From DA Flashcards

1
Q

What do you need to change a company’s name?

A

CA says special resolution. But, the company’s AoA will override.

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2
Q

To amend AoA, what is always needed?

A

A special resolution.

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3
Q

In general meetings can the chair vote to interrupt a deadlock?

A

No. Only the chair at a board meeting (for directors bascially can).

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4
Q

What should a fixed charge be allowed on when a company wants a loan?

A

Only on fixed things - e.g., machinery, not assets that the company needs to move around or deal with often, as they will need the bank’s permission every time they do.

A fixed charge gives the lender control over that asset. A floating charge allows the opposite: as stock will be moved around, this is acceptable to the borrower as they can use it for day to day stuff. Borrower maintains control and in some instances, this is how they can grow their company.

Usually: floating charge is placed on company stocks and this is acceptable as stocks can be moved around freely.

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5
Q

What to do if a general meeting needs to be held at short notice? What percent of consent is needed?

A

According to the unamended Model Articles, for a company to issue short notice for a general meeting, it must obtain the consent of a majority of shareholders who hold at least 90% of the total voting rights of the company.

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6
Q

Can companies make amendments to their AoA to do the following:
+Change the procedure of removing an auditor or director

A

No. Both must only be removed by ordinary resolution.

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7
Q

Can companies remove the Bushell v Faith clause where the director has two votes for every share rather than one as usual where they are a shareholder-director and the company wants them removed?

A

Yes.

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8
Q

Do all shareholders need to be present at a general meeting in order to pass a resolution?

A

NO.
For example, for an ordinary resolution, you only need more than 50% of votes in favour of X of the shareholders present at the meeting.

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9
Q

When a shareholder cannot attend a general meeting themselves, can they send a proxy? Yes. But can they send another shareholder as a proxy for them as well?

A

Also yes.

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10
Q

When a director is receiving gifts from a client, this is a breach of their duty to not receive gifts etc… what can be done?

A

His breach can be ratified.

The shareholders of the company need to ratify this breach by ORDINARY RESOLUTION. This is what the MA dictates.

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11
Q

If something requires a Substancial Property Transaction what does this mean?

A

Purchase is above £100,000 or is above £5,000 and more than 10% of the company’s value.

Also, property = non-cash asset.

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12
Q

If something requires a Substancial Property Transaction where director will have person interest, what must be done to allow it to happen?

A

Ordinary resolution

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13
Q

What must be done for a purchase of a director’s stock in another company that is not a Substancial Property Transaction ?

A

Board resolution or written resolution is good enough + s177 (personal interest) declaration to be made.

Also, by unanimous consent.

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14
Q

What is a s 303 notice?

A

After a section 303 notice is sent to the board, if the directors do not call a general meeting within 21 days, the shareholders who sent the notice or those representing more than half the voting rights of all of them, can call one.

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15
Q

What does the PA say about partnerships and it coming to an end?

A

Under PA 1890, any partner can dissolve a partnership at will by serving notice on the other parties. THIS CAN BE CHANGED BY USING EXPRESS PROVISIONS: Express provisions setting out how the partnership should come to an end .

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16
Q

In a partnership, what happens when one partner enters into a contract (such as purchasing machinery) for the partnerhip without the other partners’ involvement or approval?

A

Under the Partnership Act 1890, when a partner enters into a contract within the scope of the partnership’s business, all partners are jointly and severally liable for the obligations incurred, even if some partners were unaware or did not consent to the specific transaction (you can have implied authority and bind the firm under s5).

It can also be bound when a partner acts with “apparent” authority, meaning the contract is one which the partner would be reasonably expected to enter into and the counterparty didn’t know the partner was acting without authority.

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17
Q

What should an unsecured creditor do if they have not received the money due to them by a company and the company is flopping?

A

Serve a statutory demand, wait three weeks then lodge a wind-up petition at court to have the company liquidated.

An unsecured creditor with a debt exceeding £750 can serve a statutory demand on the debtor.

They need to act quickly as it looks like the company is selling its assets and trying to wrap itself up. A liquidator will be able to claw back any assets that are disposed of incorrectly and take action against the directors if necessary. Why not an administrator? An administrator has similar powers to a liquidator, but the role of administrator is slightly different, in that they have their “cascading duties” to first try and rescue the company if possible. This is inappropriate here, and the court process to appoint an administrator is lengthier than a wind-up petition.

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18
Q

If all the directors are in different countries and a board resolution is needed to make a decision, such as about a loan, what can be done?

A

Under the Model Articles, the unanimous written resolution procedure can be used by the board rather than holding a board meeting.

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19
Q

What are s 169 rights?

A
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20
Q

How could a shareholder get more protection?

A

The Companies Act 2006 does give some protections to shareholders, such as information rights, but these are limited. A minority shareholder should try and negotiate rights under a shareholders’ agreement and further rights (such as weighted voting rights) under the articles of association.

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21
Q

What take priority between fixed and floating charges?

A

Fixed takes priority - no matter when they were created

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22
Q

Within when fixed charges have been created and registered (which are 2 separate dates), which one takes priority?

A

Between fixed charges, the rule is that fixed charges take priority according to the date of creation. NOT date of registration.

23
Q

When a company goes into liquidation, where does the money go first as things are being sold?

A

1.Fixed charge holders
2.Preference creditors - HMRC and employees
3.Prescribed part
4.Floating charge holders
5.Unsecured creditors
6.Shareholders

24
Q

When can creditors come after the shareholders at insolvency?

A

When the shareholders have given a personal guarantee to cover the loan if the company can’t repay it.

25
Q

Which shareholders can demand a poll vote?

A

The ones that own more than 10%

26
Q

Realise there is distinction between 8/10 shareholders voting (for ordinary and specil) and their percentage of shares on voting on poll votes…

A

This explains why poll votes can be advantageous

27
Q

At what share percentage can a shareholder call a general meeting?

A

5%

28
Q

What does an unfair prejudice claim allow shareholders to do?

A

It allows minority shareholders to protect their individual shareholder rights against potential abuse by the majority.

29
Q

What should a minority shareholder above 5% share ownership do when they are being treated unfairly by the other major shareholders?

A

Request a GM.
Or circulating a written statement and circulating a written resolution.
Offering to sell their shares.
Finally, if none of these work, submitting an unfair prejudice claim to court.

30
Q

What is the minimum number of shareholders needed in a general meeting for it to be valid?

A

2 - this means it is quorate.

But, if the company only has one shareholder, one if enough.

Using a director as a chairperson at a GM with only one shareholder when there should be 2, does nothing - the general meeting is not valid.

Companies can increase the number of shareholders needed for a resolution at the GM through the AoA amendments.

31
Q

According to the unamended MA, can a chair do a casting vote at a general meeting when there is a deadlock?

A

No.

32
Q

According to the unamended MA, can a chair do a casting vote at a boarding meeting when there is a deadlock?

A

Yes.

33
Q

What happens when there is a deadlock at a board meeting?

A
  • If there is a chair, they can cast a vote to interrupt the deadlock, according to MA
  • The meeting can be adjourned and then reconvened
  • Shareholders can be consulted and an OR can be passed to help direct the directors.
34
Q

If a company wants to allot new shares, and this company has more than 1 type of share currently (aka they have ordinary and preference shares) what is the procedure that must be followed? As according to the unamended MAs

A

When a company has 2 types of shares, an ordinary resolution is needed to allot new shares.

35
Q

What must be done if a company wants to allot new shares but the existing shareholders have already stated that they do not want them and to sell them externally instead?

A

A special resolution is needed to disapply the pre-emption rights - according to the MA.

36
Q

What must the directors also be expected to do when new shares are being alloted?

A

To do a board resolution recording the resolutions with shareholders (if any) and resolving to allot the new shares.

37
Q

What is a novation agreement?

A
38
Q

For a directors wishing to validly execute a deed, how can it be done? Is only one director needed or all directors?

A

The following combinations will work:

  • a director + a witness
  • 2 directors
  • 1 director + 1 secretary
39
Q

When a company wants to buyback one of its shareholder’s shares AND the company has profits available for the purchase of these shares, what is the procedure?

A

An ordinary resolution passed by shareholders. And a board resolution to approve the contract.

This is pretty straightforward as the company has enough profits to buyback and they are not using the capital.

40
Q

When a company wants to buyback one of its shareholder’s shares AND the capital must be used, what is the procedure?

A

This is more long-winded.

Here you need to worry about creating statement of solvency and auditors’ report, as the buyback is being made out of capital, and so is breaching the doctrine of maintenance of capital.

41
Q

When a director uses info they have gained to set up another company, or help set it up, what is this a breach of?

A

a s175 duty not to profit from a conflict of interest. The director has used their position to profit as they have used company information received as a director to help set a business up that profits from such information. A breach of s175 means the director must account for any profits.

If director profits from it personally, directly or indirectly.

42
Q

Can a s175 duty to avoid conflicts of interests being breached be ratified?

A

Yes.

43
Q

Does the MA allow for a company to have only one director?

A

the Model Articles allow a company to operate with just one director.

44
Q

What benefit does a floating charge offer?

A

Allows for borrower to use it for day-to-day stuff.
The borrower maintains control over those assets on which the floating charges are assigned to.
Borrower can sell and increase those assets.

If the borrower defaults, then the floating charge crystallizes and the lender takes control of the assets.

45
Q

What is apparent authority and how does it work?

A

A company can be bound by a director or partner acting with apparent authority. This is when a partner acts without authority, but the contract it enters into is one the firm would reasonably be expected to enter into (such as day-to-day purchases and those purchases related to the company) and the counterparty does not know the partner is acting without authority (subjective test).

The purchase of soemthing really expensive cannot be done validly without the firm’s approval - company will not be held liable and the director/ partner will be held personally liable.
Additionally, the purchase of something totally unrelated to the business is something that cannot be validly done - company will not be held liable and the director/ partner will be held personally liable.

46
Q

What is clawback during an insolvency?

A

Clawback is when the administrator or liquidator looks back at the company’s actions before insolvency and can take actions to preserve value in the company for the creditors – that is, claw back any assets that have wrongfully left the company. For example, transaction at an undervalue.

47
Q

Where till can the administrator or liquidator clawback?

A

The liquidator/administrator can go back 2 years ending with the onset of insolvency.

48
Q

What is a transaction at undervalue?

A

This is when the company gifts someone (usually a director) an asset for free or below market value and it was not made in good faith to carry on the company’s business and there were no reasonable grounds for believing it would benefit the company.

Company must be insolvent at the time or insolvent as a result of this transaction.

A liquidator or administrator can render voidable a transaction at undervalue.

49
Q

What is a preference payment when it comes to sole traders etc on insolvency?

A

Preferences are when the bankrupt, while insolvent, intentionally gave a good deal to a creditor (e.g., a friend).
The trustee can challenge preferences within 6 months of petition or two years if an ”associate”.
The bankrupt must have been insolvent at the time of preference or become insolvent as a result of it.

The trustee can set this payment aside - aka clawback at it.

50
Q

When can trustees challenge preferences in insolvency?

A

The trustee can challenge preferences within 6 months of petition or two years if an ”associate”.

51
Q

What must a businesses debt exceed in order for them to be treated as bankrupt by the court?

A

Above £5,000

52
Q

What should be the next step if a business owes another business or person more than £5,000?

A

Should serve a statutory demand, if after 3 weeks there has been no change (aka repayment)

53
Q

On insolvency or no cash flow: what should be done if after a statutory demand has been served and no repayment has been received after 3 weeks?

A

File that business for bankruptcy.