Lecture Week 9

Question 1

what is a company?

Answer 1

a business that is ran as a separate legal entity

Question 2

limited liability = ?

Answer 2

shareholders are only liable to lose only their investment in the company and no other assets in the event that the company failed/went bust

Question 3

are the distribution of dividends compulsory in company law?

Answer 3

no

Question 4

agent = ?

Answer 4

an agent is a person who has legal authority to conduct business on behalf of another person, known as a PRINCIPAL

Question 5

who does an agent contract on behalf of?

Answer 5

their principal

Question 6

is there normally a contract between principal and agent?

Answer 6

yes

Question 7

what should be avoided between a principal and an agent?

Answer 7

conflict of interest

Question 8

what are the duties of the agent?

Answer 8

• obey lawful instructions
• use care & skill
• perform duties personally
• fiduciary duties

Question 9

fiduciary duty = ?

Answer 9

the legal responsibility to act solely in the best interest of another party

Question 10

fiduciary duties of an agent?

Answer 10

• avoid conflict of interest
• not make secret profit
• not take a bribe
• keep their own property separate
• record their dealings on their principals behalf
• duty of confidentiality

Question 11

rights of an agent?

Answer 11

• to be indemnified against losses & liabilities
• be repaid expenses and any agreed remuneration
• exercise a lien

Question 12

how can an agency be created?

Answer 12

• agency by consent
• agency by estoppel
• agency of necessity
• ratification

Question 13

what are the three types of agent authority?

Answer 13

• express actual authority
• implied actual authority
• apparent authority

Question 14

three types of businesses?

Answer 14

• sole traders
• partnerships
• companies

Question 15

what is a sole trader?

Answer 15

an individual who owns the business

can still employ others (independent contractor e.g., plumber, electrician)

unlimited liability

Question 16

difference between private/public company?

Answer 16

private company isn’t listed on stock exchange, but public company is

Question 17

what are partnerships?

Answer 17

two types:
- partnership under the partnership act 1890 (most usual form)
- limited partnerships under the limited partnership act
1907 (rare)

Question 18

typical partnerships?

Answer 18

accountancy and law firms

Question 19

partnerships under the partnership act 1890?

Answer 19

act sets out framework; if you don’t want to be bound by the act, you need a partnership agreement

unlimited liability (like a sole trader)

all partners can manage the business and are agents for each other

partners each have to share profits & losses (each pay tax on their share of the profits)

Question 20

partnerships under limited liability partnerships act 2000 (LLP)

Answer 20

legal personality separate from its members

must register with registrar of companies

NOT companies

members are partners, not shareholders

Question 21

companies?

Answer 21

artificial legal persons

separate legal entity from persons who own and control them

Question 22

landmark case for companies?

Answer 22

Salomon v Salomon

Question 23

how is a company limited?

Answer 23

by guarantee, not shares

Question 24

limited by guarantee?

Answer 24

the members promise, when the company is first registered, to contribute a fixed amount - usually a nominal sum if the company closes down

Question 25

private companies = ?

Answer 25

limited by shares

Question 26

public companies = ?

Answer 26

limited by shares

name ends with PLC or public limited company

Question 27

private company/public company prefix?

Answer 27

private = ltd
public = plc

Question 28

must a company have a name?

Answer 28

yes

must be original

Question 29

company registration requirements?

Answer 29

• application of registration must be sent to companies house
• memorandum of association
• certificate of incorporation
• articles of association

Question 30

consequences of incorporation?

Answer 30

• separate legal personality
• the company is its own artificial person
• company can enter into contracts in its own name - can sue and be sued

Question 31

lifting the corporate veil?

Answer 31

means the setting aside of the principle that a company is a distinct separate entity from its management and ownership

(for the purpose of extending civil or criminal liability to its management/ownership)