BLP Revision PDF

BLP — Revision Tags Business Law & Practice (FLK 1) miscellaneous: “client provides a personal guarantee” = client will be personally liable it is no longer a requirement for a company to have a company secretary a...

BLP — Revision Tags Business Law & Practice (FLK 1) miscellaneous: “client provides a personal guarantee” = client will be personally liable it is no longer a requirement for a company to have a company secretary an employee may have apparent authority to act as the agent of the business it works for. this is a representation made by the business as the principal, not a representation made by the employee as the agent. business mediums companies & company decision making: company as a business medium a shareholder is liable in respect of any amounts unpaid on his shares (s74 Insolvency Act 1986) shareholders’ liability? if shareholder’s shares are fully paid, then the concept of limited liability protects the shareholder from any liability directors’ for company debts: as company is a separate liability? legal personality, directors are not personally liable for company debts unless they have traded wrongfully (s214 Insolvency Act 1986) BLP — Revision 1  for breaches of directors’ duties: directors may be personally liable — a court may order a director to personally contribute to the company’s assets s9 CA 2006 — the memorandum of association must be submitted with the application requirements for registering a if the company does not elect to adopt the company? model articles, then articles of association must also be sent with the application who owns the company itself (separate legal personality) company assets? — not the shareholders or the directors requirements for two shareholders, two directors, minimum a public share capital of £50,000 [£12,500 of which company? must be paid up] at least one director who is a natural person requirements for aged 16+ a private company? model articles for private companies company decision-making limited by shares passed with majority (ie over half) of votes ordinary cast at a shareholder’s general meeting in resolution favour of the resolution 75% or more of votes cast at a shareholder’s general meeting in favour of resolution so not about number of shareholders, but the special resolution number of shares they hold — you need at least 75% of the total eligible voting rights needed for changing articles of association or name of company BLP — Revision 2  poll vote each share carries one vote each shareholder has one vote (default, show of hands unless poll is demanded - MA 42) abstaining shareholders can abstain from voting chairman’s casting vote: can be used where original vote is a tie (Companies (MA) Regulations 2008 (unamended) - (MA 13) [remember that tied vote = resolution is defeated — so if vote tied, but chairman wants it to go through, chairman can use casting vote] casting vote note: if chairman of board is voting as a shareholder, chairman does not have a casting vote (so a tie in this case means the resolution doesn’t go through) there must be 14 clear/full days between the date the notice is provided and the date of the meeting holding a general if sent by email, then add 48 hours to 14 clear meeting days [e.g. if directors email notice of general meeting to all shareholders on Tuesday 5 January, then the earliest date the meeting can be held is Friday 22 January) consent to short notice requires a majority in number of members who together hold at short notice least 90% of the shares (ss307(5) & (6) CA 2006) substantial where a director, in their personal capacity, or property someone connected with a director transactions (i) buys from or sells to (transaction) (2) property (non-cash asset) (3) of substantial value (>£100,000 or >£5,000 & >10% of company’s net asset value) BLP — Revision 3  connected = (a) member of director’s family [spouse, civil partner, child, step-child, parents, any person who lives in an enduring relationship with director as their partner, any children of such person in an enduring relationship) (b) or a company in which director or a person(s) connected with a director (or the director and persons connected with the director taken together) (i) own(s) at least 20% of shares, or is/are entitled to exercise or control the exercise of >20% voting power at any general meeting of the company for the board to enter into an SPT, you need the consent of the shareholders by way of an ordinary resolution company can change its name by special resolution or any other means set out in company’s articles of association under MAs: changing 1) complete and send prescribed form to registered name Registrar of Companies with the special resolution and with the payable fee prescribed by the Registrar of Companies 2) after Registrar accepts the change, Registrar sends through the certificate of incorporation on change of name changing articles company can change its name by special of company resolution A copy of the special resolution (together with the articles as amended) must be sent to the Registrar not later than 15 days after the amendment takes effect (section 26 CA BLP — Revision 4  2006). Usually, the changes take effect immediately. ultra vires conduct of a under CA, such conduct will still bind the company company if the other party acted in good faith employee by shareholders’ ordinary resolution or by appointing a new board resolution (MA 17) — then need to send director the relevant form (AP01) to Registrar of Companies within 14 days of the appointment if the directors hold a board meeting to vote director’s on the proposed transaction, then the director personal interest with the personal interest in the subject of the in a proposed resolution cannot count in the quorum and transaction with cannot vote, even if she declares her interest the company (MA 14). but MA 14 can be disapplied by amending the MAs partnerships: e.g. 1. A, B, and C formed a partnership (firm) without any partnership agreement. 2. C retires. Notice published in London Gazette. All partnership stationery with C’s name is destroyed. 3. On same day that C retired, with partners’ agreement, D acquires C’s share, taking into account debts incurred by firm at that date. B, C, and D agree to indemnify A in respect of these debts. 4. Firm receives notice of judgement debt following non-payment of a supplier invoice dated two months after A left. 5. Supplier has been dealing with firm and all partners for a few years. Which of the following statements best describes who may be held liable for the judgment debt? BLP — Revision 5  6. A, B, C and D will be liable as actual notice had not been given to the supplier and C continues to be liable. 7. When a partner retires from a partnership, they will not generally be liable for debts and liabilities incurred after their retirement unless: (i) they fail to give appropriate notice pursuant to s.36 Partnership Act 1890; or (ii) they knowingly hold themselves out or allow themselves to be held out as a partner after their retirement (s.14 Partnership Act 1890). 8. Here, the firm failed to give appropriate notice to the supplier. The supplier knew C was a partner and had dealt with C before C’s retirement. The supplier needed to get actual notice to ensure C would not be held liable for any future debts incurred by the firm. Actual notice requires notifying the supplier directly. Notice in the London Gazette is not actual notice. 9. Until such time as actual notice is given, the supplier is entitled to treat the partnership as being unchanged and therefore can enforce the judgment against C as they may assume that C remains a partner. how are partnership equally (in the absence of any agreement to the profits shared? contrary) sharing capital and income profits in unequal share; what are some things in respect of which sharing in profits and losses in different contributions; partners can agree to override the default not requiring unanimity to introduce a new partner; provisions in the PA 1890? not requiring unanimity to expel a partner as they share income profits equally (in the absence of any agreement to the contrary), partners pay income tax evenly too (eg if 4 partners, each pays tax on 1/4) how do partners pay ie they don’t pay income tax proportionate to their income tax? contribution to the partnership capital — it is about the total partnership income profits, which are split evenly. note that partners are taxed as individuals. BLP — Revision 6  ordinary matters = decided by majority. under PA 1890, only four decisions that require unanimity: (i) varying the terms of the partnership (s19) decisions: majority or unanimity? (ii) introducing a new partner (s24(7)) (iii) changing the nature of the partnership (s24(8)) (iv) expelling a partner from the partnership (s25) [this included consent of the partner who the other partners want to remove] s30: If a partner, without the consent of the other what if partner makes partners, carries on any profit for themselves or business of the same nature as and competing with another business by that of the firm, he carrying on the same must account for and pay over to the firm all profits business as the made by him in that business. ie partner must share partnership? the profit they have received from their rival business with the firm then (i) the partnership will end unless there is an express partnership agreement that says otherwise (s26(1)) what if a partner gives notice that they want to a partnership “at will” (for an indefinite duration) leave? may be dissolved by any partner giving notice to the others (incl. “I want to retire”) (ii) to take on a new partner, unanimity will be required among all partners including new potential partner apparent authority test 1. Does it relate to the type of business carried out by the partnership? (Objective test) 2. Is the transaction one which a single partner in such a firm would usually have the authority to act? BLP — Revision 7  (Objective test) 3. Did the other party to the transaction know that the partner lacked actual authority? (Subjective test) 4. Did the other party know or believe that the person was a partner at the time of the transaction? (Subjective test) if all parts of test are not satisfied, then partnership not bound by transaction entered into by the partner in question. but this partner remains personally liable. partners wont generally be liable for debts and liabilities incurred after their retirement unless: (i) they fail to give appropriate notice pursuant to s.36 Partnership Act 1890; or (ii) they knowingly hold themselves out or allow themselves to be held out as a partner after their retirement (s.14 Partnership Act partners’ liability for 1890) debts and liabilities incurred after their if party to whom debt/liability is owed dealt with retirement? partner before, that party is entitled to treat the partnership as unchanged and can therefore enforce the debt/liability against the retired partner on the assumption that the retired partner is still a partner, unless actual notice was given to this party that the partner retired (see here) client considerations regarding type of business: GOOD BAD desire for general partnership — limited liability privacy? don’t need to file anything partnerships — these with the Registrar of must file certain Companies at any time documents like annual accounts with the [cf limited liability Registrar of Companies partnerships — these BLP — Revision 8  must file certain documents like annual accounts with the Registrar of Companies] sole trader — no filing requirements private company — can have only 1 director and sole trader — unlimited risk-aversion? shareholder + provides liability limited liability general partnership — a partnership is formed as soon as two or more people are carrying on a ease? business in common with a view to profit; no need for registration or any written constitutional documents partnership — requires at least 2 partners sole trader — one person; have as much control you starting desire limited liability business alone partnership — requires / not wanting two members to share private company — can control? have only one director and shareholder public company — requires two shareholders and two directors income tax money with element of recurrence (e.g. salary, interest received on income? bank account) BLP — Revision 9  who pays individuals, partners, PRs, trustees income tax? who doesn’t pay income corporations (corporation tax) and charities (exempt) tax? (1) total income minus allowable reliefs = net income. (2) net income minus personal allowances = taxable income. how is it out of taxable income, calculated? separate NSNDI from savings and dividend income. then, (1) calculate tax on NSNDI, (2) calculate tax on savings income, (3) calculate tax on dividend income, then add (1) + (2) + (3) to get overall income tax liability. separate NSNDI from savings and dividend income. calculate tax on each type of income at applicable rate. add both amounts of tax to get overall income tax liability. NSNDI first. savings income second. dividend income third. BLP — Revision 10  for ordinary/basic rate: 8.75% dividends for upper/higher rate: 33.75% for additional rate: 39.35% for £0 — £5,000: 0% for £5,000 — £37,700: 20% savings for £37,701 — £125,140: 40% for >£125,140: 45% savings = interest received in savings accounts for £0 — £37,700: 20% NSNDI for £37,701 — £125,140: 40% for >£125,140: 45% for £0 — £37,700: £1,000 tax free personal savings for £37,701 — £125,140: £500 tax free allowance for >£125,140: no allowance qualifying loans: loans to buy a share in a partnership or to lend money to a allowable partnership reliefs the interest paid on these loans can be deducted from total income = a ‘qualifying loan’ dividend £500 allowance partners partnerships: not separate legal persons. so individual partners pay tax and/or CGT. 1. chargeable receipts minus deductible expenditure minus capital BLP — Revision 11  allowances = trading profit. 2. trading profit is apportioned apportioned between the partners in accordance with their shares in the income profits of the partnership 3. each partner pays tax on their individual share of the income profits of the partnership If an individual borrows money to buy a share in a partnership or to lend money to a partnership, they can deduct the interest they pay on this borrowing from total income — this loan is a ‘qualifying loan’. cap on this tax relief = £50,000 or 25% of the taxpayer’s total income less allowable pension contributions in the tax year where the relief is claimed, whichever is bigger (but the cap only relates to income from sources other than the trade which produced the loss, so its effect is limited) chargeable receipts minus deductible expenditure and capital sole traders allowances = trading profit directors and other employees BLP — Revision 12