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
When may courts bind the principal of authority through necessity?
It was not possible for the agent to discuss the issue with the principal to gain their instructions
Agents action was necessary under the circumstances to prevent damage or loss to principal
Agent acted in good faith
What is the fiduciary duty of an agent?
A commitment of the agent to always act in the best interests of the principal
What are the obligations of agents under fiduciary duty?
Avoid placing themselves in a position where their own interest conflicts with principal
Abstain from being in situations where they profit from the principal
To refrain from disclosing confidential information or docments
What are some other duties of agents?
Obligation to obey the lawful instructions of the principal
Carry duties assigned to them personally unless delegation allowed / implied / required
Obligation to carry out duties with care and diligence
Obligation to pay the principal all sums received on their behalf to maintain proper accounts
What are the rights agents have?
Indemnity
Payment
Maintain the goods (lien)
What is the agents right of indemnity?
Any costs occurred in the the course of their duties unless specified in the agreement or authority exceeded covered by principal
What is an agents rights to payment?
Can either be the result of an express agreement or implied by parties conduct and circumstances
What is an agents rights in regards to maintaining goods?
Entitles the agent owed money by principal to maintain control over the goods relating to the debt until satisified
What is the tort liability of agents?
Where the agent committed a wrongful act, they are held liable and must pay damages.
The principal may be jointly and severally liable for wrongful act provided there is sufficiently close connection between agents authority and the events (vicarious liability)
What is the basis for vicarious liability?
The deep pocket theory - the principal has deeper pockets than the agent to pay for injuries traceable one way or another to events set in motion
What are some examples of vicarious liability?
Owner of delivery company liable for a car accident caused by a driver while delivering to clients
Employer liable for leak of lists of personal data by security expert or marketing professional
What can happen if the third party files a claim against the principal rather than the agent?
The principal is entitled to seek reimbursement by the agent for any damages they were forced to pay, but for the when the principal authorised wrongful conduct
What contractual liability is there where an agent exceeds the principals authority?
It depends on whether the agent has identified themselves as such, or if they have not disclosed themselves as acting for a principal
What liability is there where the agent has disclosed the agency relationship?
When the agent discloses the principal to the third party and were acting under actual authority, liability is transferred to the principals.
What liability is there if the agent has not disclosed the principal?
The contract will exist between the agent and third party. The undisclosed principal may assume obligations arising from such contracts unless where the third party would not have agreed if the principal was disclosed or specifically asked the agent to identify the principal but they did not.
When may an agency be terminated?
Mutual agreement of parties Expiry of its period of validity Accomplishment of purpose Revocation of the agreement Alteration in business circumstances Bankruptcy, loss of capacity, illness/death of either Purpose of agency becoming illegal
What are the categories of employment law?
Employment law / individual labour law
Labour law / collective law
What are some formal sources of employment law?
Common Law
Employment Protection Legislation
Code of Practice
What are some Employment Protection Legislations?
Equality Act
National Minimum Wage Act
Working Time Regulations
What are some informal sources of employment law?
Collective agreements
Work rules, notices and other management documents
Self-regulatory codes of practice
What are some national institutions of employment law?
Employment Tribunals Employment Appeal Tribunal Common Law Courts Equality and Human Rights Commission Advisory Conciliation and Arbitration Service
What are some international institutions of employment law?
International Labour Organisation
European Court of Human Rights
Where can express terms be found?
In the written statement of terms
Incorporated from collective agreements
From work rules in handbooks
Out of express terms and implied terms, which prevail when relating to the same manner?
Express terms
How soon does a written statement of the employment need to be given?
Within two months of starting employment (only if you are an employee)
What must the written statement that is given upon starting employment state?
Names of employer and employee Date employment began Remuneration Terms and conditions relating to hours of work, holiday, sick pay Pension scheme Notice period Place of work
What are some implied duties owed by employers?
To pay To provide work To indemnify Safety or duty of care Mutual trust and confidence
What are some implied duties of the employee?
Duty of mutual trust and confidence To be ready and willing to work To use reasonable skill and care To obey lawful orders To take care of the employer's property
What are the 3 employment statuses?
Employee
Worker
Independent Contractor
What rights do employees get?
Unfair dismissal Notice periods Redundancy payments NI contributions Request flexible working Dependants emergencies
What rights do you get if you are at least a worker?
Minimum wage Paid holiday Rest breaks Limits on maximum working time per week Statutory sick pay/maternity pay...
What tools are there to define worker relationship?
Statutory definition
Judicially construed tests
What does the statutory definition say about employment rights?
An employee has a contract of service - a contract of employment
What type of contract does an independent contractor have?
A contract for services
What common law tests are there to determine employment status?
Control test Integration test Economic Reality test Mutuality of Obligations Combined multifactorial test
What is a lawful dismissal?
Dismissal of employee by reasonable notice, summary dismissal for cause without notice, non renewal of contract
What is wrongful dismissal?
Dismissal of employee where the employer breached an expressed or implied term
What is the control test?
Who is the master and the servant?
Who sets the hours of work?
What is the integration test?
Check how integrated someone is within the business, the more they are the more an employee they are
What is the economic reality test?
Who assumes the financial risk - if the person then they’re most likely a contractor
What is the mutuality of obligations test?
Is there an obligation for the employer to provide wok and pay them, and is there an obligation for the employee to work?
What is unfair dismissal?
Where the employer acts unfairly, without good reason to dismiss someone. Usually have to have worked for two years.
What are the qualifications for unfair dismissal?
Is the claimant entitled to take a case? (burden of proof on employee)
Was the main reason for dismissal lawful? (Burden on the employer)
Did the employer handle the dismissal in a reasonable way? (burden of proof neutral)
What is redundancy?
This is where compensation is offered for the loss of the job to an employee.
Employer must apply proper and fair redundancy procedures (pools, selection criteria, consultation)
What are some reasons for redundancy?
Business closure, workplace closure, reduced employee requirement
Who is covered by the Equality Act 2010?
Someone employed to personally do work
Who should not discriminate?
Employers
Employees/workers
Vocational training providers
Trade unions and associations
Who is excluded for age and disability discrimination?
Armed forces
What are the protected characteristics?
Age, disability, gender reassignment, marriage and civil partnership, race, religion, sex, sexual orientation
What is direct discrimination?
Treating a person less favourably because of a protected characteristic?
What is direct discrimination by association?
Less favourable treatment of a person because they have a link with the protected characteristic but do not share it
What is direct discrimination by perception?
Less favourable treatment because someone is perceived to bear a protected characteristic, whether the perception is correct or not
What is indirect discrimination?
This is where a provision or practice puts someone with a protected characteristic at a disadvantage
How do you show indirect discrimination?
Show that you have suffered or that a particular group has suffered by making a comparison to those who have not
What is harassment?
It is unwanted conduct related to the relevant protected characteristic that violates dignity or creates a hostile environment.
Types are related to sex/gender, sexual harassment or less favourable treatment due to acceptance/rejection
What is victimisation?
This is where an employee subjects a person to detriment because they brought proceeding under the act, gave evidence in connection to proceedings or alleged that another person breached the equality act
What is the equality clause in the equality act?
It aims to ensure that a woman’s terms of employment are no less favourable than a mans
What must claims under the equality clause must have reference to?
A comparator from the same employment or hypothetical comparator
What defence can an employer have to an equality claim?
A material factor defence that a difference in pay is not due to the sex of the claimant but reasons such as responsibility or experience
What are some work-life balance rights?
Pregnant workers (unfair dismissal if pregnant) Maternity rights (maternity leave, pay, allowance) Family friendly policies (provide assistance to dependant)
What are the Working Time Regulations of 1998?
They implement working time directive and young workers directive for health and safety limits.
What sectors are excluded from the Working Time Regulations?
Armed forces, police Mobile workers Domestic service Agricultural workers Doctors in training
What does the WTR state?
You must have minimum daily, weekly and annual periods of rest, entitled to breaks, entitled to holiday pay and annual leave
What is the maximum working week?
The maximum working time (including overtime) must not exceed 48 hours per week over a period of 17 weeks
What is the maximum working week for young workers?
8 hours per day or 40 per week
What rest periods for adult workers and young workers?
Rest for 11 consecutive hours in each 24, 24 hours in each seven-day period (Adult)
Rest 12/24 consecutive hours, 48 hours in each 7 day period (Young workers)
What are the annual leave rules?
5.6 weeks in any leave year
20 days plus 8 days
Must be taken in the leave year which it was due
What are some issues with annual leave?
Rate of Holiday Pay
No carry forward
No right to roll up holiday pay
What does the WTR lay down?
Criminal and civil proceeding used to enforce its provisions
What must workers be paid?
The National Minimum Wage - including workers
What is pay counted over?
Period of one day/week/month discounting tips or expenses
What can individuals do with their pay records?
They can inspect them to check them for unauthorised deductions or a breach of minimum wage
What act regulates health and safety?
Health and Safety at Work Act 1974
What do employers owe to employees in regards to safety?
Duty to take reasonable care of health and safety of all workers by providing safe plant and systems, safe handling, relevant information and a safe environment
How is enforcement of the health and safety act enforced?
A fine or imprisonment of the employer
