence or be offensive (s53) like swear words or T groups
  2. Sec of state’s approval needed to reg company suggesting connection w/ govt dept (s54)
  3. Geographical locations like British - not misleading public to where company operates.
  4. Certain letters, characteristics, signs, symbols + punctuation cannot be used (under name regs 2015) +
  5. Name of company can’t exceed 160 characters, including spaces.
20
Q

What is a trading name?

A

A name different from the company’s registered name.

21
Q

What info about shareholders needs to go on IN01?

A

Name, addresses, details of each type of share.

22
Q

What does the company use the money given to them by shareholders for?

A

The shareholders will pay money to the company in return for shares and the company will use the money provided by shareholders to run the business.

The shareholders’ money will be used for rent, buy stock + pay employees.

23
Q

What forms a company’s constitution?

A

Memo of association + articles of association (articles) + incorp certificate + current statement of capital + court orders and legislation altering company’s constitution + shareholders’ resolution affecting constitution + certain agreement involving shareholders = company’s constitution (s17 + 29 CA 2006).

24
Q

Decision-making of directors vs shareholders?

A

Directors: Board meetings (Day to Day decisions).

Shareholders: General meetings (Significant decisions).

25
Q

What is a company’s memo of association?

A

Memo: statement that subscribers wish to form a company + agree to become a shareholder + take at least 1 share each.

26
Q

What is the difference between Table A articles and Modern Articles (MA)?

A

Table A: CA 1985 - companies before 1 Oct 2009 - 21 days’ notice for GM if special resolution is passed.

MA: CA 2006 - companies after 1 Oct 2009 - 14 clear days’ of any GM regardless of what type of resolution is passed.

27
Q

How can shareholders amend the articles?

A

By special resolution (s21(1) CA 2006).

28
Q

What is a shareholder’s special resolution?

A

A decision of shareholders which must be passed by majority of at least 75% of Shareholders (s283(1) CA 2006).

29
Q

What must the company file at CH to amend the articles?

A
  1. Copy of amended articles within 15 days of amended articles taking effect (a26(1) CA 2006) +
  2. Copy of SR (special resolution) to amend articles (s29 + 30 CA 2006) within 15 days.
30
Q

In summary, what are the 3 options for companies when submitting proposed articles?

A
  1. MA entirely - tick relevant box on IN01 OR
  2. MA with some amendments - submit copy, OR
  3. Supply entirely bespoke articles.
31
Q

Who are the people with significant control?

A

People who:
1. Holds more than 25% of the shares in the company OR

  1. Holds more than 25% of the voting rights in the company OR
  2. Holds the right to appoint or remove a majority of the board of D’s of company.
32
Q

Who can pass + block ordinary and special resolutions?

A
  1. 25% + but no more than 50% - can block special resolutions, but if exactly 50% they can block ordinary resolutions
  2. 50% + but no more than 75% - can pass + block ordinary resolutions on their own but can’t pass special resolutions
  3. 70% + - can pass special resolutions alone.
33
Q

What does a public company need before it can start trading?

A

Before commencing trade, it must obtain a trading certificate as proof it can trade + borrow + met allotted share capital requirements in s761 CA.

Application for trading certificate: SH50.

34
Q

If a private company wants to become public, what type of resolution do they need to pass?

A

Special resolution (s90(1)(a) CA 2006).

35
Q

What is a shelf-company?

A

A company that is already set up, w/ 2 directors + 2 shareholders, each owning 1 ordinary £1 share

→ formed

→ left ‘on the shelf’ at law firms until a client needs a company quickly.

36
Q

True or false? Directors and subscribers of the SHELF company will be employees of the firm?

A

True.

37
Q

How the employees transfer the shelf company to the client?

A

Employees then resign then sign a stock transfer form to transfer their shares to the client + vote on new directors.

38
Q

Changing the name of a shelf company. What do they file at CH?

A

Form NM01 + copy of the special resolution + applicable fee.

39
Q

When is a company’s accounting reference date?

A

Date up to which it must prep its annual accounts = last day of the month in which the company was incorporated (s391(4) CA 2006).

40
Q

How a company can change its accounting reference date?

A

To do this, company needs to pass a board resolution - either extend or shorten.
→ complete form AA01.

41
Q

Which companies are exempt from filing audited accounts?

A

Smaller companies which satisfy certain conditions in s382 CA 2006.

42
Q

If a company were incorporated before the Companies Act 2006 came into force, is it still governed by the 2006 Act?

A

Yes, it is. The previous companies acts no longer apply, it doesn’t matter when thecompany was incorporated.

SQE1 (FLK1 + 2) (12 decks)

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