Week 9 - Company Law

Question 1

What is the principle of limited liability?

Answer 1

Shareholders stand to lose only their investment in the company and no other assets in the event that the company fails.

Question 2

What is an agent?

Answer 2

An agent is a person who has legal authority to conduct business on behalf of another person, known as a principal.

Question 3

What does an agent not do?

Answer 3

An agent does not contract on their own behalf, but on behalf of their principal. Normally, there will be a contract between principal and agent.

Question 4

What are the duties of an agent?

Answer 4

• Obey lawful instructions
• Use care and skill
• Perform duties personally
• Fiduciary duties

Question 5

What are examples of fiduciary duties?

Answer 5

• Avoiding conflict of interest (Imageview v Jack [2009])
• Not making secret profit (Boardman v Phipps [1967])
• Not take a bribe
• Keep their own property separate
• Record their dealings on their principal’s behalf
• Duty of confidentiality

Question 6

What are the rights of an agent?

Answer 6

• To be indemnified (reimbursed) against losses and liabilities.
• Be repaid expenses and any agreed remuneration
• Exercise a lien

Question 7

How can an agency be created?

Answer 7

• Agency by consent (this may be expressed or implied)
• Agency be estoppel
• Agency of necessity
• Ratification

Question 8

What are the different types of business ventures?

Answer 8

• Sole Traders
• Partnerships
• Companies

Question 9

What are the characteristics of a sole trader?

Answer 9

• One individual, who owns the business, even though may employ others e.g. plumber, electrician
• One person business
• Business is not registered
• Trading name must not clash with that of another business
• Liable for business debts to extent of everything owned e.g. house, car, savings. Unlimited liability.

Question 10

What are the different partnerships in law?

Answer 10

• Partnership under the Partnership Act 1890 is the most usual form of partnership.
• Limited Partnerships under the Limited Partnership Act 1907, (amended 1890 Act) - very rare.
• Limited Liability partnerships under the Limited Liability Partnerships Act 2000 - LLP, designed for large worldwide partnerships e.g. accountancy and law firms.