Topic 16 Flashcards
Name the types of legal persons
The first type of legal persons is an individual human being acting in their own private capacity with the ability to be in and a part of transaction.
The second type of persons is legal entities such as commercial, businesses, executors, trustees and other entities such as non profit organisations.
define and explain what it is to be a sole trader
A sole trader is a business where there is no distinction between the business and the individual therefore all liabilities will lie upon the individual as they are making all the decisions and they will also benefit from all the profits after tax. They are taxed as a regular individual and is not complicated with its filing of taxes or to set up the company making it easy to start. However it may be very difficult to raise capital for the business.
what are the key features of companies
Companies are separate from its shareholder therefore the liability is not put upon them they are only liable for the shares they hold in that company lower the risk as well as the profits. The company must be registered with the government with its intentions of operations as well as an internal explanation of set up voting rights and dividends. The company can also borrow as an entity which must be checked by lenders if there are any gov interventions in the lending but they can borrower without the liability being put onto shareholders. However with companies there may not be an alignment of agreement with shareholders and directors causing conflict as well as administration and compliance costs.
Define general partnerships and Limited liability partnerships
A general partnership is set up as sole traders in the way that they are both liable for 100% of the debt and are also taxed as individuals instead of as a company, but a written agreement is highly recommended to outline their liability and their responsibility.
A limited liability partnership is where the partner is only liable for their investment as well as the company having to register with the company house. The partner will also only be taxed on their share of profits.
what are the requirements for a legally binding contract
A contract to be legally binding a formal offer has to be given and accepted by the other party but if a counteroffer is given then it will be nullified and new negotiations start. There must be consideration which is a value given either money, goods or services any value given before will not be counted as a part of the contract. The parties involves must be of a nature to enter a contract for example mentally sane and a company within their rights and powers as well as being over 18.
The contract must be clear and show the responsibilities of the contract as well as both parties agreeing it is legally binding not a social or domestic agreement. The contract must also abide by the laws and public policy but if the contract is deceiving, under duress or misrepresenting then it cannot be valid.
What obligations are there to disclose information
In a general contract there must be a caveat to warn the one in contracts however it is left upon both parties to do their own research.
In the insurance contracts there is an act to represent the full information to the client about the insurance and their transparency with a no right to refuse claim to honest claims however it is also in the insurers rights to have the consumer not misrepresent their information to gain better insurance claims.
Explain the types of misrepresentation
careless misrepresentation- this i when the claim is invalid due to information which was given wrongfully without the intention to do so therefore in a claim the payout would not be valid and the claim will not stand however the premiums paid would be offered as a refund this would be the same in life assurance. outside of a claim it would the right to terminate through either party.
deliberate or reckless misinformation- this would terminate the contract with no means to refund the premiums.
what are the breach of contract remedies
the first one would be damages which is where the court would make the obligation of the wrong done party to receive payment in order to cover the damages or to hire another to complete the contract.
the second would be specific performance, this is where the court would make the party in the wrong to fulfil their contractual agreement to the full amount of the contract.
the third is injunction which is the prevention of a party to take certain actions which would cause harm
what is the law of agency and its roles and responsibilities
an agent is an individual who will act on behalf of the principle which will give then certain amount of authority given to them for example a real estate agent.
The role of an agent is to act only in the power which is given to them by the principle to carry out this action by either explicitly stating the action or to imply that they have the authority to do so, if the agent acts out of their authority they will personally liable for the actions. If there ever is a scenario which the agent has acted out of their authorisation for example accepting a lower price for a house then this can be ratified by the principle.
what are the types of power of attorney
The power of attorney if for the delegation of decision making on behalf of another individual in a situation they are unable to make decisions for a reason.
The types are an ordinary power of attorney which is suitable for managing affairs such as travel in the short term but ceases if the donor loses mental capacity. The next is a enduring power of attorney which continues after mental capacity loss but will need registration is mental capacity arises and is no longer given out since 2007. The next is a lasting power of attorney for either health and welfare or for finance and property management. The health and welfare can only become active when mental capacity is lost but the finance and property can be given when capacity is still there.
If there is no power of attorney in place then the court can find a deputy to manage affairs but it is a lengthy process and the deputy has restricted authority.
What is a will and how is it created
A will is a written testimony of a way which an individuals estate is distributed along with the guardianship of children.
The will has to be a written document with their specifications along with a testator and two witnesses and those witnesses must not be a beneficiary or married to one this will invalidate the will.
If the will is not created then by default the individual will follow the one given by the government and law. this can be detrimental to those not married as they will gain nothing.
The will also can be invalidated by marriage unless it is written to anticipate the event.
What are the steps if a will exists
If a will exists then the there will be a executor which will handle all of the administrations as well as the distribution of the assets of the deceased. They will have to first pay off all the debts including inheritance tax after gathering the assets and estates. Then they will be in charge of the distribution of this wealth in accordance of the will. Then will have to fill out a form to H&M revenue.
The executor will have to apply for a grant of probate first in order to act upon the behalf of the deceased. This will be done through the government which will verify if they able to act on their behalf. The executor can be a beneficiary of the will.
What are the steps if a will does not exist
If there is no will in existence then some one closest to the deceased will become the administrator which has a similar role to the executor. The way which the estate is then split up is that the spouse will inherit everything if there is no children involved, however if there are children involved then the spouse will gain £322,000 of the estate and the half of the remaining will be absolute and the other half will go to the children. If there are children with no spouse then it is distributed equally. If there is no spouse and no children then there is a strict hierarchy of relatives which will receive the estate but if no are there then it will return all back to the crown.
What is the deed of variation
This is when the beneficiaries are able to redistribute the estate in their own liking after receiving it but they must all be over 18 and there must not be any monetary compensation for it as well as notifying HMRC within 6 months.
The most common reason will be for unfair distribution or tax efficiency.
What are trusts and trustees
A trust is a the transfer of assets to trustees for the benefit of the beneficiaries. The way this happens is from the executor which will transfer the assets and capital into the trustees and then the beneficiaries which are a group or individual who will benefit from the trust.
When the trustee gains the assets they have to follow some rules which are to invest in with suitable and diverse investments as well as settle any disputes between the type of investments wanted by the beneficiaries, they must also act in accordance to the trust deed which outlines the terms of the trust.
There are three different types of trusts. one being the discretionary trust which is where the trustees decide the distribution and assets amongst the beneficiaries. The second is a bare trust which the beneficiaries have direct access to the trust and finally the life interest trust which is where one beneficiary gains monthly payments while the other beneficiaries will gain capital at the death of the one receiving payment.
What is bankruptcy
This when an individual is in a minimum of £5000 debt and can declare they are bankrupt which will enable a 12 month window of undischarged which then an official receiver will manage the assets of the bankrupt and sell non essential items to repay the debt. This will negatively effect credit and can restrict access to financial tools.
what is an company and individual voluntary agreement
This is a formal agreement made by the creditor and the debtor which will agree that the repayment will be made at a later date, This will require the one which owns 75% of the debt to agree and will hurt credit rating.
The company voluntary agreement is when a company will reschedule payment with the permission of the creditors so they can keep trading.
What is the FCA Scamsmart initiative
This is a tool which is available online to everyone in need to use it to avoid scams. This tool grants educational information for example seeing if the returns are too high and unrealistic to help consumers to identify scams in the future as well as a quationaire tool which can help to understand if what they are entering is a scam through questions such as where did they discover this investment opportunity as well as what finances are they suggesting to use and then finally they can have reported scams which people have fallen victim to before therefore if they come up again they can be flagged and people can use the site in order to check the authenticity of the tool.
What is the role of a financial advisor
This is a role which acts as the first line of defence for the consumer when up against scams especially in insurance and pension schemes. Their job is to spot red flags in investments, provide awareness of financial tools and to provide those resources.
Explain how there has been strengthened consumer protection
There has been improvements in 2 major scams which would be refused refunds and protection in the past which would leave the consumer to be left with nothing.
The banking scam has now been improved by automatic refunds only if there hasn’t been gross negligence which means that they have been ignoring clear and obvious neglect of red flags and signs.
In the pension scam the consumer has been protected by having protocols in place which is to ask those who want to transfer their pension funds into other investments which are clear warnings and research into the investment.
What are the common type of scams
Some of the main scams which most people fall victim to is pension scams to target older audience promising higher returns from this investment. Another is investment scams which are similar to pension scams offering great returns for unfamiliar markets. identity theft such as posing as a bank making people transfer funds to unfamiliar accounts or paying fees they are unfamiliar with. Finally ponzi and pyramid schemes which use money from new investors and recruitment.
What are the steps for consumers to follow to avoid scams
They are advised to verify authority of those they are speaking to so they know that they are speaking to the real thing or search up the number to verify. They should also always be skeptical of the oppertunities that they are given especially from unfamiliar markets or companies they have never heard of and even contact specialists to help. They should always report scams if they have fallen victim or suspected one of them being a scam to the FCA Scamsmart and finally stay informed of new scams which are going around and what would be asked of them from their institutions.
