The Formation and Constitution of Organisations Flashcards
What are the types of authority?
- Express
- Implied
- Apparent/Ostensible
How can an agency relationship be formed?
- Express agreement between the principal and agent
- Ratification
- Implication
- Necessity
- Estoppel
Which type of authority is associated with agency by estoppel?
Apparent
An agent will not be liable for a contract where the agent acts on his own behalf but identifies himself as an agent.
Is this statement true or false?
True
Under what circumstances can an agency relationship be terminated by operation of law?
- Death or insanity of the agent or principal
- Bankruptcy of a partner
- Impossibility of performance
What are the types of partnership?
- Unlimited/ordinary
- Limited
- Limited liability
A partnership is automatically dissolved if a partner is unable to carry out their duties as described in the partnership agreement.
Is this statement true or false?
False
How is a partnership at will dissolved?
Where one partner gives notice to all the others that the partnership is dissolved
The annual financial statements of an LLP must be filed with the Registrar of Companies.
Is this statement true or false?
True
How can a partnership be created?
A partnership can be created:
- By oral agreement
- If the conduct of the partners suggest that they are in a partnership
- By a formal written agreement
What is a partnership?
A partnership is the relationship that subsists between two or more people carrying on business in common with a view to profit.
All of the partners within a limited partnership must be limited in their liability.
Is this statement true or false?
False, there must be at least one partner with unlimited liability
Is an unlimited partnership a separate legal entity from its partners?
No
Partners with limited liability in a limited partnership cannot manage or bind the partnership.
Is this statement true or false?
True
The annual accounts of the LLP must be filed and audited.
Is this statement true or false?
True
How is a limited liability partnership formed?
- 2 or more persons must subscribe to an incorporation document
- The incorporation document must be delivered to the Companies Registry
- A statement of compliance must be completed by a solicitor or subscriber to the incorporation document
How is an ordinary partnership dissolved?
- Expiry of a fixed period, if stated in the partnership agreement
- Completion of the express purpose for which the partnership was formed
- If the activity of the partnership becomes illegal
- Partner gives notice to leave
- Death or bankruptcy of a partner
What are the statutory rights of a partner?
- To share profits equally
- To be indemnified by the firm for any liabilities
- To take part in the management of the business
- To have access to the firm’s books
- To prevent the admission of a new partner
Is a limited liability partnership a separate legal entity from its partners?
Yes
What abbreviation is used to denote a private limited company?
Ltd
plc is used to denote what type of company?
A public company
In terms of offering shares, how does a public company differ from a private company?
A public company can offer its shares to the public at large, while a private company can only offer shares to its existing members
Salomon v Salomon & Company established what legal principle?
The company is a separate legal entity from its owners
Under what common law circumstances can the veil of incorporation be lifted?
- Where a company is being used to evade the legal duties of the member
- Where the company is actually a partnership/ quasi-partnership
- To identify the controlling mind of a company in cases of corporate manslaughter
- Where a group of companies are so inter-related that they are one single entity
- To recognise the alien enemy character of a company
Under what statutory circumstances can the veil of incorporation be lifted?
- Failing to have correct trading certificate
- Fraudulent trading
- Wrongful trading
A promoter is anyone who has involvement in the formation of a company.
Is this statement true or false?
True
What are the duties of a promoter?
- To exercise reasonable skill and care
- To disclose and account to the company
- To avoid conflicts of interest with the company
- Not to make a secret profit
Upon breach of a promoter’s duties, what can the company do?
- Rescind any contracts made
2. Recover any monies lost from the promoter
What makes up a company’s constitution?
The Articles of Association and any resolutions or agreements made.
A private limited company needs a trading certificate in order to be formed.
Is this statement true or false?
False, a public limited company needs a trading certificate
If an aspect of a partnership is covered by the agreement, what takes precedent - the agreement or the provisions of the Partnership Act 1890?
The agreement takes precedent.
When is an agent liable when making a contract?
An agent is liable when:
- They do not disclose that they are an agent
- The contract is made solely for their benefit
If a promoter makes a profit, is this profit wrongful?
No, once disclosed, the profit is not wrongful
How can a promoter make sure their expenses can be reimbursed?
By agreeing and contracting with the company post-incorporation for reimbursement
A managing director signs a contract on behalf of the company.
The company is bound due to what type of authority?
Implied, due to the person’s position as a managing director
Does a limited liability partnership pay corporation tax?
No, only the partners pay individual taxes
In order for a principal to ratify a contract made by a supposed agent, they must have existed when the contract was made.
Is this statement true or false?
True
Do the Articles of Association need to be sent to the Registrar in order to register a company?
No, as if they are not submitted, model articles will be applied
Is a partner an agent of the partnership?
Yes
What is a key element of agency by estoppel?
A person “holding out” or pretending to be an agent
Is the insanity of a partner an automatic ground for the dissolution of a partnership?
No
Finish the following:
A sleeping partner is a partner who…
does not actively take part in the business
How does implied authority differ from apparent authority?
With implied authority, a third party can assume the person has authority based on their position.
With apparent authority, a person pretends to hold a position with the required implied authority to make a contract.
Is an agent liable on a contract if it is the usual business practice to do so?
Yes.
A public limited company must always have share capital.
Is this statement true or false?
True.
A company’s articles can be amended to compel existing shareholders to subscribe to additional shares in the company.
Is this statement true or false?
False.
Once a person becomes a member of the company, they cannot subsequently be required to pay more for their shares than what was agreed at the outset, or be required to subscribe for additional shares in the company as these acts are restricted under company law.
