Week 6: Business Organisations, Law of Agency, Employment Law, Equality and Diversity Law Flashcards
What are the two ways a business can exist as a legal entity?
Unincorporated and Incorporated
What is a sole trader?
This is the simplest business organisation, no distinction between the individual and the person running the business
What are sole traders liable for?
They have unlimited personal liability to their counterparties and the State for any acts or omissions related to the business
How can sole traders form?
They just need to register with HMRC
How are sole traders terminated?
They only need to inform the relevant authorities of their action to cease trading, assuming debts have been paid.
What happens if a sole trader cannot pay their debts?
Formalities related to bankruptcy proceedings
What are the 4 types of partnerships?
Typical
Silent
Salaried
Partner by estoppel
What does a typical partner have the rights to do?
They have the rights to take part in the management of the firm
What does a silent partner do?
Invest in the firm but have no active role in management
What does a salaried partner do?
Appear on letterheads but have no rights or obligations of the other partners
What does partner by estoppel mean?
They appear as partners of the firm even if they have no active participation on it
What are partners liable for?
The firms debts and contracts and the torts committed in the course of business
What happens if one partner does not have the resources to satisfy a debt?
The other partner is responsible for the debt if they can satisfy it and they can then seek the money owed from the partner who can’t pay
Can liability be imposed on a partner for act that occurred before they entered the partnership?
No - but the liability continues for acts conducted while someone was a partner should they leave
How are partnerships formed?
Through a contractually binding agreement
What does a partnership agreement identify?
The purpose, the time it exists, the names of partners, business address, percentage of profits, authority of each, responsibilities of each
How are partnerships terminated?
On agreement of partners On lapse of time When a task has been completed Death, bankruptcy or incapacity Illegality on behalf of the partnership
What is an LLP?
A Limited Liability Partnership
Who are contracts created with when referring to an LLP?
The LLP itself rather than the individual partners
What does limited liability mean?
Partners are only liable up to the value of their participation
In the case of insolvency, they only lose up to their investment
How are LLPs formed?
Incorporation doc and statement of compliance files with Companies House
Certificate of incorporation then issued
LLP can then trade
How can LLPs be terminated?
They can be voluntarily dissolved following an application by the majority of its members
They can also be wound up through insolvency
What does it mean if a company is registered as a Limited Company?
Their assets and revenues are separate from the owners’ assets and income
Limited companies are one of two things, what are these things?
Private or Public
What happens if there are insufficient funds and assets to pay creditors in regards to Limited Companies?
Shareholders are liable for any remaining debts limited to the nominal value of the shares they own
What does perpetual succession mean in regards to a limited company?
Once established, they will remain in existence until they are legally wound up
What does contractual ability mean in regards to a limited company?
Due to their separate legal personality, they may establish contracts and enforce them when the other party is in breach, although a director of the company must physically undertake this
What ability do limited companies have in regards to owning property?
They have the ability to own property irrespective of the composition of the shareholders.
The persons who form the company may introduce property to it, either in the form of capital contribution or through a sale agreement
What ability do limited companies have to commit torts and criminal offences?
It is possible for a limited company to commit a criminal offence or a tort through their directors
Directors may also be convicted on the basis of their actions
What does PLC and Ltd mean?
PLC means Public Limited Company
Ltd means Private Limited Company
Out of a PLC and Ltd, who can offer shares to the public?
The PLC can offer shares to the public and be listed on the London Stock Market. A Ltd company cannot offer shares to the public, though it is much less regulated and more favourable to those who run Ltds than before
Out of a PLC and Ltd, who needs to host an Annual General Meeting (AGM) annualy?
PLCs must
What does a PLC require that a Ltd does not?
A secretary, though a Ltd may have one if they choose to do so.
How many directors are required for PLCs and Ltds?
PLCs must have at least 2, only one director is required for an Ltd.
How can Limited Companies form?
By Royal Charter
Statute
Registration
How are Limited Companies formed by registration?
Founding members must send to Companies House:
- The memorandum of association
- The articles of association
- A completed Form IN01
- Appropriate registration fee
Where are new Limited Companies noted?
In the London Gazette
How are Limited Companies terminated?
Application to be struck off register Voluntary liquidation (for solvent companies) Liquidation by a court (for insolvent companies)
What is the Agency Relationship?
It shows the relationship between a principal, an agent and the third party
The principal gives the agent the authority to contract with the third party on its behalf
How can agencies be created?
Express appointment by principle (actual authority)
Implied appointment by principal (implied authority)
Impression of representation conveyed by the principle to third party (apparent or ostensible authority)
The retrospective acceptance of a contract by the principle (ratification)
Situation of emergency (necessity)
How does creation of agency by actual authority work?
Authority is conferred by principal to agent by express agreement.
Can be verbal or in writing
Agreement should identify the extent of the authority
How does the creation of an agency by implied authority work?
The authority of the agent is implied by the nature of the relationship. Law can infer creation by implication when a person by their words or conducts acts as if authority was given.
Give an example of implied authority
A shop owner allows an assistant to order goods on their behalf, but the shop owner pays for them
How does the creation of an agency through apparent/ostensible authority work?
This is where the principal has represented to the third party that the agent has authority to act on their behalf.
What criteria must be demonstrated to establish apparent authority?
Must have been a representation regarding the person as an agent
Principal must have conveyed this representation
Third party acts based on this representation
How does the creation of an agency through ratification work?
An agent who was duly appointed has exceeded their power or a person with no authority has acted as if they have authority - the principal can either accept or reject the contract
What can ratification either be?
Expressed or implied
What criteria must ratification meet in order to become effective?
Given in reasonable time
Principal must be in existence at the time of contracting
Third party must be aware principal exists and agent acting on their behalf
Principal must have capacity to contract
How does the creation of an agency through necessity work?
This occurs during emergency or extraordinary situations, where one party has acted on behalf of another