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Business Law and Practice > General > Flashcards

General Flashcards

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1
Q

What must a sole trader include on their letterhead?

A

U.K. business entities must give certain trading disclosures on their letterhead. In the case of a sole trader, all that is required is that the individual disclose their business name, their real (full) name if it is different to the business name, and their business address.

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2
Q

What is a hold harmless agreement?

A

Agreement where the firm agrees to indemnify the outgoing partner for any ongoing liabilities.

*Has no effect against the creditors/thirs parties UNLESS you can agree novation agreement.

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3
Q

What is holding out and when does it apply?

A

When person is not actually partner but holds themselves out to be a partner they will be liable as if a partner to a third party who has given credit to the partnership on the strength of the holding out.

ALSO applies to retiring partners who failed to give proper notice.

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4
Q

Can creditors trace/place charge on partnership property to satisfy debt of individual partner?

A

No - no right ot seek execution on partnership property to satisfy separate debt.

Property belongs to partnership NOT individual partner.

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5
Q

Is there a right to distribution of partnership profits?

A

No - no right to distribution before dissolution except as agreed by the partners.

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6
Q

Are partners entitled to interest on contributions to partnership?

A

NO - but they are entitled to interest on any loan to the partnership at 5% per annum.

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7
Q

Are partners entitled to remuneration for partnership?

A

No - some partners MAY manage the business and could be remunerated/have salaried positions. But sleeping partners (who only contribute capital) not entitled to remuneration.

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8
Q

How are decisions typically approved in a partnership

A

Usually by simple majority

**NOTE four decision which require unanimity:

  1. expulsion of P
  2. appointment of P
  3. Change in nature of Partnership
  4. Alteration to Partnership Agreement
    5.
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9
Q

What are 4 ways in which a partnership can be dissolved WITHOUT Court order?

A
  1. By expiry - if fixed term
  2. At will - one P can give notice of intention to dissolve
  3. By death, bankruptcy or charge (P charges their share of partnership for a personal debt)
  4. By illegality - If event occurs which makes it unlawful to continue
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10
Q

In what 5 circumstances can the Court order the dissolution of a partnership

A
  1. P persistently breaches partnership agreement
  2. P permenantly incapable of performing their part
  3. P guilty of conduct which prejudices the business.
  4. When partnernship only carried on at loss
  5. Just and equitable
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11
Q

How are partnership assets distributed after dissolution?

A

After dissolution partners remain personally liable for debts to creditors.

  1. Assets paid out to creditors;
  2. IF any left, assets paid to partners for loans to partnship
  3. IF any left, assets paid to partners for contributions
  4. IF any left, profits according to partnership agreemnet.
    5.
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12
Q

What is a designated member of an LLP?
What if none appointed?

A

Perform admin and filing duties.

LLPs MUST have designated members. If not specifically appointed, law will treat all members as designated.

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13
Q

When must LLP notify CH re changes in membership of LLP

A

Within 14 days.

Failure to comply is offence.

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14
Q

Within the context of an LLP, what is a person with significant control?

A
  • (In)directly holds more htan 25% surplus sassets winding up
  • (In)directly holds more than 25% of voting rights
  • (In)directly right to appoint/remove majoiry of management
  • Otherwise exercises significant control
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15
Q

To what extent are members and LLPs liable for the acts of members?

A

Members are NOT liable for wrongful acts/omissions of fellow members

LLP is liable to the same extent as the relevant member.

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16
Q

What 5 things must LLPs make publically available by filing at the Registrar of Companies?

A
  1. Annual accounts
  2. Annual confirmation statement
  3. Appointment/removal of members
  4. Changes to details of members (eg address change)
  5. Changes to registered name/office of the LLP
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17
Q

When would member of an LLP or Ltd or PLC be held personally liable?

A

For all: When found guilty of wrongful or fraudulent trading.

For PLC only: If trading without a trading certificate

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18
Q

When may LLP NOT be struck off (3 circs):

A
  1. LLP has traded within last 3 months
  2. LLP has changed name in the last 3 months
  3. LLP is subject to isolvency proceedings
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19
Q

How can members voluntarily strike off LLP?

A

IF majority of members apply to Registrar of Companies to have LLP struck off.

MUST notify other members, creditors

Registrar will subsequently place ad in London Gazette AND LLP will dissolve within 3 months of date.

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20
Q

In what circs will SDLT NOT be payable by an LLP on LLP property?

A

IF within one year of incorporation:

(1) Property was transferred by person who is/was partner OR who held prop on bare trust for partner

AND

(2) the proportional ownership of the property in the LLP remains the same as the prop ownership of the property in the (unincorporated) partnership.

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21
Q

What is an unlimited company?

A

Incorporated - has separate legal personality

Members are personally liable for debts of company

Not obliged to publish accounts - more confidential

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22
Q

What are promoters, what are their duties?

A

Promotors take the relevant steps to start company

File the Memo of Association - which is signed by the subscribers.

Owe fiduciary duties like directors - duty of good faith etc.

23
Q

In what FOUR WAYS can a promotor protect themselves from liability under pre-incorp contracts?

A
  1. Draft contract, unsigned until company registered;
  2. Novation contract following formation;
  3. Assignment of benefit of contract to the company post formation;
  4. Use of shelf company.
24
Q

What must be included in a statement of capital and initial shareholdings?

A
  • Number of shares
  • Nominal value of shares
  • Amount paid up by shareholders, and amount outstanding
  • Classes of shares, if any.
25
Q

What is the minimum age of a Director?

A

16

26
Q

What is an alternate director?

A

Director can appoint alternate director to attend and vote at board meeting with director is unable to attend.

27
Q

What is a nominee director?

A

Nominated to represent particular stakeholder’s interest at board meeting (usually shareholder interest).

Held liable as if director

28
Q

What are the requirements for a director to execute a contract on behalf of the company?

A

Either 2 Directors sign

OR

1 director and 1 secretary

OR

1 director with 1 witness who attests

29
Q

What is the enlightened shareholder value and when is it applicable?

A

Companies Act 2006 sets this out as standard for the duty to promote the success of the company.

eg

foster company’s business relationships,

maintain desirable reputation

act fairly between members of the company

30
Q

In what circumstances will the duty to avoid conflict of interest NOT be breached?

A

WHEN

  1. Transaction is with company itself AND board knows D’s interest;
  2. Cannot reasonably be regarded to give rise to conflict of interest; OR
  3. matter is authorised by the directors.
31
Q

What are secret profits?

A

Unauthorised profits made by member/director of company as a result of their membership/directorship.

Must account for them BUT note that secret profits can be authorised by directors.

32
Q

What is the duty to declare interest and how does it work?

A

Directors must declare their interest in any transaction of the company.

Notice can be given in any way to the directors AND the relevant director CANNOT vote (be counted toward Quorum) on the transaction

33
Q

In what circumstances can a company loan money to a director?

A

With the approval of the members of the company ONLY.

34
Q

What is quorum of a board meeting?

A

Generally 2 directors

*NB if director has personal interest in the vote they may be prohibited from voting.

35
Q

In what circs can directors pass written resolution instead of board meeting?

A

ONLY if unanimous (rather than majority)

36
Q

How is the power to remove a director exercisable?

A

NOT by written resolution

BY ordinary resolution

WITH 28 days’ notice

D has right to speak

NB - Bushell v Faith - gives weighted voting power to a director who is also a shareholder in the event of a resoluton to remove a director.

37
Q

What are the qualification reqs of a secretary?

A

Any of the below 4:

  1. Previously sec of PLC for at least 3 of last 5 years
  2. Member of accountancy/secretarial body
  3. Barrsiter, advocate, solicitor, or
  4. Person who appears capacble of discharging function by virtue of position held
38
Q

Define profits available for the purpose

A

Accumulated realised profits less accumulated realised losses

39
Q

What must the Court consider when determining a derivative claim

A
  1. Is there a prima facie case?

IF SO

  1. Is shareholder acting in best interest in the company
  2. Was the action under challenge authorised by the company?
  3. Is shareholder acting in good faith?
40
Q

What is the usual notice period for calling a shareholder meeting?

A

14 clear days

+ 48 hours if notice is given in any away other than hand delivery

SO meeting days minus 15 for hand delivery

meeting day minus 17 for mailed delivery

41
Q

What is quorum of a shareholders meeting?

A

2!

42
Q

When must special resolution sbe filed at CH?

A

Within 15 days.

43
Q

How are written shareholder resolutions passed?

A

Ordinary - More than 50% of ALL shareholders

Special - More than 75% of ALL shareholders

**Always POLL VOTE - one vote per share NOT one vote per shareholder.

*NB written resolution must state when the resolution will lapse (usually 28 days)

44
Q

What is a premium value for a share?

A

Anything above the nominal value.

45
Q

How are shares at a premium recorded?

A

Anything received in excess of the nominal share value, the premium, must be paid into a separate share premium account

46
Q

What is a debt security?

A

It is a document which evidences a loan made to a company which may be traded. A tradeable I Owe You.

Must be repaid by the company at an agreed future date.

47
Q

What 5 registers are private companies required to keep under the Companies Act 2006?

A
  1. Register of Directors
  2. Register of Members
  3. Register of Secretaries
  4. Register of PSCs
  5. Register of Charges against Company’s assets
48
Q

For how long must general shareholder meetings minutes be kept?

A

10 years

49
Q

For how long must directors’ service contracts be kept?

A

At least one year after director’s service

50
Q

What kind of resolution is required to add a class of shares?

A

Special resolution

Eg if company has only ony class of ordiary shares and wants to allot preference shares, first require special resolution to create the class of shares. Then ordinary resolution to allot shares.

51
Q

When is a vote from the shareholders required for the sale of land?

A

Directors have the power to sell a company’s land to anyone, including a shareholder.

A vote of the shareholders is required only if the sale is a substantial property transaction (‘SPT’). A purchase or sale of property is an SPT if the company is buying from or selling to a director or someone closely connected to a director.

The special procedure does not apply when, as here, the purchase or sale involves a shareholder who is not a director.

52
Q

What is the aim of shareholder agreements?

A

To anticipate disputes, to protect the interests of minority of majority shareholders.

Think about this when advising client. It is always possible to create an agreement, collateral to the company, which really amounts to a separate contract, to protect the interests and assist with negotiation.

53
Q

How can a creditor prove insolvency?

A
  1. Unable to pay debt of £750 (through statutory demand)
  2. Balance sheet test (assets - debts)
  3. Cash flow test (looks at whether a company can pay its liabilities as and when they fall due)

Business Law and Practice (5 decks)

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