Summary Notes – Business Law and Practice PDF

is En im Summary Notes – ah Business Law and Practice br Solicitors Qualifying Examination – SQE ,I an zk © QLTS School Ltd. All Rights Reserv...

is En im Summary Notes – ah Business Law and Practice br Solicitors Qualifying Examination – SQE ,I an zk © QLTS School Ltd. All Rights Reserved. Not for Distribution. O  Summary Notes – Business Law and Practice 1. Forms of Business Organisations is A comparison for the sole proprietorship, partnership, LLP and private company limited by shares is provided below: Sole Proprietorship Partnership LLP Private Company Limited by Shares En General The sole proprietorship The partnership is generally The LLP is generally suited to The company is generally suited to overview is generally suited to suited to small businesses larger businesses involving two or larger businesses involving at least small businesses involving two or more people more people where there may be a one person where there may be a involving one person which do not require need to raise a significant amount need to raise a significant amount of im which do not require significant capital and where of capital initially or in future. capital initially or in future. significant capital and the owners are willing to share The members will be The members have no automatic where the owner is responsibility for management. automatically entitled to equal right to participate in management ah willing to accept full The partners will be participation in management and nor to receive a dividend. Any responsibility for automatically entitled to equal profit share. Any alternative alternative agreement needs to be management. participation in management agreement needs to be recorded in recorded in the articles of association br The owner will be and profit share. Any an LLP Agreement. or a shareholders’ agreement. entitled to all profits, alternative agreement needs The liability of the members for the The liability of the members for the but will have unlimited to be recorded in a Partnership debts, liabilities and obligations debts, liabilities and obligations will liability for the debts, liabilities and obligations of the ,I Agreement. The partners will have unlimited liability for the debts, will generally be limited to the initial capital contribution of each member. generally be limited to the initial capital contribution of each member. The company can be costly and an business. liabilities and obligations of the The LLP can be costly and time- time-consuming to establish, and is The sole proprietorship business. consuming to establish, and is subject to on-going filing is cost effective and The partnership is cost subject to on-going filing requirements. These disadvantages offers a quick route into effective and offers a quick requirements. These are generally seen to be outweighed zk business, with no initial route into business, with no disadvantages are generally seen by the benefit conferred by limited registration or on-going initial registration or on-going to be outweighed by the benefit liability. disclosure requirements. disclosure requirements. conferred by limited liability. O 2 © QLTS School Ltd S/N 718218  Summary Notes – Business Law and Practice Ownership and The sole proprietor will The general partners will be The members will be the owners of The members will be the owners of management be the owner and the owners of the business. the business. the business. manager of the Subject to any alternative Subject to any alternative Subject to any alternative is business, though may agreement, each general agreement, each member will be agreement, members are employ others. partner will be entitled to entitled to equal participation in automatically entitled to be directors En equal participation in management. of the company. management. The LLP may employ others. The company may employ others. The general partnership may employ others. Funding Limited to the personal Limited to the personal Capital can be provided by the Capital can be provided by the im financial resources of financial resources of the members from personal financial members from personal financial the owner. general partners. resources. The LLP can borrow resources. The company can borrow money in its own right. money in its own right, and raise ah capital through the sale of shares (though not to the public). Legal None None The LLP is a separate legal person The company is a separate legal personality from its members. person from its members. br Liability of Unlimited Unlimited Limited to the initial capital Limited to the initial capital owners contribution of each member (if contribution of each member (which any). can be as little as £1). Initial and on- going None ,I None A specified statutory procedure must be followed on incorporation, A specified statutory procedure must be followed on incorporation, with an requirements with on-going disclosure and filing on-going disclosure and filing requirements thereafter. A requirements thereafter. A specified specified statutory procedure must statutory procedure must be be followed to bring the LLP to an followed to bring the company to an zk end. end. Costs None None Initial and on-going registration Initial and on-going registration fees. fees. O 3 © QLTS School Ltd S/N 718218  Summary Notes – Business Law and Practice Continuity The sole proprietorship The partnership will dissolve The LLP will be unaffected by the The company will be unaffected by will cease on the on the bankruptcy, death, etc. bankruptcy, death, etc. of an LLP the bankruptcy, death, etc. of a bankruptcy, death, etc. of a partner. member. member. is of the owner. Transferability The business of a sole The business of a general The business of an LLP is an asset The business of a company is an En proprietorship is an partnership is an asset owned of the LLP and cannot be freely asset of the company and cannot be asset of the owner, and collectively by the general transferred other than by the LLP freely transferred other than by the so can be freely partners, and cannot be itself. company itself. transferred. transferred without an A member can, however, transfer A member can, however, transfer his agreement between the his or her interest in an LLP to a or her shares to a third party, subject im partners. third party, subject to any to any restrictions in the articles of A general partner cannot restrictions in the LLP Agreement. association of the company. transfer his or her interest in a ah general partnership to a third party because to do so would cause the existing partnership to come to an end. br Taxation The owner is personally Each general partner is Each member is personally taxed The company personally pays taxed on all profits. personally taxed on his or her on his or her profit share. corporation tax on profits. profit share. Each member is personally taxed on ,I any dividend. Despite this, a member of a company will generally pay less tax on a an dividend than would be the case if an equivalent sum was received as profit share from any other form of zk business organisation. Legislation None Partnership Act 1890 LLP Act 2000 Companies Act 2006 O 4 © QLTS School Ltd S/N 718218  Summary Notes – Business Law and Practice Each form of business organisation is treated differently for taxation purposes. A comparison for the sole proprietorship, partnership, LLP, and private company limited by shares is provided below. is Sole Proprietorship Partnership LLP Private Company Limited by Shares Trading The owner personally pays Each partner personally pays Each member personally pays The company pays corporation tax on all profits tax on all profits, subject to tax on his or her profit share, tax on his or her profit share, profits. Each member will then personally En his or her Personal subject to his or her Personal subject to his or her Personal pay tax on his or her dividend if a Allowance. This is regardless Allowance. This is regardless Allowance. This is regardless dividend is paid, subject to his or her of whether the profits are of whether the profits are of whether the profits are Dividend Allowance. paid to the owner, or paid to the partners, or paid to the members, or im retained within the business. retained within the business. retained within the business. Capital The owner personally pays Each partner personally pays Each member personally pays The company pays corporation tax on all gains tax on any capital gain, tax on his or her share of any tax on his or her share of any chargeable gains. Each member will subject to his or her Personal capital gain, subject to his or capital gain, subject to his or then personally pay tax on any capital ah Allowance. her Personal Allowance. her Personal Allowance. gain arising from a sale of shares, subject to his or her Personal Allowance. Business Business relief on inheritance Business relief on inheritance Business relief on inheritance Business relief on inheritance tax can be br relief for tax can be claimed at: tax can be claimed at: tax can be claimed at: claimed at: inheritance 100% of the value of the 100% of the value of the 100% of the value of the 100% of the value of the Deceased’s tax business of the sole Deceased’s interest in the Deceased’s interest in the shares (provided the company is not proprietorship; and 50% of the value of any land, buildings or ,I business of the partnership; and 50% of the value of any business of the LLP; and 50% of the value of any land, buildings or listed on a stock exchange); and 50% of the value of any land, buildings or machinery owned by the Deceased an machinery owned by the land, buildings or machinery owned by the personally for at least 2 years and Deceased personally for machinery owned by the Deceased personally for at used in the course of business. at least 2 years and used Deceased personally for at least 2 years and used in zk in the course of business. least 2 years and used in the course of business. the course of business. Pension Pension relief can be Pension relief can be claimed Pension relief can be claimed Pension relief can be claimed by a O relief claimed by the owner on by a partner on private by an LLP member on private member on company and private private pension contributions pension contributions, subject pension contributions, subject pension contributions, subject to his or subject to his or her annual to his or her annual and to his or her annual and her annual and lifetime allowance. and lifetime allowance. lifetime allowance. lifetime allowance. 5 © QLTS School Ltd S/N 718218  Summary Notes – Business Law and Practice A variety of factors must be taken into account when deciding which form of business organisation is the most suitable for a client’s purposes. These factors can be business-or tax-related, or may be influenced by legal concerns. is If the client’s objective is to limit the personal risk associated with the business venture, the LLP or the company limited by shares is the En most appropriate form of business organisation. If the client’s objective is to carry on business as cost-effectively, quickly and simply as possible, the sole proprietorship or partnership may be the most appropriate form of business organisation for the client. im ah br ,I an zk O 6 © QLTS School Ltd S/N 718218  Summary Notes – Business Law and Practice 2. The Various Types of Companies and the Theory Behind the Limited Company Types of Companies Types of companies that can be incorporated under the Companies Act 2006 (CA 2006): Company limited by shares. Company limited by guarantee. Unlimited company. Each type can be incorporated as a private company. A public company must be limited by is shares. En Public and Private Companies Public Company Private Company Minimum Membership 1 (although it is very rare that 1 Minimum Share Capital £50,000 im a public company will have only one member) No ah Minimum Paid Shares 25% No Public Trading of Shares and Yes No Debentures br Name (suffix) “public limited company” or “Limited” or “Ltd” “plc” Minimum Directors 2 1 ,I Company Secretary (CoSec) Separate CoSec required. Sole Director can act as Needs to have several CoSec or just not have qualifications. one at all. an Requirement to hold AGM Yes No zk Written Resolutions No May pass written resolutions O Commencing Business After receipt of certificate After receipt of certificate from the Registrar stating of incorporation from the that the nominal value of the Registrar company’s allotted share capital is not less than the authorised minimum 7 © QLTS School Ltd S/N 643901  Summary Notes – Business Law and Practice Unlisted Public Companies Public companies may be listed on a stock exchange, or not. The CA 2006 does not distinguish between listed and unlisted public companies. A listed public company can be delisted and become an unlisted public company by choice or if it fails to meet certain criteria. The Company as a Separate Legal Person Doctrine of separate legal personality: A company is a separate legal person from its members (Salomon v Salomon & Co. Ltd ). As a legal person acting through its directors, a company is permitted by law to: is enter into contracts; En buy and sell property; employ natural persons, including its own members if necessary; and sue and be sued. im Any debts, liabilities or other obligations of the company belong to the company. ah Exceptions to the Rule in Salomon A member cannot be held liable to contribute any further sum in respect of the debts, liabilities or obligations of the company, other than in exceptional circumstances: br as a consequence of the carrying out of a legislative offence; ,I upon the “piercing of the veil” by the court; or upon the imposition by the court of liability in tort. an Legislative Offences These impose liability on the members or offices of the company to contribute to the assets of zk the company in liquidation but apply only when a company is being wound up. Fraudulent trading – occurs when the business of a company has been carried on with O intent to defraud the company’s creditors or for any fraudulent purpose (s. 213(1), IA 1986). Wrongful trading – occurs when a company has gone into insolvent liquidation and a person who was a director of the company knew or ought to have known that there was no reasonable prospect of avoiding insolvent liquidation (s. 214(2), IA 1986). Transactions defrauding creditors - occurs where a person: o makes a gift to another person or otherwise enters into a transaction with the other on terms that provide for him to receive no consideration; or 8 © QLTS School Ltd S/N 643901  Summary Notes – Business Law and Practice o enters into a transaction with another person for a consideration the value of which, in money or money’s worth, is significantly less than the value, in money or money’s worth, of the consideration provided by himself. Piercing the Corporate Veil This means disregarding the doctrine of separate legal personality to impose liability for the debts, liabilities or obligations of a company on its members. Prest v Petrodel Resources Limited : “…there is not a single instance in this jurisdiction where the doctrine [that it is open to a court to pierce the veil of incorporation] has been invoked properly and successfully”. is Concealment principle enables the identification of facts which may be concealed by En the doctrine of separate legal personality. Evasion principle applies where a person interposes a company under his control in order to evade or frustrate an existing legal obligation, liability or restriction; Liability in Tort im The court may impose tortious liability on a member or officer of a company for activities carried out by or through the company, based on the existence of a duty owed by the member ah or officer to a third party transacting with the company. Duty of care (Chandler v Cape Plc ) br A parent company had assumed a duty of care for the safety of employees of a subsidiary and, upon breach of that duty, was held to be liable for damages. ,I The duty of care was established on the facts that the conduct of the parent company amounted to an assumption of a duty of care for the employees of the subsidiary. an Negligent misstatement (Williams v Natural Life Health Foods Ltd ) A director, employee or member of a company can be held personally liable for a zk negligent misstatement made to a claimant who has transacted with the company if: o there was reasonable reliance by the claimant on an assumption of personal O responsibility by the director, employee or member; and o the extent of that personal responsibility was such as to create a special relationship between them. Ring-Fencing Individuals or companies have the right to protect themselves against potential future liabilities by creating a separate limited liability company for specific activities. For example, a parent company can establish a subsidiary to handle activities that may lead to personal injury claims. This practice effectively ring-fences the subsidiary, shielding it from such claims. 9 © QLTS School Ltd S/N 643901  Summary Notes – Business Law and Practice Ring-fencing is a legal or financial arrangement that isolates certain assets or activities to protect them or create separation. It can be employed when transferring assets from a parent company to its subsidiary, providing protection against risks or achieving tax benefits. While the presence of ring-fencing may be a factor in a court's decision to lift the corporate veil, it is generally not sufficient on its own. Courts typically look for factors like fraud, improper conduct, or an abuse of the corporate structure to disregard the separation between a company and its shareholders. is En im ah br ,I an zk O 10 © QLTS School Ltd S/N 643901  Summary Notes – Business Law and Practice A comparison of the different types of company is provided below: Private Company Public Company Limited Company Limited by Unlimited Company is Limited by Shares by Shares Guarantee Overview The most common The only company which A private company A private company with or without En form of company. can sell its shares to the without share capital share capital, and the most unusual public, either directly or by which is typically used for form of company because the liability listing on a stock exchange. charitable, social or non- of its members is unlimited. trading purposes. im Name Must end in Must end in “Public Limited May be exempt from Prohibited from using the word “Limited” or “Ltd”. Company” or “Plc”. using the word “Limited”. “Limited”. ah Separate Legal Personality Yes Yes Yes Yes Limited Liability Yes. Limited to the amount unpaid on the nominal Yes. Limited to the None. The liability of members is value of the shares held by each member, if any. amount each member has unlimited. In the event of winding up if br undertaken to contribute the company is unable to pay its debts, This is possible because in principle it is possible to to the company in the members or persons who ceased to be defer payment of the purchase price of a share, event of winding up members within one year of winding up ,I though it is unusual to do so. The nominal value is the book value of the share whilst he or she is a member, or within one year of ceasing to be a may be required to contribute an unlimited sum to the assets of the company. an assigned when the share is issued. For example, a member. company may have share capital of 100 “ordinary A former member will not be liable for shares of £1 each”. The amount is agreed at any debts incurred after he or she zk the time the member joins ceased to be a member or if he or she The nominal value can be different to the purchase the company. is unable to afford to make a price of the share, which may include a premium to contribution. reflect the perceived value of the share. O Creditors cannot claim against the members directly. A claim must be made against the company, and the 11 © QLTS School Ltd S/N 718218  Summary Notes – Business Law and Practice liquidator will seek contributions from the members. is Capital Restrictions Restrictions relating to: N/A No restrictions, subject to any reduction of capital; alternative provision in the articles of This is because a En issue and redemption of redeemable association. company limited by shares; and guarantee does not have This may be advantageous in group purchase by a company of its own shares. share capital. structures where free movement of capital within the group is required. im Filing Requirements Required to file annual accounts. Required to file annual Not required to file annual accounts. accounts. This may be advantageous if the ah company does not wish to publicise its financial position. br ,I an zk O 12 © QLTS School Ltd S/N 718218  Summary Notes – Business Law and Practice 3. Limited Companies – Formalities, Statutory Filing and Disclosure Setting Up a Limited Company A limited company may be incorporated by complying with the registration process administered by the Registrar of Companies (i.e. Companies House). Promoter – an individual who undertakes to form a company and takes the necessary steps to accomplish that purpose. He will be personally liable for any contract entered into prior to incorporation of the proposed company even if the contract is for the benefit of the company (s. 51, CA 2006). is Prior to Incorporation En One or more persons (known as “initial subscribers”) subscribe their names to a memorandum of association and comply with the requirements of the CA 2006 which include the filing of an application to register a company with the Registrar of Companies in form IN01. If the registration requirements are met: im The Registrar of Companies will issue a certification of incorporation and the company will come into existence as a separate legal person. ah The initial subscribers become the first members of the company and their names will be entered on the register of members. br Factors to Consider for Incorporation Name of the Company ,I A private limited company can have any name providing it ends with the word ‘limited’ or ‘ltd’ or the Welsh equivalents with exceptions as noted in the CA 2006. A company can voluntarily an change its name: by any means provided in the articles of association; zk by passing a special resolution of the members; or by passing a special resolution conditional on the occurrence of some specified event. O Registered Office A company is required to have a registered office situated within the UK to which communications and notices may be addressed. A change in the registered office may be done by giving notice to the Registrar of Companies using Form AD01. Initial Shareholdings A private limited company must have at least one issued share. There is no upper limit (i.e. no maximum number of members) unless provided otherwise in the articles of association. 13 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice A statement of share capital and initial shareholdings must be provided as part of the process of registering a new company. Constitution of a Company The constitution of a company comprises the articles of association and certain resolutions and agreements of the members (s. 17). Historically, it also included the memorandum of association. Memorandum of Association The memorandum is evidence of is the intention of the subscribers to form a company and become members of that company on formation; and En the members’ agreement to take at least one share each in the company (for companies that is to be limited by shares only). Company’s Objects im An objects clause states the purpose for which a company is formed and/or the range of activities it is permitted to carry out. It must be provided as part of the process of registering a ah new company. The objects of a company incorporated post- 1 September 2009 are unrestricted unless the articles of association provide otherwise (s. 31(1)). Articles of Association br All registered companies must have articles of association which must be contained in a single document and be divided into paragraphs numbered consecutively (s. 18(1)). ,I The articles are the primary part of a company’s constitution as these: an contain internal rules for the administration of the company, ranging from the responsibilities and powers of the directors, to the conduct of board and members’ meetings. zk form a statutory contract between the company and its members, and between each of the members in their capacity as members. O The company can adopt model articles with no amendments, adopt model articles with bespoke amendments, or adopt standard form articles as drafted by its legal advisers. Post-Incorporation Formalities The members or officers will need to take into account several considerations (as necessary) upon incorporation such as appointing bankers and auditors, opening bank accounts, altering the company’s automatically designated reference date, registering the company for tax, etc. The company is also required to publish the company’s name and registered address according to the Company, Limited Liability Partnership and Business (Names and Trading Disclosures) Regulations 2015: 14 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice registered name to be displayed at its registered office and any other locations at which it carries on business; registered name to appear on items such as business letters, notices, official publications, order forms, invoices, cheques, receipts, business correspondence and documentation, order forms and websites; the country in which the company is registered, its registered number and the address of its registered office to appear on items such as the company’s business letters, order forms and website; and correspondence which includes the name of any director of the company to also disclose the name of every director of the company. is Articles of Association En Provisions Directors – The model articles include provisions relating to company directors including their decision-making process and powers (Articles 7 to 16), appointment (Article 17), role and remuneration (Article 19). im Shares – The model articles include provisions relating to shares including the power of the ah company to issue and allocate shares (Article 21), the power of the company to create different classes of shares (Article 22), the administration of share capital (Articles 23 to 29), and the payment of dividends (Articles 30 to 35). br Members – The model articles include provisions relating to members including the organisation of meetings and the conditions which must be met to ensure meetings are valid (Articles 37 to 41) and the rules governing voting at general meetings of members (Articles 42 ,I to 47). Amendment an The articles can be amended by a special resolution of the members (s. 21). A special resolution requires the approval of not less than 75% of the members. zk Any amendment or alteration must be in the best interests of the company as a whole. The company must register the amendment by sending: O a copy of the amended articles to the Registrar of Companies within 15 days after the amendment takes effect (s. 26(1)); and a copy of the resolution within 15 days after it is passed or made (30(1)). The amended articles take effect immediately upon the passing of the members’ resolution and regardless of whether the registration requirements are complied with or not (Gunewardena v Conran Holdings Limited ). Exception: the amendment is to add, remove or alter the company’s objects in which case the amendment will not be effective until registered. 15 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Provision for Entrenchment A provision for entrenchment may be included in the articles. This provision states that specified provisions (“entrenched provisions”) may only be amended or repealed if certain conditions are met or procedures are complied with (s. 22(1)). If entrenched provisions have been amended, the company must send the usual amendment registration requirements (i.e. a copy of the resolution and the amended articles) to the Registrar of Companies and also include a statement of compliance certifying that the amendment has been made in accordance with the company’s articles. A provision for entrenchment does not prevent amendment of the company's articles by: is a unanimous resolution of the members; or En by order of the court or any other authority having power to alter the articles (s. 22(3)). Annual Confirmation Statement im Every company is required to file a confirmation statement using Form CS01 with the Registrar of Companies at least once every 12 months. The annual confirmation statement confirms that the company has notified the Registrar of any relevant company events or changes to the company during the confirmation period. The changes to the company could be about: ah principal business activities or standard industrial classification (SIC) code; information about people with significant control (PSC); br statement of capital; trading status of shares; and/or ,I member information. an Company Secretary The company secretary is a company officer who often have the following responsibilities: zk administer the company’s records and registers; execute documents on behalf of the company; O file confirmation statements, notices and resolutions with the Registrar; and take minutes of board and members’ meetings. A private company may have a company secretary, and there are no qualification requirements for the company secretary. A sole director can be appointed as both company secretary and director. A public company must have a company secretary, and the company secretary must satisfy certain qualification requirements. Any director can be appointed as both company secretary and director. 16 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Execution of Documents on Behalf of a Company (per s. 44, CA 2006) A document may be executed by a private limited company in one of the following ways: by the affixing of its common seal (this is less common today as most companies do not have a seal); by two authorised signatories; by a director of the company in the presence of a witness who attests the signature; by every director of the company and the company secretary. is Company Records Depending on its type, a company may have some or all of the following records and keep En them for inspection at its registered office: register of members; register of directors; directors’ service contracts; im register of people with significant control (“PSC Register”) ah directors’ indemnities; register of secretaries; records of resolutions and minutes of general meetings; br accounts; agreements; ,I contracts or memoranda relating to purchase of own shares; documents relating to redemption or purchase of own shares out of capital by a an private company; register of debenture holders; zk report to members of outcome of investigation by public company into interests in its shares; register of interests in shares disclosed to a public company; or O instruments creating charges and a register of charges. Company records may be kept in hard copy or electronic form. Private companies may elect to keep certain of their statutory registers on the central register at Companies House, and thereby dispense with having to maintain their own registers additionally. Corporate Governance for Large Private Companies Large company – one which passes two or more of the following thresholds: 17 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice a turnover of over £36 million; a balance sheet total of over £18 million; or over 250 employees. Very large company – one which is not otherwise subject to a corporate governance requirement and meets at least one of the following: over 2,000 global employees; or a turnover of over £200 million and a balance sheet total of over £2 billion. Large and very large private companies must consider the corporate governance reporting is obligations of the Companies (Miscellaneous Reporting) Regulations 2018 (SI 2018/860). En im ah br ,I an zk O 18 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice 4. Company Members Shares Member – shareholder, someone who owns shares in a limited company Share – interest of a shareholder in the company, measured by a sum of money, for the purpose of liability in the first place, and of interest the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with the Companies Act (Borlands Trustee v Steel ). Shares are personal property and are not in the nature of real estate (s. 541). Shares in a is limited company with a share capital: En must each have a fixed nominal value (s. 542); may be denominated in any currency, and different classes of shares may be denominated in different currencies; and im are transferable in accordance with the company’s articles. A certificate specifying the number of shares held by a member is prima facie evidence of the member’s title to the shares (s. 768) but only the entry of the member’s details in the register ah of members provides proof of legal ownership of the shares. Classes of Shares br Ordinary shares – have no special rights or restrictions. Preference shares – have the right to payment of any dividend which is declared by ,I the company in priority to any other share. Redeemable shares – may be bought back by the company after a certain period. an Cumulative preference shares – carry a right that if the company cannot pay the dividend in one year, it will carry it forward to successive years. zk Contract of Membership Statutory contract of membership: The provisions of a company’s constitution “bind the O company and its members to the same extent as if there were covenants on the part of the company and of each member to observe those provisions” (s. 33). In effect: the company can enforce the provisions of the company’s constitution against the members (for example, to demand payment of a sum unpaid in respect of a member’s shares); the members can enforce the provisions of the company’s constitution against the company (for example, to require the company to recognise the votes cast by a member at a general meeting); and 19 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice the members can enforce the provisions of the company’s constitution against each other (for example, to enforce pre-emption rights). Rights of Members/Shareholders Rights vary depending on the class of shares held and the corresponding provisions of the company constitution. Rights commonly enjoyed by members/shareholders: to receive notice of general meetings; is to attend and vote at general meetings (either personally or by proxy); to transfer shares (subject to pre-emption rights); En to receive a copy of the annual accounts and reports (providing the company has the current address of the member); to receive payment of any dividend that may be declared by the company from time to time; and Payment of Dividends im to receive a share of the proceeds recovered if the company is wound up. ah Dividend – distribution of a company’s post-tax profits to its members in cash or ‘in specie’ (‘in kind’ such as a physical asset or financial asset (s. 845). br Two types of dividends: ,I Interim dividend – given during the course of any accounting period. Final dividend – given after the annual accounts have been drawn up for an accounting period (usually every 12 months). an Distribution – means every description of distribution of a company's assets to its members, whether in cash or otherwise (s. 829(1)), e.g. dividends. zk Sources of distributions: out of profits “available for the purpose” (s. 830(1)), calculated as accumulated realised profits (so far as not previously utilised) less accumulated realised losses O (so far as not previously written off) (s. 830(2)). If a distribution is unlawful for any reason: any member who knew or ought to have known the distribution to be unlawful will be liable to repay the corresponding sum to the company (s. 847(2)); and the board of directors who recommended the distribution for payment may be found to have acted in breach of duty and liable to compensate the company for any loss. 20 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Register of Members Every company must keep a register of its members (except for a private company where it is optional), to be maintained by the directors and the company secretary (if appointed). The register must keep the details of previous members until the expiry of 10 years from the date the member ceased to be one. Private Companies A private company may choose to hold information on its membership with the Registrar of Companies instead of maintaining a register of members. All of the members’ details, including their addresses, will be publicly available. is If the company ceases to be a private company, or the company elects to maintain its own En register of members and notifies the Registrar of withdrawing the option of keeping its membership at the Registrar, the holding of details of the company’s membership at the Companies House will discontinue. Content of the Register of Members im The register of members of a company with a share capital must contain: the name and address of each member; ah the date on which each member was first registered as a member; the date on which any person ceased to be a member; br a statement of the shares held by each member (number and class; and the amount paid or agreed to be considered as paid on the shares of each member. ,I If a company has only one member, the register must include a note stating that fact. If a company had multiple members and has become a single member company after its an incorporation, a statement must be included in the register with the name and address of the sole member and the date on which the company became a single member company. zk A company with more than 50 members must keep an index of the members’ names. Register of members must be kept available for inspection at the company’s registered office. O Any person may make a request to inspect the register of members, which is available for free to members and for a prescribed fee to the general public. Register of People with Significant Control (PSC Register) Every company must maintain a register of persons (corporate or natural) with significant control over the company, i.e. a PSC register. The Registrar of Companies also maintains a PSC register, which is publicly accessible. A person is classified as having significant control if any of the following conditions are met: the person holds, directly or indirectly, more than 25% of the shares in the company; 21 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice the person holds, directly or indirectly, more than 25% of the voting rights in the company; the person holds the right, directly or indirectly, to remove or appoint the majority of the board members of the company; the person holds the right to exercise, or is actually exercising, significant control or influence over the company; or the person holds the right to exercise, or is actually exercising, significant control or influence over a trust or firm with no legal personality under the law by which it is governed, but which meets one of the above four conditions. is Companies must record any change of a PSC on their own PSC Register within 14 days of the change, and must also notify the Registrar of Companies of that change within a further 14 days. En Company Resolutions and Members’ Meetings General Meetings im Two types of general meetings: annual general meeting and general meeting. Annual General Meeting (AGM) ah commonly involve the presentation of audited accounts, the appointment of directors and auditors and the determination of their remuneration, and confirmation of the br payment of dividends not required for private companies incorporated post - 1 October 2007, subject to ,I articles or members required for private companies incorporated pre - 1 October 2007, subject to articles or members an required for public companies General Meeting zk any general meeting of the company which is not an annual general meeting O can be called at the discretion of the directors at any time (s. 302) can be called by the directors on request from members representing at least 5% of the paid-up share capital of the company or, in the case of a company not having share capital, at least 5% of the voting rights (s. 303) must be called by the directors within 21 days of the date the request from members is received and be held within 28 days of the date of issue of the directors’ call (s. 304), or if these deadlines are not met by the directors, members following certain requirements may themselves call the meeting may be called by the court 22 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Notice of Meetings A company must send a notice of the general meeting to every director and member of the company, subject to any statutory requirement or the company articles stating otherwise (s. 310). The company must give 14 clear days’ notice of a general meeting and 21 clear days’ notice of an AGM. A general meeting may be called by shorter notice if requested by members representing at least 90% of the voting rights (for a private company) and at least 95% of the voting rights (for a public company, except for an AGM where unanimity is required). The company may give notice of a meeting: is by electronic form (e.g. email); in hard copy form; En by means of a website; or a combination of any of the above. im The notice must state the time, date and location of the meeting, any resolutions to be agreed, the business to be transacted, and the right to appoint a proxy. If the meeting is being convened to pass a special resolution (or a resolution for which special notice is required), the notice must include the text of this resolution and specify the intention to propose the ah resolution as a special resolution. A resolution of the members of a company is validly passed at a general meeting if notice of br the meeting and of the resolution is given, and the meeting is held and conducted, in accordance with the provisions of the CA 2006 and the company’s articles. ,I Quorum at Meetings An AGM or general meeting will only be valid if it has a “quorum” (minimum number of an members which must be present at the meeting). Quorum for a private company with a single member: 1 zk Quorum for a private company with two or more members: 2 (subject to the articles) Company Resolutions O Company Resolution (or Members’ Resolution) – a decision made by members or some class of members of a company and typically passed by a majority vote at a general meeting. In the case of private companies, the decision may be passed in writing (i.e. by e-mail or post). Three types of resolutions: ordinary resolutions (can only be passed by a simple majority of more than 50% of those eligible to vote) special resolutions (can only be passed by a majority of not less than 75% of those eligible to vote subject to the articles of association) 23 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Proposing a Resolution Resolutions can be proposed by directors and members at any time, and will be determined by the members at a general meeting or, in the case of private companies only, as a written resolution. A written resolution: can only be proposed by the directors or by members representing 5% of those members eligible to vote subject to the articles. must be sent to each member eligible to vote by electronic or hard copy. is will be identified as a special resolution if it states it is proposed as a special resolution, and if the resolution so stated, it may only be passed as a special resolution. En The company must circulate notice of the intention to propose a resolution to its members in advance of the meeting at which the members will vote on the resolution. A notice for a special resolution must contain the full text of the proposed resolution. im The members must receive at least 28 days’ notice of any resolution for which ‘special notice’ is required (such as to remove auditors or directors before the end of term or to appoint somebody instead of an auditor or director so removed at the meeting at which they are ah removed). The company must, where practicable, give its members notice of any such resolution in the same manner and at the same time as it gives notice of the general meeting. If this is not practicable, at least 14 days’ notice must be given by advertisement in a newspaper having ‘appropriate circulation’ or in any other manner which the articles may br provide. Passing a Resolution ,I A resolution can be passed following a vote of the members by a show of hands at a general meeting. This method typically applies to small, privately held companies where each an member holds a similar number of shares. For companies with many members, or where there is an imbalance in the number of shares zk held by the members, a vote can be held by a poll using an electronic or paper ballot form. The votes are then calculated by reference to the number of shares held by each member who voted, rather than by reference to the number of physical attendees at the meeting. O For a written resolution, a member signifies agreement to the resolution by submitting an authenticated document identifying the resolution and indicating his agreement to it. A member’s agreement cannot be revoked once signified, and the written resolution will pass upon the required majority of members having signified agreement. A proposed written resolution will lapse if not passed within 28 days of the “circulation date” (the date on which the resolution is sent to members). Notwithstanding the requirements in the CA 2006 and the articles of association in relation to the passing of resolutions, the members of a company who are entitled to attend and vote at 24 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice a general meeting can pass a resolution without a meeting being held or a written resolution being passed if all members agree to the resolution (Re Duomatic Ltd ). The Companies Act requires the company to deliver certain resolutions (including all special resolutions) to the Registrar of Companies within 15 days of the resolution being passed. A company must keep for a period of 10 years the minutes of all general meetings and copies of all resolutions passed other than at general meetings. Voting Rights Per s. 284, but subject to the company’s articles, a member will generally have: is one vote irrespective of the number of shares which the member holds (for a vote on a show of hands at a general meeting); or En one vote for each share that the member holds (for a poll or a written resolution). If a member is not able to attend a general meeting to vote in person, he may appoint a proxy to do so. Protection of the Minority im ah There are a number of mechanisms in place to offer protection to minority shareholders: section 33 Companies Act 2006 br shareholders’ agreements derivative claims (not widely used) ,I protection of shareholders against unfair prejudice (most commonly used) just and equitable winding up an Section 33 Companies Act 2006 Any member can rely on the “statutory contract of membership” (s. 33) to enforce the zk member’s membership rights. A member whose membership rights (e.g. the right to vote at general meetings and to receive payment of a dividend once declared) were infringed can pursue a claim against the company to enforce those rights. O Shareholders’ Agreements The members of a company will commonly enter into a shareholders’ agreement which imposes obligations on the parties, that are outside the scope of the articles of association. The court may compel all parties to the agreement to vote on any corresponding resolutions in a way which is consistent with the agreement (Russell v Northern Bank Development Corp Ltd ). 25 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Derivative Claims Proper Claimant Rule: The proper claimant in relation to a wrong committed against a company, whether by the directors or by third parties, is the company itself (Foss v Harbottle ). The power to pursue litigation is generally at the discretion of the directors, and if the directors are the wrongdoers, the directors could refuse to allow the company to pursue a claim against themselves. Common Law Derivative Claim is A derivative claim is a claim brought by a member on behalf of a company in respect of a cause of action vested in the company, and seeking relief for the company. It operates for the En direct benefit of the company and the indirect benefit of the member who pursues the claim. The nature of the remedy provided by the derivative claim is justified by the rule against claiming reflective loss. Rule against claiming reflective loss: A member cannot bring a claim for the reduction in im share value that results from a loss caused to the company by a wrongdoer (Prudential Assurance Co Ltd v Newman Industries Ltd (No 2) ). This is intended to prevent "double recovery”. ah Statutory Derivative Claim The statutory derivative claim is a claim by a member of a company in respect of a cause of br action vested in the company, and seeking relief on behalf of the company (s. 260(1)). may only be brought in respect of a cause of action arising from an actual or proposed ,I act or omission involving negligence, default, breach of duty or breach of trust by a director of the company includes former and shadow directors (s. 260(3), s. 260(5)). an the cause of action may have arisen before or after the person seeking to pursue the claim became a member of the company (s. 260(4)). The court will consider whether the member has made out a prima facie case for the grant of zk permission to continue the derivative claim. After which, the court will also need to take into account several factors when to dismiss the application (s. 263(2)) as well as considerations O before granting permission (s. 263(3)). Protection of Shareholders Against Unfair Prejudice Petition for Unfair Prejudice: A member of a company may apply to the court by petition for an order under s. 994 on the ground: (a) that the company's affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself); or (b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial. 26 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice The conduct complained of must be unfair and prejudicial such as: breach of directors’ duties, but only if “real prejudice” has been suffered as a result (Rock (Nominees) Ltd v RCO (Holdings) plc ) mismanagement of the company, determined by reference to the frequency of the mismanagement and the extent of loss suffered (Re Macro (Ipswich) Ltd ) the payment of excessive remuneration to the directors in lieu of the payment of dividends to the members (Irvine v Irvine (no 1) ) If the court is satisfied the conduct is unfair and prejudicial, the court may make any order to: is regulate the future conduct of the company’s affairs; authorise civil proceedings on the company’s behalf; En require the company not to make any changes to its articles of association without the court’s permission; require the company to refrain from doing or continuing an act complained of or to do im an act that the petitioner has complained it has omitted to do; or require the other shareholders who have caused the unfair prejudice to purchase the shares of the shareholder, or by the company itself, and in such a case, the reduction of ah the company's capital accordingly (s. 996). Just and Equitable Winding Up br Winding up - refers to the placing of a company into liquidation and, thereafter, the dissolution of the company. ,I A company can be wound up by the court if it is “just and equitable” to do so (s. 122(1)(g), Insolvency Act): an there has been a loss of the company’s substratum (i.e. it can no longer fulfil its intended purpose) (Re Perfectair Holdings Ltd ); there is deadlock in the company (Re Yenidje Tobacco Co Ltd ); zk there has been serious mismanagement (Re a Company (No 00370 of 1987) ex p. Glossop ); or O a member has been excluded from management despite having a genuine expectation of being entitled to participate (Ebrahimi v Westbourne Galleries Ltd ). 27 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice is En im ah br ,I an zk O 28 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice is En im ah br ,I an zk O 29 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice 5. Directors Directors – responsible for supervising the management of the company. The model articles provide that the shareholders may, by special resolution, direct the directors to take, or refrain from taking, specified action (Article 4(1)). The term “director” includes: an executive director who has been formally appointed by the company; a non-executive director who has been formally appointed by the company; is a de facto director (that is, a person who has assumed the status and functions of a company director even though he has not been formally appointed). En “Shadow Director” - a person in accordance with whose directions or instructions the directors of the company are accustomed to acting even though that person has not been appointed as a director (s. 251). im A private company must have at least one director, whilst a public company must have at least two directors (s. 154). In both cases, at least one director must be a natural person (s. 155(1)). ah To be appointed a director, a person must be over 16 years old (s. 157). He or she must also not: br be an undischarged bankrupt (having entered but not been released from bankruptcy); ,I have a bankruptcy restrictions order or undertaking in force; have a debt relief restrictions order or undertaking in force; or an have a moratorium period under a debt relief order applied to him (s. 11, Company Directors Disqualification Act 1986). zk Register of Directors Each company must: O keep a register of its directors which contains prescribed particulars of each director including, for example, the director’s full name, address and date of birth (this is accessible to the public through the Registrar of Companies’ online register). maintain a physical register which is available for inspection at the company’s registered office. A private company may elect not to maintain a physical register if it has notified the Registrar and ensures the information on the public record is up to date. give notice of an appointment, removal or change in details of a director to the Registrar within 14 days. The company must also update its own register of directors of 30 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice this change (except for a private company which has elected not to maintain registers). Appointment and Removal of Directors The power to appoint and remove directors is conferred on the members and is subject to various provisions in the articles of association and the CA 2006. Appointment – first directors are those named in the statement of proposed officers filed on incorporation. Thereafter the appointment of directors is usually covered in the articles, e.g. the model articles provide that appointment may be done by ordinary resolution or by a decision of the directors. is Removal – the model articles (Article 18) provide that a director of a company will cease to be En one: by virtue of any provision of the CA 2006 or by law if a bankruptcy order is made against that person person’s debts; im if a composition is made with that person’s creditors generally in satisfaction of that ah if a registered medical practitioner who is treating that person provides a written statement that the person has become physically or mentally incapable of acting as a director and may remain so for more than three months br if that person resigns from office. ,I The company may remove a director at any time by ordinary resolution provided a ‘special notice’ of at least 28 days is given to each member. A director cannot be removed by written resolution. an Directors’ Remuneration zk The remuneration of the directors of a private company will generally be determined by the directors themselves, subject to the articles. O Directors usually enter into a service contract which will accord them various rights and duties (e.g. the right to receive a salary and ancillary remuneration in return for carrying out the defined obligations). A copy of an executive director’s service contract must be kept for at least one year after it has expired. A service contract that gives a director guaranteed employment for more than two years requires members’ approval. 31 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Powers of Directors The powers of the directors of a company will be set out in the company’s articles. The model articles provide that subject to any provision in the articles to the contrary, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company (Article 3). Exercise of power at meetings – decisions should be made by majority vote at a meeting (Article 7) or unanimously by any other means (Article 8). Authority of individual directors may be: is actual – expressly granted by the company; implied – authority of the director as can be implied from, for example, his or her role En or as being necessary to act in accordance with an express grant of authority; or apparent or ostensible – authority of the director as it appears to third parties. At common law: whom the director acts; and im a director acting with actual or implied authority will bind the company on behalf of ah a third party can rely on the apparent or ostensible authority of a director to enforce a corresponding transaction against the company providing: o the third party does not have knowledge of any lack of authority of the director br to bind the company; and o there are no “suspicious circumstances”. ,I Corporate capacity – the validity of an act done by a company shall not be called into question on the ground of lack of capacity by reason of anything in the company's constitution an (s. 39(1)). Power of directors to bind the company – In favour of a person dealing with a company in zk good faith, the power of the directors to bind the company, or authorise others to do so, is deemed to be free of any limitation under the company's constitution (s. 40(1)). O For the company to be bound under s. 40(1), the third party is required to have dealt with the company “in good faith”. This is a low threshold to meet because a person dealing with a company: is not bound to enquire as to any limitation on the powers of the directors to bind the company or authorise others to do so; is presumed to have acted in good faith unless the contrary is proved; and is not to be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company's constitution (s. 40(2)(b)). 32 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Where the transaction is entered into with a director of the company or of its holding company or a connected person, the transaction is voidable at the instance of the company (s. 41(2)). Board Meetings The conduct of board meetings will generally be governed by the articles. The model articles provide: Any director may call a directors’ meeting by giving notice of the meeting. Notice must be given to each director (need not be in writing). is The meeting may be in person or done remotely (does not matter how it takes place). Meeting must have a quorum. En Only decisions that can be made if meeting does not have a quorum: appoint further directors or call a general meeting of members. Matters at board meetings are usually decided by a majority of the votes of the im directors present, on a one-person one-vote basis. Directors may appoint a chair who will have a casting vote if the number of votes for and against a proposal are equal ah The company must keep a record in writing, for 10 years, of every majority or unanimous decision taken by the directors. br General Statutory Duties of Directors 1) Duty to act within their powers – duty to act for “a proper purpose” ,I A director must: an (a) act in accordance with the company's constitution, and (b) only exercise powers for the purposes for which they are conferred (s. 171). zk 2) Duty to promote the success of the company A director must act in the way he considers, in good faith, would be most likely to promote the O success of the company and have regard to: (a) the likely consequences of any decision in the long term; (b) the interests of the company's employees; (c) the company's business relationships with suppliers, customers and others; (d) the impact of the company's operations on the community and the environment; (e) the company reputation; and (f) the need to act fairly as between members of the company (s. 172(1)). 33 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice 3) Duty to exercise independent judgement A director must exercise independent judgment (s. 173(1)): cannot simply act on the instructions of another person (e.g. a member) may rely on the advice of a third party (e.g. a solicitor) but must exercise independent judgment as to the appropriateness of the advice 4) Duty to exercise reasonable care, skill and diligence A director must exercise care, skill and diligence exercised by a reasonably diligent person with: is (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out a director’s function; and En (b) the general knowledge, skill and experience that the director has (s. 174(2)). 5) Duty to avoid conflicts of interest im A director must avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company (s. 175(1)). “Conflict of interest” – includes a conflict of interest and duty and a conflict of duties (s. ah 175(7)). Having directorships in competing companies is, prima facie, a conflict of interest except if authorised by the directors of each company. br 6) Duty not to accept benefits from third parties A director must not accept a benefit from a third party conferred by reason of: ,I (a) his being a director, or an (b) his doing (or not doing) anything as director (s. 176(1)). A director will not be in breach of this duty if the acceptance of such benefit cannot reasonably be regarded as likely to give rise to a conflict of interest. zk 7) Duty to declare interest in proposed transaction with the company O A director who is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company must declare the nature and extent of that interest to the other directors (s. 177(1)). This applies to transactions or arrangements in which persons connected with a director are interested. Declaration not needed where: the interest is not likely to give rise to a conflict of interest other directors are already aware, or “ought reasonably to be aware” of the director’s interest; 34 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice the interest concerns the terms of his service contract which have been considered at a board meeting or board committee. Breach of Duty and Remedies Breach (or threatened breach) of the duties of a director: has the same consequences as would apply if the corresponding common law rule or equitable principle applied (s. 178(1)) actionable by the company directly or by way of a derivative claim on behalf of the company is has remedies that include damages, restoration of property and an account of profits. Ratification of Acts of Directors En Ratification (a conduct of a director which amounts to negligence, default, breach of duty or breach of trust in relation to the company is ratified by the company): im excuses the conduct complained of and prevents a claim being pursued cannot be applied to a breach which involved an unlawful conduct, such as fraud requires a resolution of the members ah Grant of Relief by the Court br A director can apply to court for relief. The court may relieve a director of liability for negligence, default, breach of duty or breach of trust if it appears to the court that: ,I (a) the director is or may be liable but acted honestly and reasonably; and (b) having regard to all the circumstances of the case the director ought fairly to be excused (s. 1157(1)). an Provisions Protecting Directors from Liability zk Any provision that purports to exempt a director of a company (to any extent) from any liability that would otherwise attach to him in connection with any negligence, default, breach of duty or breach of trust in relation to the company is void (s. 232(1)). O There is an equivalent provision in relation to indemnities (s. 232(2)), except as may be permitted by: s. 233 (provision of insurance); s. 234 (qualifying third party indemnity provision); or s. 235 (qualifying pension scheme indemnity provision). 35 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice Offences CA 2006 includes a wide range of criminal offences which may expose a director to disqualification, fine or imprisonment. Interests in Contracts A director who is in any way, directly or indirectly, interested in a transaction or arrangement that has been entered into by the company must declare the nature and extent of the interest to the other directors (s. 182(1)). Failing to comply is an offence and is liable to a fine (s. 183). Declaration not needed where: is the interest is not likely to give rise to a conflict of interest En other directors are already aware, or “ought reasonably to be aware” of the director’s interest; the interest concerns the terms of his service contract which have been considered at a board meeting or board committee. Substantial Property Transactions im ah Unless approved by an ordinary resolution or is conditional on such approval being obtained, a company may not enter into an arrangement under which: (a) a director of the company or of its holding company, or a person connected with such br a director, acquires or is to acquire from the company (directly or indirectly) a substantial non-cash asset, or ,I (b) the company acquires or is to acquire a substantial non-cash asset (directly or indirectly) from such a director or a person so connected (s. 190(1)). an Substantial non-cash asset – an asset with a value which exceeds 10% of the company's asset value and is more than £5,000, or an asset with a value which exceeds £100,000 (s. 191(2)). zk Loans to Directors Loans Requiring Members’ Approval O Under s. 197, unless approved by an ordinary resolution, a company may not: (a) make a loan to a director, or (b) give a guarantee or provide security in connection with a loan made by any person to such a director. Approval is not required if: the value does not exceed £10,000 (s. 207(1)); a company is a money lending company and the transaction is entered into in the ordinary course of the company’s business. 36 © QLTS School Ltd S/N 836250  Summary Notes – Business Law and Practice If a transaction has been approved by a resolution, the resolution will only be valid if a memorandum setting out details of the relevant transaction (nature, amount of loan, purpose and extent of the company’s liability) has been made available to the members in advance (in the case of a written resolution) or by being made available for inspection both at the company’s registered office for not less than 15 days ending with the date of the meeting, and at the meeting itself. If these requirements are not met or the resolution is n