FLK1 Business Mediums Flashcards
what is the best explanation for the concept of limited liability?
the shareholders of a validly incorporated company will be liable for the debts of the business up to the amount that they have agreed to invest in the company.
what types of businesses have a separate legal personality? incorporated or UNincorporated?
incorporated.
what does SLP mean for an incorporated company? who’s liable?
the company/business is responsible for its own debts. if it fails, members lose how much they invested no more.
so the company itself is liable.
what is a consequence of separate legal personality?
limited liability.
who can benefit from limited liability? shareholders or directors?
shareholders, not directors.
what are directors protected from in an incorporated company with SLP?
liability. eg breach of contract, including non-payments of debts.
this relates to SLP. Limited liability is different.
is it shareholders or partners who are jointly or severally liable for the debts of the company?
partners in a general partnership, not the shareholders.
under s17 CA 2006, what does a company’s constitution comprise of?
company’s articles
memo of association + resolutions and agreements specified in s29
shareholder special resolutions and agreements
court orders and legislation affecting company’s constitution.
how do you know if a law firm is an UNincorporated business entity? so a partnership or sole trader.
if they don’t have “LLP” or “plc” or “limited” at the end of their name.
if they do, then they’re legal entities.
which best describes the position in relation to the arts of association of private, public and listed companies?
a private limited company set up under the CA 2006 will automatically have the Model Articles for private companies limited by shares unamended if it does not submit its own articles.
can a private company choose whether to adopt the Model Articles for private limited companies, either unamended or with amendments, or to use bespoke articles?
yes, it it not obliged to use the model articles.
who could use Table A articles?
private + public companies set up before CA 2006 came into force.
if public and private companies don’t submit their own articles, default model articles apply and registration won’t be refused?
correct.
if there were 4 people in a partnership, and if 1 left the partnership, and then another one joined, and now they’re liable to a supplier, who pays the debts?
the 1 who left the partnership and the 4 people are liable as they were all partners at the time the contract was entered into with the supplier.
if someone joined the partnership after something happened, like a contract breach, are they liable?
no. people joining after something happened in the partnership are not liable.
what does s17(2) PA 1890 say about partners retiring and their liability?
partner who retires from a firm does not cease to be liable for partnership debts incurred before retirement. former partners can still be pursued for the debt by the supplier.
if the person who’s joining joins the partnership and they agree to accept any of the partnership’s pre-existing liabilities, then they will be liable?
yes, they will.
if a shareholder’s crimes come to light, what option is available to creditors?
in the case of fraud or sham, it is permissible to pierce the corporate veil. so another company hiding the dodgy assets will also be liable for the company’s debts.
what did the courts say in the case of Salomon v A Salomon say?
they said just because 1 person controls the company and benefits from it, doesn’t mean they can’t be treated like an independent person.
any incorporated company is treated with SLP.
what is one of the advantages of a general partnership (GP)?
it can be created informally + doesn’t have to be registered.
when is a GP formed?
as soon as at least 2 persons are carrying on a business in common with a view of profit (s1 PA 1890).
are any formalities required? does a GP need to be registered?
no, no formalities and does not need to be registered.
