The management of a business and company decision making Flashcards
What is ordinary resolution?
Most common type of shareholder resolution
Used to give shareholder approval for decisions taken by the company that are too important for the board to make independently
- Can be passed by simple majority (more than 50%)
What is special resolution?
An SR is required before the company makes certain major decisions (e.g. name change)
- requires minimum of 75% shareholder approval
- Only used where expressly required under the Companies Act 2006 or Articles
Liability - new partners
Not automatically liable in relation to any debts incurred before they joined
Liability - former partners
A partner will still be liable in respect of debts incurred whilst they were a partner - the partnership may novate the agreement to relieve a partner but this must be with the consent of the creditors
It is possible for a former partner to become for debts incurred after they have left - a third party can treat all apparent partners of the firm as jointly liable to pay any new debt UNLESS that third party has been notified by actual notice (for those who have had actual dealings with the partner before departure); or constructive notice by virtue of publication of the departure in the London Gazette, for those who have NOT had actual dealings with the partner
Liability - non-partners - holding out
A non-partner may be PERSONALLY liable on a partnership debt if they have held themselves our or knowingly allowed themselves to be held out - 3 required elements: 1. a representation; 2. third party’s action in response; 3. third party’s state of mind - this deals with the liability of the NON-PARTNER - the firms’ liability for the acts of the non-partner are established by applying the common law principles of agency
Binding the firm - partners against the other partner’s wishes
Will bind the firm if (viewed objectively): 1. the act is carrying on the kind of business carried on by the firm and 2. the act is carrying on the business in the usual way - BUT NOT if the third party knew the partner was not authorised to bind the firm OR the third party did not know or believe the partner was in fact a partner
A partner who binds the firm without authority may be liable to the other partner’s for breach of contract
Status of the Partnership Act (except s1, s2 and ss5-18)
Can be overridden by the partnership agreement
Commencement
If the partners being working together prior to the commencement date then the default provisions of PA 1890 will apply until the commencement date of the agreement
Duration of partnership agreement
Partnership agreement may have a fixed term or continue until terminated in accordance with its provisions. If a fixed term but the partners continue in business after the term without a new agreement, they are presumed to be on the same terms as before
Partnership property
Per PA 1890, all property brought into the partnership whether by purchase or otherwise, on account of the firm or for the purposes and in the course of the partnership business is property. All property bought with money belonging to the firm is deemed to have been bought on account of the partnership unless contrary is shown.
Renumeration
Without an agreement a partner is not entitled to a salary
Expulsion
A partner cannot be expelled by majority vote unless all of the partners have previously expressly agreed that a majority can do this - effectively a partner has to agree to their own expulsion if a previous agreement hasn’t been made - big reason to agree provisions in advance - otherwise would have to dissolve the partnership
Partner leaving
If no partnership agreement or agreement doesn’t address the point, a partner leaving means the partnership dissolves - but might only be a ‘technical dissolution’ meaning that a new partnership is formed by the remaining partners
Objects clause and ultra vires
Before CA 2006, a memorandum of association had to include an ‘objects clause’
- this set out what company’s object s were (what kind of business activities it was permitted to carry out)
- anything that was not permitted by the clause was deemed ultra vires (outside of the company powers)
This caused problems and limited flexibility. Requirement to have one was abolished. Companies can have one if they wish
- default position is that company’s powers are unrestricted unless stated otherwise
Directors authority’
Actual authority - this can be express or implied
Deemed authority - this can be deemed by statute or by common law
Directors actual authority
‘An actual authority is a legal relationship between principal and agent created by a consensual agreement’
The Articles can confer express actual authority
Directors implied authority
This can be from appointment to a specific role or as to a result of a course of dealings
Directors deemed authority
Under CA 2006, when a third party is dealing in good faith with a company, the powers of directors to bind the company is ‘free of any limitation under the company’s constitution’
Separate legal personality: (2)
- the recognition by the law of an entity as having a separate legal existence 2. being an appropriate subject of legal rights and responsibilities.
Key points about piercing the veil: (5)
- limited circumstances as business is done on assumption that separate legal personality and limited liability is effective
- economic integration is not an independent reason for it
- Agency/nominee is only likely to work where this is expressly the case
- Tort depends upon the establishment of a duty of care, under “normal” tort principles. This is not the same as piercing the veil.
- Being in a group of companies does not provide a reason to pierce the veil, though there are some legislative (especially tax) provisions which impose-liability on group companies for an individual company’s liabilities.
How long must records of board decisions at board meetings be kept for?
10 years
How long must records of shareholders’ decisions be kept for?
10 years
When is the change in a company’s name effective?
What form is used?
When he registrar issues the certificate of incorporation on change of name.
Form NM01
When should the register of members be updated on the transfer of shares?
Immediately. CH should be updated yearly in the confirmation statement.
When should share certificates be issued on the transfer/ allotment of shares?
Within 2 months of the transfer or allotment.
