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Financial Markets And institutions > Legal Concepts > Flashcards

Legal Concepts Flashcards

1
Q

What are the two types of legal person?

A

natural people - e.g. humans

artificial people - e.g. corporations, coperatives and soverign states

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2
Q

What is the legal difference between a corporation (e.g. a limited company) and an unincorporated association?

A

An unincorporated association like a partnership doesn’t have a separate legal entity from its members

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3
Q

What happens when an enterprise is registered as a company?

A

The company now has legal status distinct from its owners meaning the owners now have limited liability
For determining tax residence a company may still be identified with owners

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4
Q

What is important for charging a company on criminal charges?

A

a ‘mens rea’ or controlling mind must be shown. This is difficult to do with large companies and it is only really in small companies it can be proved the controlling mind is connected with the criminal act

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5
Q

Can the legal distinction between a person and company be waived?

A

Yes, a court may ignore the distinction is humans use it to evade legal actions

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6
Q

What are the two types remits of an attorney?

A

either general or for a specific act - the donor is liable to the consequences of attorneys so long as they have acted within the terms of the agreement

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7
Q

Where is the form for power of attorney set out?

A

S10 Powers of Attorney Act 1971 - the document must be executed as a deed

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8
Q

What is the validity of ordinary power of attorney?

A

it is valid whilst the donor can instruct
can and will be revoked if the donor or attorney become bankrupt or die
it also ceases is the donee dies of becomes incapacitated

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9
Q

What does the Mental Capacity Act 05 do?

A

it sets out a single decision-specific test for assessing capacity of a person.
A lack of capacity cannot be determined by age, appearance or personality.
Carers and family members have the right to be consulted

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10
Q

What are/is Court appointed deputies?

A

The system of court appointed deputies replaced the previous system of receviership in Court of Protection

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11
Q

What is the LPA?

A

attorney can make health and welfare decisions
it was established in Mental Capacity Act 05
it is a legal document made by special form available at OPB
Donee can make decisions about property, affairs and personal welfare is the donor cant or doesnt want to

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12
Q

What validates an LPA?

A

It can only be used after registering with OPG
Only people over 18 with mental capacity can make it and decide to have one or more LPA.
Each donor must make a LPA seperately
If the LPA isnt made before incapacity occurs an application may be needed to the court of protection which is much more expensive

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13
Q

What are the two types of LPA

A

Personal welfare LPA

  • makes decisions about healthcare and welfare if the person can’t
  • they are allowed to consent on types of healthcare and decide on place of residence/care home

Can make decisions about life sustaining treatment if this power is expressly given

Property and Affairs LPA

  • personal financial affairs
    can be used regardless of capacity, e.g. bill paying may be an unwanted inconvenience
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14
Q

What happens to the pre-existing Enduring power of attorney?

A

it was replaced by Mental capacity act 05
no changes are allowed
it can run alongside an LPA
an unregistered EPA can still be used if it was set up before october 1st 07 but must then be registered with the OPB

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15
Q

What are the essential elements for a contract to be valid?

A

Agreement- had a party made an offer which the other has accepted
Consideration - the promise a claimant seeks to enforce must be shown as part of the bargain
Intention
Also both parties must intend to create legal relations - this is determined by reference to words or conduct
the standardisation of business has led to the the standard form contracy

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16
Q

how can offer an acceptance be made?

A

written, verbal or implied by conduct of the parties. however sales of land and tenancy must be written

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17
Q

How is an offer done in life assurance?

A

A proposal form makes the offer which the life assurance firm can accept or accept on special terms which is basically a counter offer

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18
Q

How can a contract be discharged?

A

Breach
Performance - this occurs if all contract terms are met
Agreement
Frustration

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19
Q

When settling a contract dispute what is the rule on financial damages?

A

They will only be granted if proof of financial loss exists

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20
Q

When must all info be given in contrast to standard buyer beware?

A

Insurance contracts require all info to be given and if if isn’t the policy can be voided. The need to provide all the correct info is ‘utmost good faith’ or uberrimae fidei

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21
Q

What is the Agency relationship

A

an agreement between principal and agent
usually created informally in an ‘express agreement’
examples are
partnerships
brokers
appointed representatives of product providers
retail investment advisor

22
Q

What are the obligations of an Agent?

A

performance and obedience - unless illegal
skill and accountability
no conflict of interest
keep info in confidence
benefits must be given to principal unless agreed differently

23
Q

What are the two types of legal ownership?

A

Legal ownership e.g. client money in firm account

Equitable/beneficial ownership - this is who benefits e.g. the client whose money it is

24
Q

What are the types of Co-ownership of Land?

A

Joint Tenacy
no words of severance are sued and there is no defined share
often used by husband and wife

Tenants in Common
defined share of land. If a person dies, their share goes into their estate

25
Q

What is the Law of Property Act 1925?

A

It states when land is owned by two or more people, no more than 4 of these people hold the legal estate as joint tenants and trustees, for the beneficial or equitable interest of themselves and other co-owners. Transfers can be effected by 4 signatures but the sale proceeds are subject to trusts so all owners get fair shares

26
Q

What is Insolvency?

A

When a firm cannot meet their obligations on time.
In this event a firm must re-negotiate or generate funds.
However, if this can’t be achieve the firm may face bankruptcy where court ‘administrators’, debtholders receivers or liquidators will wind up the company.

27
Q

What is the purpose of Insolvency Law and which corporate insolvency officials exist?

A

exists to determine what should happen
there are three types of corporate insolvency officials depending if a firm goes into administration, receivership or liquidation.

28
Q

What are the aims of Insolvency law?

A

protect company creditors
balance interest of competing groups
control of punishing directors responsible for company’s financial collapse
encourage rescue operations

29
Q

How is Insolvency defined?

A

A state where liabilities exceed assets

30
Q

How is bankruptcy defined?

A

It is a legal matter where a firm fails to regain solvency. This can be caused by the possession of illiquid assets

31
Q

What happens in a Bankruptcy?

A

Affairs are taken over by the court and assets are transferred into a trust for repayments.
A sole trader or partner who cant pay debts could face bankruptcy.

32
Q

What is the legislation regarding Bankruptcy?

A

Insolvency Act 86 which was Amended by the Insolvency Act 2000 and Entreprise Act 2002

33
Q

What are the proceedings of Bankruptcy?

A
  • Firm will make a presentation of a petition for a bankruptcy order to a high or county court.
  • The presenter may be the person or a creditor however, if it is a creditor he must be owed at least £750
  • After the Bankruptcy order the official receiver, who is an official of BIS and officer of the court, takes control of assets as manager and receiver. There remit is to protect the property until a trustee in bankruptcy has been appointed
34
Q

Who controls Bankruptcies?

A

Bankruptices are under the general control of the court, which can control the trustee. All property of the debtor passes to the trustee

35
Q

What does a will do?

A

appoints executor or personal representative and gives them instructions.

36
Q

What are the conditions for a will to be valid?

A 
Laid out in writing
signed and witnessed by two people
creator must be over 18
must have the mental capacity 
no pressure from another person
37
Q

Can a witness benefit from a will?

A

No and neither can their spouse. If they have been named as a beneficiary the will will stand but the person cannot benefit.

38
Q

What must an executor do?

A

obtain a grant of probate from probate registry to show they can administer the estate. They then collect the estate assets and settle all liabilities first.

39
Q

What happens to a will if the creator marries/divorces?

A

The will will be invalidated unless stated it was made in contemplation of marriage
If creator divorces, bequests in favour of the ex-spouse no longer have effect.

40
Q

what is intestate?

A

a person dies without having a valid will

41
Q

What is a Trust?

A

An equitable obligation where the trustee(s) (can also be a beneficiary) has to deal with assets under their control for the beneficiaries

42
Q

What is a settlor?

A

A person who transfers assets into a trust in their lifetime. These trusts are called settlements.
The settlor may be a trustee or beneficiary

43
Q

How can a trust be created?

A

In a will in which case it is called a will trust or when still living

44
Q

What is the name of a trust set down in writing?

A

trust instrument

45
Q

What is the Judicature Act 1873?

A

it meant equity overrided common law but the two are still different

46
Q

what is the difference between equity and common law?

A

common law is ancient customs which were eventually compiled into a book. it tended to focus on the form of transcation (e.g. land) rather than the substance e.g. who provided the purchase money

Definite principles emerged from this and became known as equity

47
Q

Where do legal and equitable rights derive from?

A

legal rights derive from common law but equitable rights derive from equity

48
Q

What happens if trustees don’t act in accordance with the terms of the trust?

A

The beneficiaries may apply to court to enforce them

49
Q

What the types of Trusts?

A

Bare/simple trust- one beneficiary who has immediate and absolute right to assets and can direct trustee or takeover at any time - the trustee has no discretion over payment

IIP Trust - beneficiary is known as ‘income beneficiary’ or ‘life interest’. They have a legal right to assets as they arise. On the death of the beneficiary assets will be held for the secondary class, the remainder man

Discretionary trust - trustee has discretion, often used by families

NB. for IHT there is CLT when an IIP or discretionary trust is set up. Trust suffers principal charge each 10 years and an exit charge

Charitable Trust - Charitbale purpose set out by ch arities Act 06. This means the actions must be for public benefit. The settlor has some authority over distribution and is tax free

50
Q

Why might a trust be set up?

A

tax purposes
people may not be able to hold property on their own behalf
unincorporated associations like some charities, trade unions or clubs can’t own property as they aren’t legal persons

51
Q

What is a resulting Trust?

A

Often occurs in the context of a marriage of cohabitation. both people contribute monies but both have legal ownership. The owner will hold part of the interest for the other even if not stated

52
Q

What is a ‘secret trust’?

A

A trust which protects the identity of the beneficial owner

Financial Markets And institutions (14 decks)

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