Introduction to business law Flashcards

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1
Q

How is a sole trader taxed for income and CGT purposes?

A
  • Any profits made taxed as individual’s income
  • Any gains on one-off transaction charged as CGT
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2
Q

What is the difference between how a partnership and LLP is taxed?

A

Not different - both tax transparent; partners taxed on individual share of profits and chargeable gains as either income or CGT

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3
Q

How does a company pay tax?

A

Corporation tax at flat rate on taxable total profits (TTP) made up of company’s income profits and capital gains

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4
Q

What is meant by double taxation on profits in the context of companies?

A
  1. Company pays corporation tax on profits
  2. Pays dividends to shareholder which will be taxed on income tax
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5
Q

When can a private company, who has converted to a public company, begin trading as a Plc?

A

Once the new certificate of incorporation and trading certificate showing company’s allotted share capital is not less than minimum has been issued by Registrar

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6
Q

What is a listed company?

A

Company whose shares are listed on a recognised stock exchange (allows commercial investors freedom to deal)

Not all public companies apply to have shares listed

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7
Q

How do listed companies operate their various businesses?

A

Through private company subsidiaries (not listed but affected by governing rules of listed holding companies)

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8
Q

Why does a listed company need greater regulation than private companies?

A

They have 1000s of shareholders only a few of whom have any managerial role at all - need more regulation to ensure accountability of directors as an individual shareholder will not normally have any access to the board

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9
Q

What is the difference between a private and public companyin terms of how resolutions can be passed?

A

A private company can pass shareholder resolutions as written resolutions (bar for removing director/auditor), a public company cannot

Private / Written

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10
Q

What is the difference in public and private companies re offering shares?

A
  • Private prohibited from offering shares to public at large
  • Public companies can raise further equity by applying for listing to access a wider investor base (inc international debt capital markets)
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11
Q

Is an AGM required for all companies?

A

Only public, but private can if it wants

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12
Q

What is the minimum share capital to be issued for a private and public company?

A
  • Private - one share (could be only 1 share of 1p)
  • Public - minimum of £50,000
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13
Q

When can a private and public company commence trading?

Re certificates they have to receive

A
  • Private - can start as soon as incorporated (certificate of incorporation)
  • Public - can start when a trading certificate is issued by Registrar showing that company’s allotted share capital is not less than minimum
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14
Q

What are the consequences of a company having separate legal personality?

A
  • Continues to exist even if shareholders/directors change (is an entity itself)
  • Directors owe duties to company, not shareholders
  • Company owns own property and enters into contracts (and enjoys benefits and liabilities)
  • Company sues and sued on its own
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15
Q

Who do shareholders and TPs have rights against?

A

The company, rather than directors

Even though creditors will negotiate with directors!

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16
Q

What is limited liability?

A

The liability of shareholders for the company’s debts is limited to the amount they paid (or agreed to pay) for their shares

Personal assets entirely separate from the company

Creditors cannot pursue claims against shareholder if company has insufficient funds to meet liabilities (but shareholders can lose investment if company becomes insolvent)

17
Q

Will shareholders of limited company be liable to liquidator in the event of insolvency?

A

No!

18
Q

What does ‘piercing the corporate veil’ mean?

A

A limit on LL - court can ‘pierce the corporate veil’ in the interests of justice e.g. company considered facade

19
Q

How can counterparties negate the advantage of limited liability?

A

By requiring security/guarantee from shareholder(s) of the companya s part of lending money to company for example

Comes down to bargaining power of parties

20
Q

How can creditors assess the financial viability of a company?

A

By checking publicly filed documents at CH

21
Q

When is a principal bound by its agent?

A

When it has authorised the agent to do so on its behalf

E.g. how a company is bound by directors

22
Q

What are the 3 types of acts by an agent and which will bind principle?

A
  1. Within actual authority (express/implied) = principal bound
  2. Outside actual authority but within apparent (ostensible) authority = principal bound
  3. Outside his actual and apparent authority = principal not bound but can ratify agent’s acts
23
Q

What do heads of terms do in commercial contracts? Are they binding?

A

Outline the agreed intentions of the parties prior to negotiation of formal contract - intended to be expressly non-binding but carry substantial mount of moral force

24
Q

What are letters of comfort in loan finance transactions?

A

E.g. parent company seeks to provide ‘comfort’ to bank that subsidiary can make loan repayments (representations on subsidiary’s past/future peformance)

25
Q

What is battle of the forms and how is it resolved?

A
  • Where parties attempt to contract on own standard terms
  • Usually - whoever sends their terms last will prevail

(not a guarantee - safer to expressly agree)

26
Q

What are conditions precedent?

A

Criteria/conditions that must be met before (parts of the) agreement can come into force

27
Q

What is the difference between assignment and novation? Can both be effected without consent or knowledge of other party?

A
  • Assignment = benefits of an agreement will be assigned but not burden (contracts state whether assignment permitted); usually can be effected without consent of other party
  • Novation = both benefit and burden is transferred with effect that TP steps into shoes of party it is replacing; will usually require consent of all
28
Q

How can a company and partnership sign a contract?

A
  • Partnership = by one or more of the partners
  • Company = director authorised by BR (save for Articles)
29
Q

How does a company and a partnership execute a deed?

A
  • Company = signed by 2 authorised signatories (2 directors or 1 director and secretary) if common seal used or signed by single director in presence of witness
  • Partnership = signature of all partners (individual partner will not have authority to execute deed on behalf of partnership unless authority has expressly been conferred by deed)
30
Q

When should an agreement take the form of a deed rather than a contract?

A
  • The document is required to be executed as a deed (e.g. certain transactions relating to land)
  • It is desirable to have a limitation period
  • It is questionable whether party to document is providing consideration (deed binding even if valuable consideration not given)
31
Q

What are ‘subscribers’?

A

The first shareholders in a company who invest when initially set up

32
Q

What are PSCs?

A

Persons with significant control - generally over 25% shares - details must be provided to CH

33
Q

What does a confirmation statement do?

A

For a private company - submit annual returns

Replaced the AGM for private companies

34
Q

How many directors are needed by private and public companies?

A

2 directors for public, 1 for private

35
Q

Are secretaries always needed for companies?

A
  • Private = not obliged, director can carry out role
  • Public = obliged, must have requisite knowledge, experience and specified qualifications
36
Q

What is the minimum share capital for a private and public company?

A
  • Private = no requirement
  • Public = £50,000
37
Q

If a company has ‘Plc’ in name, does that mean it is a listed company?

A

No!!!!