Business Org L1 Transcript PDF

Business Org L1 Transcript Useful information about on there about the assessment and the module. Um, I won\'t say too much about the assessment at this point, except that it\'s very similar to tort law in the sense that it\'s coursework. It\'s not an exam. Uh, if you want more information ab...

Business Org L1 Transcript Useful information about on there about the assessment and the module. Um, I won\'t say too much about the assessment at this point, except that it\'s very similar to tort law in the sense that it\'s coursework. It\'s not an exam. Uh, if you want more information about the assessment, whether it\'s the formative or the summative, um, you\'ll find it here as well as a sample assessment and other useful, uh, materials. Okay. So with that out of the way, back to the the lecture. So the business organisations module is all about, um, mainly company law. But in this lecture in particular, we\'ll look at other business organisations as well. So that\'s why it\'s called business organisations rather than just being called company law. We look at partnerships sole traders and other forms of business organisation to. Two. Okay, so, um, this lecture is just an introduction to, uh, business organisations. Uh, the assessment I briefly spoke about their, um, how to approach this module. It\'s taught by problem based learning. So very familiar to you from last term, uh, in, in tort law and other modules that you studied. Um, in this lecture, we\'ll introduce you to the most common types of business organisation. Uh, so for in particular sole traders, partnerships, LPs and uh, companies and companies, as I said, are the type of organisation that we will mainly focus on, uh, in this module in the weeks to come. Okay. So. We\'ll also introduce you to groups of companies as well. Um, the term company is quite a wide term. Uh, it covers lots of different types of organisation, even within companies as well. And I\'ll give you a brief introduction to, to what that means to, uh, and we\'ll finish off by talking about the distinction between different types of companies. Uh, terms like private company, public company, listed company, which you may have heard before, will hopefully make more sense, uh, after this lecture today. Okay. Um, so there\'s a lot of terminology here that we\'ll cover. Uh, for the first time, you will get very used to this terminology after today. Um, but I think important to emphasise that this is a very sort of practical Tactical module. Um, because you will all have encountered businesses at one time or another. Uh, even today, you know, you will have encountered a business, interacted with a business in some form. If you\'ve used the tube, if you\'ve bought a coffee, uh, if you\'ve bought, um, anything, uh, if you bought breakfast, uh, if you bought your groceries, you know, you have interacted with a business of some form, uh, companies build our homes, they feed us, uh, they clothe us, they transport us, uh, and they inform us. So companies and businesses generally are very much a part of our lives, all our lives in some form. Um, and, and I would also say as well, just in terms of introducing this module, it\'s not just relevant if you are going to practice company law. Commercial law or corporate law? It\'s actually relevant whatever type of law you eventually go into, because any lawyer, whatever your area of practice is, will deal with businesses. Any lawyer will deal with business organisations. Okay. Um, a finance lawyer. We\'ll deal with a company to raise funds for the company. A property lawyer. You know, you don\'t just purchase properties for individuals. You may purchase them for commercial entities. Uh, an employment lawyer. You know, you need to understand the rules by which companies and other organisations employ people. Um, IP lawyers, you know, if you might want to protect, um, a company whose intellectual property has been infringed, a family lawyer. You know, if you\'re working for a high net worth client, they may have a business. You need to know how to divide up that business in the event of a divorce. So you get my point. Essentially, a company law is a very sort of foundational subject. Understanding business organisations will help you whatever area you go into. Okay. So that\'s really why we\'ve included this module in your first year as a kind of foundational subject, a compulsory subject, which you have to study, okay, because it will come in useful whatever area you go into. Okay. So brief kind of overview of the module then. So we start off with quite a wide view of businesses generally. Um, and the way that this module is structured, it\'s structured quite logically in terms of if you are starting up a business. The first thing you think about is what form your business will take. What type of business form you want to adopt. Because there are certain considerations that will encourage you to adopt a sole trader form of business compared with other forms of business, for example. Um, one of the key, um, differences in terms of what business form you adopt is tax. Um, don\'t worry about tax too much. We don\'t go into tax very much in this module. Uh, it was more tax heavy in previous years. But that tax element has been removed as you as the years have gone on. Probably probably to your relief. Uh, but you will, have some understanding at least of what tax, both individual and corporation um uh, is relevant. Okay. Um, having started broad, we\'ll start to narrow down the course. As we go on through the course, we\'ll talk about incorporation of companies. We\'ll talk about the constitution of companies. You know, the rules which govern companies. We\'ll talk about ownership and management, which is which is quite a key aspect of company law. Okay. Um, and in particular shares and directors, this is really the heart of company law, the relationship between shareholders and directors. Uh, we\'ll talk about that a lot more in the weeks to come. The rights and responsibilities divided up between shareholders. Directors. Um, this is not so much that these last two points are perhaps not freestanding points, but they\'re kind of pervasive points about this module. Um, but in company law, generally there\'s much more of a push towards sustainability and ethical behaviour. So if you\'ve ever heard the term corporate social responsibility or ESG or CSG, you know, it takes various forms. This is a much more prominent aspect in recent years, and you\'ll get some understanding of this through this course as well. We\'ll talk about corporate governance as one of the topics as well. Um, and I think as well, this module, perhaps more than any other, will give you the professional skills to have a sort of commercial mindset. So we talk about being commercial as a lawyer. I don\'t mean being commercial in terms of being good at company law. I mean commercial in terms of knowing how to advise your client, particularly if they\'re a business client. So you will get a commercial, practical, client centred mindset when it comes to providing legal assistance to companies and other business clients. Okay, so that\'s the why. What and how? Um, in terms of assessment. Summative assessment is a coursework problem based coursework, which is 3000 words long, very familiar to you from tort law and other modules. You\'ll also have formative later on in the term. Okay. There\'ll be a revision lecture and workshops. Two in terms of the module overview, ten lectures, including revision lecture, ten workshops including revision sessions. Sessions. Preparation is the key to success. That\'s a quote famous quote. Then we\'ll know who that\'s a famous quote from now. Uh, Alexander Graham Bell, I believe, um, said that. So as with last term, make sure you\'re prepared. Make sure you prepare each week, uh, for the problem based learning sessions. Um, business organisations, much like tort law, is quite a problem based learning heavy subject just to warn you. And make use of the resources. Um, the core textbook is Dignam and Lowry, which I think is quite a good textbook for students. It\'s quite readable. Um, if you want to add to that, you\'ve got Hanigan, which is a bit more dense. It\'s a bit bigger, um, if you want to kind of prepare for assessments and so on. But week to week, Dignam and Lowry will probably give you everything that you need. I\'ll also, as in tort law, put up, um, resources in terms of journal articles and stuff like that, which it\'s useful to read to just get, uh, to develop your understanding a little bit further. Um, it\'s worth saying, uh, that business law, business organisations. Is quite a useful module. If any of you are staying with us next year, because year two is quite commercial focus, because there\'s a number of modules that you\'ll do next year, like commercial law, company financing strategy and so on. Where business organisations, it provides the platform for those modules. Okay. So it\'s very useful if you\'re staying with us next year as well as obviously if you are intending to practice in any sort of commercial or finance related sphere. Okay. So, um, suggested approach to the module. Keep on repeating preparation, preparation, preparation. Um, this is not a theoretical course. I don\'t think any of the modules that you\'ve studied so far are theoretical, but business in particular is a very practical. Client focussed module, very commercial, etc. so very important to come prepared and to consolidate your knowledge each week after the lecture and the workshop. If you\'re unsure about anything, ask your tutor. Um, you\'ll be taught this term either by me or by Chris Sheppard, um, who I think will be new to to all of you. But, um, he will take a number of the workshop groups as well. Um, as I said, most of the modules next term, um, next year, which you study, a number of them, uh, will be sort of building upon what you learn in business organisations. Okay. So let\'s get into it then. I think, um, that\'s kind of the introductory stuff, uh, sort of out of the way. Okay. So, um, as I said at the start, there\'s a number of different, um, business organisations, uh, many different commercial areas. Uh, whether it\'s food, housing, transport, uh, manufacturing, dry cleaning, law firms, uh, etc.. All of them are business organisations in some way or another. But there are distinctions in their structure which you\'ll get a more of an understanding, uh, of in this lecture. Having said that, they have a lot in common as well. So with all of the business organisations, whether it\'s sole trader or anything else, there are certain things that they have in common. Okay. Uh, probably the best thread to think of, to tie them together is the fact that any form of business organisation has usually been put together to meet some sort of need, usually some sort of commercial need. Okay. That commercial need will determine the form that that business will take and the way that it governs and regulates itself. Okay. What is a business? Now there\'s no one definition of what a business is. I\'ve used this definition because it is quite useful in terms of understanding. Um, this definition I\'ve chosen because it kind of roots the concept of a business within the wider concept of satisfying society\'s needs in some way. So I get back to that point about any business is usually being set up to meet a need, a commercial need of some sort. So business is the organised effort of individuals to produce and sell for a profit. That\'s important. Most businesses want to make money, um, for a profit. The goods and services that satisfy society\'s needs. Okay. Having said that, businesses should not purely be seen, um, as, um, profit making. Okay. It\'s not purely about profit making. To be successful, business must perform three activities. It must be organised. Hence the term business organisations. It must satisfy needs. And definitely important, but not the only thing. It must earn a profit to. Okay, but all of these things are three things are connected to earn a profit. A business needs to be organised appropriately in some way. might seem self-evident. But in the next couple of slides, we\'ll look at this concept of being organised and the tensions inherent in earning a profit. Okay. But the main thing I want you to take from this slide is that businesses are not, or at least shouldn\'t be, purely moneymaking ventures without some sort of more fundamental link to society, i.e. by meeting some sort of need. Okay, so, um, this shows the sort of relationship, um, inherent in any business organisation. A business needs to be able to repeat what it does. Okay. The context here is that a business operates within some sort of competitive landscape. They have to be able to continually repeat what they do. Hence this diagram. Okay. Um, the other thing that this diagram shows is business organisations are defined by their relationships as well, and the differing needs of parties in their relationship. A company particularly needs investment in order to grow. A company needs investment in order to grow because you need investment in order to buy machinery, buildings, equipment, all of those sorts of things. Hiring new people. The money has to come from somewhere. But to keep going, you still. You need to make money as you go on. Okay make sell. Products, all services, etc.. So an investor isn\'t just giving you money for nothing. They expect something in return, you know? That\'s the whole point. You put in money for some sort of return. You expect the business to generate profit in return for investment. But the time period for this return. Is one example of the sort of tension in the relationship between an investor and the business. Okay. So this is what I mean about tensions in relationships between organisations and external stakeholders like investors. So here\'s a few sort of key concepts in any business, not purely a company. Okay. Um, so before you start to look at the different types of organisations, uh, it\'s important to think about the different parties in the relationship. Okay. So this slide hopefully fairly self-evident, but worth pointing out two things in particular here. Um, managers, this concept of managers. Um, a manager can take a different form depending on the type of business. So a manager in a company, the name of a manager is a director in companies. Uh, company managers are directors. In partnerships we call them partners. Okay. But they essentially perform the same sort of role. Um, they day to day manage the company, essentially. But in small business in particular, these two roles, manager and owner may be performed by the same people. It\'s only in larger businesses that they are. These roles are divided up. So owners, um, in companies we call them shareholders. But you can see in partnerships, in a general ordinary partnership, the role of manager and owner is performer. The same person, a partner is both a manager and an owner. Uh, you can also call an investor an owner as well. But then you also have investors separately. Investors, um, could be pension funds. They could be banks, they could be private equity. Uh, they could be what we call angel investors. Okay. Um, and the last point here is profit. It\'s not important to understand what profit is as well. Okay. So businesses need to make money. But the fact that you\'re making money doesn\'t automatically mean that you\'re in profit. Making money means that you\'re turning over revenue. But revenue and profit are not the same thing. Profit is is what remains after the deduction of costs, expenses, paying staff, renting premises, paying for materials. Those are the main sort of costs that you have. So make sure you differentiate between revenue and profit. What investors are going to be looking at is always going to be the bottom line in terms of profit, okay. Is the company actually making more money than it spends? That\'s what we talk about when we\'re talking about profit. Okay. So what we\'ll be looking at in this week\'s lecture and next week\'s workshop, uh, we\'ll be talking about these four types of business. So Sole Traders Partnerships LPs or limited liability partnerships. And lastly, limited liability companies and also other types of companies. Okay. So these are the four most common types of business organisations. So we\'ll start off with company. Um we are going to focus mainly in this module on companies. Um companies can be enormous in size if you think about, you know, many of your household names on the high street. They, they could be gigantic business organisations, but they don\'t have to be. Companies can also be very small. You only need one person to set up a company. Okay. So a company could either employ thousands of people or it could be 2 or 3 people. Okay. Um, you can usually tell whether something is a company simply by looking at the name of the company. It will usually have these letters after it. So if you see the letters limited, that means private limited company. Also you might see the letters PLC public limited company okay. PLC could just be a normal public listed a public limited company or it could be a listed company. Public companies take two two different forms. Okay. And there\'s a big difference between private companies and public companies, mainly in terms of how their activities affect the general public. But just for present purposes, usually the way that you recognise whether something is a company or not is you look at the name after the words, after the names. And by the way, when you see LCD or PLC, See, that\'s also seen as a mark of prestige as well. That\'s one of the reasons why, uh, sole traders incorporate and become companies. It\'s kind of like, uh, you know, badge of honour almost. You have limited or plc after your, your business name. Okay. Uh, next year, if you do stay with us next year, the company financing module, uh, examines PLCs in much more detail. But in this module we\'ll mainly focus on limited private limited companies rather than public limited companies. Okay. So that\'s all I\'ll say about companies for now. You then have partnerships, uh, very popular form of business organisation. Um, as the term implies, a partnership has to be more than one person. Usually it\'s two, you know, sole traders that have gotten together more than one owner. Um, you can almost you can actually enter a partnership almost without realising that you\'re in a partnership because there\'s an objective test as to whether you\'re in a partnership or not. And we\'ll come on to what that means in a second. Okay. And in fact, there\'s almost as many partnerships as businesses. Um, and there were a number of professions such as solicitors and accountants, who until relatively recently had to practice only as partnerships. They now have other options in terms of the form their business can take. But in the past, if any of you were going to qualify as solicitors, you would enter a partnership as a trainee solicitor. You still do, but could take a slightly different form. Okay. Um, and that\'s where LPs come in. Uh, limited liability partnerships. Now, the vast majority of law firms are LPs rather than, uh, Ordinary partnerships. Uh, LPs. I won\'t say too much about this now, but essentially, LPs are a hybrid form of business. They\'re kind of midway between a company and a partnership. They have some aspects of partnerships, some aspects of companies, and they\'re they\'re the most recent type of business organisation. They\'ve only existed since the year 2000. And lastly, you\'ve got sole trader ships. Um, okay. So, um, are you two okay? Yeah. Okay. Do you want to keep it down? Okay. Um. Sole trader ships are not really business organisations at all. They are individuals. Okay. Individuals who set up to run their business as a single person. Okay. Hence the term sole trader. It\'s an individual. And you can come across sole traders in a number of different areas. It could be a plumber, you know, plumber, carpenter or even a management consultant. You know, almost anybody can be a sole trader. You can actually also have solicitors who are sole traders as well. Okay. So it\'s not simply kind of, um, professionals who become partnerships or anything like that. You could equally have them being sole traders. And I should also emphasise the most popular form of business, even today is the sole trader ship. There are more sole traders than any other type of business for reasons which we will understand soon. Yeah, we\'re going to have an LLC. No, no. So that\'s a somewhat misleading term. That\'s not kind of part of UK company law. Okay. So uh, These are the four main forms of business. There are other forms of business that are not mentioned here, which we\'ll talk about briefly, such as limited partnerships. Um, but these are the four main types of business in the UK. Okay. So hopefully this should dispel the myth that all forms of business are companies. Okay. Actually the most common form of business is a sole trader ship. Okay. Um, the similarities and differences between these types of business will determine why you\'ve chosen one form of business over another. Okay. So what type of things do you need to think about in choosing which business medium? Um, your business will take the form of. Okay. Generally speaking, these are the things you think about cost. How easy it is to set up. Tax will be a factor. That\'s one of the reasons why we cover tax on this course control as well. How much control do you want over your business? All of those are good points to think about when you\'re thinking about which medium to adopt. And you have a lot of freedom over the form your organisation takes in terms of which of those you choose. Okay. So let\'s break that down by looking at each of the types of business. So we\'ll start off with Sole Trader. So um a number of factors here about sole trader. These are the general features of a sole trader right. A sole trader is one person. Right. A single owner. Okay. There\'s just one person involved in the ownership. No partners. Nice and simple. Um, as a sole trader, you could have employees. So don\'t be misled by that. A sole trader doesn\'t just mean that you\'re one person you might employ and pay people, but you\'re the owner. So sole trader ship has one owner. Okay. No other owners of the business? No. Yeah. Is that right? Is that a very important part of your salary? No, no. Nothing like that. No, no. Yeah. Unlimited. Essentially. Yeah. Yeah. Okay. Um, there are no formalities in setting up a sole trader ship. This is one of the reasons why they\'re so popular and so common. Okay, um, essentially, all you need to do is tell HMRC revenue and Customs that you are self-employed because it affects your tax status. That\'s really it in terms of formalities. And you can do that very easily just by going through the self-assessment section on the HMRC government website. Okay. You don\'t need to register anywhere. Um, you don\'t need to enter into an agreement with anybody. That\'s it. Okay. You\'re up and running because of the lack of formality. It\'s therefore the cheapest legal structure to operate. There\'s no ongoing expenses either. Unless, for example, you may want to employ an accountant to to file your accounts. But most sole traders will be able to do this themselves. It keeps costs down as well. Um, even once the sole trader is up and running, there\'s no legal requirements about how you manage your business. As we\'ll see, the other types of business organisation are governed by, um, statutes. There\'s no statute which governs how sole traders run their business. Okay. Other than it must be, they shouldn\'t break the law. Otherwise, you know, they shouldn\'t commit fraud or anything like that. But there\'s no specific piece of legislation which governs sole traders. For partnerships, there\'s a partnership act for LPs. The there\'s the LLP act for companies as the companies act. Okay. The sole trader makes all the decisions. And another big advantage of being a sole trader is that you don\'t have to disclose anything about your business in all of the other types of business, to one degree or another. There\'s disclosure requirements. You have to, in some form, be public. Oops, sorry. So so again, it makes it very straightforward if you value your privacy which is the biggest attraction really of this, of this business model. That\'s why you do it. So. So you might be asking at this point, well, why doesn\'t everybody just stay a sole trader if it\'s so easy, if it\'s so cheap, you know, so straightforward, why don\'t we all just have sole traders? Well, there\'s a couple of big disadvantages of being a sole trader. One is no separate legal personality. So for example, if we look at a company, a company has a distinct personality from the people who own and run it. Um, so there\'s a sort of almost a shield between what the business does and the people who own the business. And that becomes important for a number of reasons. That means there\'s no division between the assets and liabilities of the business and the sole traders own personal assets and liabilities. So the owner, the sole trader, has what\'s called unlimited personal liability. If anything goes wrong, the only person who can be sued or be held responsible is the person who\'s the sole trader. And that\'s a big disadvantage, because it could potentially mean that the sole traders own assets uh, their property, their house, uh, etc. could be taken to and be sold off to satisfy the debts of the business. Okay. So hopefully you\'re starting to see the drawbacks then of being a sole trader. So this is the big. Yeah. So it\'s quite rare for big corporations to be sole traders. It\'s usually for smaller businesses. Yes. I think that\'s probably fair to say. Although I should say as well, you could still have a big business being a sole trader. It depends. Okay. But as a general rule, when it comes to protecting your risk, safeguarding risk and all the rest of it, there\'s a strong commercial reason for adopting the company form as opposed to remaining a sole trader for this reason. Okay. Okay. So. The final big disadvantage. Yeah. Go on. Can you set up a company as a sole owner? Yes. Yes. You only need one person to set up a company. So what about this matter about the structure that you want to make it? Yeah. Yeah. Yeah. So a single person can set up a company. Okay. Just to bear that in mind as well. Companies don\'t have to be big. Okay. Another disadvantage of being a sole trader is that you have very limited funding options. The big advantage of being a company is that you can raise investment through shares. Issuing shares, for example, is the most common way of attracting investment and growing your company. You can\'t do that with a sole trader, okay. All you can really do as a sole trader if you want money is get a loan. You know, like any anyone else. Go to the bank and get a loan. Okay. Or borrow money from a friend or family member, whatever it may be. Okay. But you don\'t have the sorts of funding options that you would have as a business. Okay. Um, so as I say, that\'s the first of our business organisations. And as I said, sole trader ships are the most popular and common group of businesses in the UK. Um, many, many businesses. In fact, almost all businesses at least start off as sole traders to begin with. So this is part of the reason why they\'re so common. Because even if you do eventually become a company or a partnership, it\'s likely that you started off as a sole trader. Before you move on to any other type of business. Okay, so that\'s sole traders. Um, the rest of this part of the lecture, uh, before the break is we\'re just going to focus on partnerships. Okay. So, um, partnerships, the biggest difference between a partnership and a sole trader. Pretty self-evident. You need at least two people. Okay, that\'s the the definition of a partnership. Okay. Um, now that may seem very obvious, but it\'s also codified in something called the Partnership Act 1890. So, um, partnerships, unlike sole trader ships are governed by their own piece of legislation. This is a Partnership Act 1890. And that specifically says that you need. You know, a minimum of two owners to set up a company. We\'ll come back to that act because it has a big impact on partnerships. Um, but how can you describe a partnership? Well, a partnership is essentially a contractual relationship between 2 or 2 or more people who decide to work together on the basis of terms agreed between them, usually to share profit in some way. It can be in a general business area, or it could be a professional partnership. So it could a partnership could be anything from two friends running a cafe, for example, that\'s a partnership. Or it could be a small firm of architects that come together. Partnerships, by the way. If you ever hear the term firm, a firm is what we call a partnership, okay. Use the right terminology. Okay. A firm is never a company. A firm is always a partnership. Law firms are partnerships. Now, again, pretty easy to set up a partnership. Um, no real formalities are required. I mean, again, you know, tell HMRC of course, for tax purposes, but with partnerships there\'s more of a need to have a partnership agreement. Um, very strongly recommended that you have a partnership agreement that records the kind of basis of your relationship. Um, if for business purposes, with your partner. Okay. So in that sense, it\'s not quite as straightforward as a, um, sole trader. It\'s very strongly recommended that you put into place some sort of contract or agreement. Okay. You don\'t have to. Um, but even if you don\'t, you\'re going to be governed by the Partnership Act 1890. Um, so it\'s sensible to adapt your partnership by having your own partnership agreement. Okay. Um, so you therefore move up a gear in terms of costs, because by its very nature, you\'re usually going to instruct a solicitor to draw up this partnership agreement. So straight away the costs start racking up. Uh, you will usually also employ an accountant as well, uh, to keep your taxes. Once it\'s all set up, though, you do have a lot of freedom in how you run? Uh, your partnership management is largely up to the partners. Um, to agree. But it\'s, again, not quite as free as a sole trader because you\'ve got this partnership act 1819, the background. So you can only do you know what\'s allowed by the Partnership Act. Now, you can vary the terms of the act by having your own partnership agreement. But if you don\'t do that then you\'ll be governed by the Partnership Act. Okay. Most partnerships will be run according to the terms of their own partnership agreement. Anything which isn\'t covered in the partnership agreement will be covered by the Partnership Act 1819. If you have a partnership, you can use that expressly excluded. Yep. Yeah. That\'s the purpose of having the Partnership Act to exclude or vary bits of the partnership app that you don\'t want to apply. You can\'t exclude everything. There are certain elements that you have to include. Yeah. Yeah. Absolutely. And you are recommended to do that as well. Okay. But it\'s still not as heavy in terms of formalities as a company. So so there is that. You do have a certain amount of freedom. Um, another way in which partnerships differ from companies is, again, there\'s no separate legal personality. There\'s no division between the partnership and the people who are in the partnership. The partners are the partnership. Okay. There\'s no shield between what the business does and the people who own and run the business. So again, that\'s a big disadvantage. Or it\'s perceived as a big disadvantage of being a partnership. Yeah. If you don\'t have a partnership agreement, how would the HMRC know that you guys are in partnership. Well, you need to. You need to let HMRC know in terms of because your tax regime is going to be slightly different. Okay. Yeah. On on the HMRC website. Okay. When you file your return. Yeah. It asks you exactly like a separate thing that you do when you\'re filing. Exactly. As you would do if you were a sole trader. Okay. Um, and very closely linked to that. It also means you have unlimited personal liability. Okay. Um, so. That aspect is similar to sole traders, but there\'s an extra dimension to it because not only do you have unlimited personal liability, you have joint in several liability, which means that each partner, each and every partner is fully, personally liable for all the debts of the business. Bottom line, you have to really trust the people you go into partnership with for this reason. Okay. And that\'s actually an even bigger drawback of being in partnership. The fact that you are exposed to joint and several liability. Um, and another disadvantage very similar to sole traders is you have very limited funding options other than going to a bank or a private lender. You don\'t have the sorts of, um, options that you have if you\'re a form of a company. Um. Okay. So just sticking with partnerships because they are a little bit more complicated than sole traders. As I say, they are governed by the Partnership Act 1890 and also by common law. To some extent, the definition of a partnership comes from the partnership at 1890. And it is this okay. This this comes from section one of the Partnership Act. Um, a partnership is a relationship which exists between persons carrying on a business in common with a view of profit. Okay. So each of those elements is an important aspect of being a partnership. You need persons. So more than one person you need to carry on the business in common. And it needs to be with a view to profit. Okay. Now this is what I you remember I said earlier you could be in partnership potentially without even knowing that you\'re in partnership, because this is an objective test provided that those things exist. You don\'t need to show an intention to create a partnership. If those things exist, you are in a partnership whether you like it or not, okay? And therefore you\'re governed by the Partnership Act 1890. Okay. So these are what we call the badges of partnership. You look for these badges of partnership. If they exist, then a partnership exists. There\'s a common business activities, arrangements for sharing profits and losses. Um, if you\'re intending to make profit and so on, then, uh, and if you both have some sort of role in running the business, then then that\'s a partnership essentially. So if two people are sole traders intending to work together so they can accidentally. Yeah, if they do this, if they are sharing profits and losses, if they\'re both playing a role in running the business, etc., then essentially, for all intents and purposes, as far as the law is concerned. They\'re a partnership. Okay. Now this aspect becomes quite significant because if you\'re accidentally in a partnership, this has implications. Because if if somebody is suing your partner then remember joint in civil liability. You\'re also going to be potentially on the hook for their debts. Okay. So accidental partnership can give rise to difficulties. Plus partnership brings with it, you know additional obligations in terms of taxes. You know letting HMRC know. ET cetera. Submitting your self-assessment tax return and so on. Okay. So the Partnership Act 1890 also has, you know, unintended consequences if you are in partnership. Um, so, um, particularly in terms of the impact on management of the partnership. Okay. So parties may not even be aware and may still be in partnership. So if we look at the way that partnerships, ordinary partnerships are managed, then um, there\'s a number of aspects to this as well. Okay. So, um, every partner in a partnership is an agent of the partnership. So what does that mean. That essentially means that if you are in business with a partnership, if you\'re dealing with a partnership. You can assume that if you\'re dealing with a partner of a partnership, they are entitled to make decisions on behalf of the partnership. So that\'s what I mean when I say every partner is an agent of the partnership. They can bind the partnership to any sort of deal, any sort of sale or anything like that. Any sort of agreement that the partnership enters into a single partner can fully bind the entire partnership to anything. Okay, now that doesn\'t sound like an unintended consequence, but it could be because it could be that you\'ve entered into a partnership on the basis that you only have one of the partners who\'s responsible for making deals and entering into contracts and stuff like that. You might want one of the other partners to have a much more limited role. But unless it specifically says that in the partnership agreement, you\'re not entitled to assume that. Okay, the as far as the Partnership Act is concerned, that each partner is fully able to bind the partnership to any sort of agreement or deal that the partner enters into. Um, because every partner has equal ability to participate in the management of the company. Okay. So that\'s one of the aspects of one of the essential aspects of partnership. Uh, if you\'re a partner in a business, you have kind of this unlimited management role in a business. Okay. Again, could be a problem if that\'s not what you intended. If you only intended, you know, to have a managing partner, let\'s say who is who\'s the main person making the decisions. And other partners were more kind of silent partners. That could be a problem. Okay. This is why it\'s important to have a partnership agreement to avoid these sorts of unintended consequences. Um, this one we\'ve already mentioned. Yeah. There is no cause for concern Yeah. Absolutely. Absolutely. Yeah. Yeah. Exactly. Exactly. Exactly. That\'s why it\'s really important. And that\'s one of the. If you were drawing up a partnership agreement, that\'s one of the key things you\'re going to have in there. What is the management responsibility of the partners? Okay. We\'ve already mentioned this one. But profits and losses are shared equally. Okay. Um, again, could be a problem if one partner has put in 70% of the shares and expects some sort of proportionate, um, you know, 70% of the funds, I should say, and expect some sort of proportionate share of any return. But again, unless that\'s in the partnership agreement, the expectation is that profits and losses are fully shared equally. Okay. Um, partners aren\'t entitled to salary because they are owners of the business, so they will automatically get the profits. They don\'t have a specific salary unless that\'s in the partnership agreement. So what you might do if you have a managing a single managing partner is give them a salary, okay. But again, unless that\'s in the partnership agreement that that won\'t automatically be provided. Okay. Um, managers, um, or I should say partners are personally liable for, uh, all of the debts of the business, as we\'ve seen. Um, some decisions might be unanimous, um, but that there could be a stalemate if you\'ve got two partners in the business and they both want to do different things. So you might want to, if you\'re sensible, put something in the partnership agreement about how stalemates are resolved when it comes to making decisions. Um, in theory, the minute a partner leaves the partnership, the partnership dissolves. Because by its very nature, a partnership is made up of the people in it. So if anyone leaves, the partnership automatically dissolves. Getting rid of partners is also quite difficult. Um, particularly where there are just two people. In fact, it\'s probably impossible to get rid of your partner. Um, if there\'s only two people, you would have to dissolve the partnership altogether. Okay. So, um. How do you do that? You don\'t have an agreement. Well, you just say that the partnership. I\'m not in business with you anymore. So that\'s what you\'d have to do. Uh, okay. Not. I\'m not going to talk too much more about partnerships. Um, a couple of other important things. Um, partners are in a fiduciary sort of relationship. We sometimes talk about, um, the duties in a partnership as being fiduciary in nature. Now, you\'ve probably come across this term fiduciary before. Essentially, if you\'re in a fiduciary relationship, it is a relationship of utmost trust faith and confidence. Okay. So there\'s a perceived responsibility on each partner to act in the best interest of all the other partners, given the close relationship of partners. You could say this is an inherent obligation of partnership. Okay. It\'s for partners to conduct themselves towards one another with the highest standards of sort of behaviour, integrity, openness, etc., even where their interests, uh, conflict with each other. Okay. So a fundamental aspect of partnership because it\'s a fiduciary relationship, is that you shouldn\'t place yourself in a position where you\'re in conflict with the interests of your other partners. Okay. The duty, this duty of good faith is so important that it\'s actually enshrined in the in the Partnership Act 1890 as well. So that\'s one of the fundamental aspects of the partnership relationship. There\'s also a number of sort of statutory duties. These are under the Partnership Act. Um, you have to deliver true accounts to each other. So one partner shouldn\'t benefit at the expense of the others. Um, you have to account for any private profits. You have a duty not to compete with each other. Uh, and so on. There\'s no statutory duty to only focus on partnership matters. There\'s nothing to stop a partner in a partnership from having interests outside the partnership. Yeah. Can you be in a partnership with family? Yeah. In fact, some of the most common partnerships are between family members. So, for example, if you see such and such brothers or something like that, that\'s a partnership. Yeah. Those sections 28 to 30 could use them. Yeah. Yeah. You can, you can. Yeah. Contract out of them as well. Okay. Um, and generally speaking again, unless there\'s something in the partnership agreement specifically saying it, there\'s also nothing to stop a partner from competing with the partnership after they\'ve left it. But obviously a non-compete clause is usually going to be one of the main things you put in a partnership agreement. Okay. So that\'s quite a commercial point that you, as a lawyer, might want to advise your client about if they are going to partnership with somebody else. Um, one last Common facet to look at with partnerships is how you dissolve or terminate a general partnership. We\'ve already talked about this a little bit. Um, so the partnership gets dissolved when you terminate the relationship between yourself and, and your partners. Uh, it\'s possible to have a technical dissolution in the sense, uh, I explained earlier, which is that technically, the minute any partner leaves a partnership, it automatically dissolves unless there\'s something in the partnership agreement saying that the partnership can continue even after one of the partners leaves. But essentially, any partner leaving on the face of it would dissolve the partnership. Okay. And that\'s important because, uh, if a partnership dissolves, the rights and liabilities that go along with the partnership are also, um, also disappear, essentially, unless the partnership agreement provides that they can go on without a break. Okay. A full dissolution, though, uh, leads to what we call winding up a company where all of the parties agree it\'s best that the partnership is dissolved. Um, if that happens, all of the liabilities, any outstanding debts of the partnership have to be satisfied. Uh, any remaining assets are then distributed among the partners who are left. Okay. Um, the. Partnership Act 1890 provides that a partnership can be dissolved, uh, on the happening of any of the following. By unanimous agreement between the partners, by a partnership expiring if it\'s been set up for a limited period, bankruptcy, death, or a charge on any one of the partners. Illegality. You know, any of the partners committing a crime. A court order can dissolve the partnership. Um, and again, very important if you\'re a lawyer advising client who\'s going into partnership to ensure that dissolution and termination of a partnership is covered in the partnership agreement. Okay. Um, so anyway, that\'s a quick overview of partnerships. You can see from that that they are somewhat more meaty than sole traders. There\'s more involved with partnerships than there is with sole traders. There\'s much more involved with companies. But one of the reasons I\'ve run through that is so that you can understand, um, the way that businesses work, because a lot of the aspects of partnership law are reflected in company law as well. Okay. So, uh, I think at this point we\'ll just take a break and then we\'ll talk about companies after the break. Thank you. Thank you Thank you. Thank you. Good luck. Thank. You. How are you doing? I\'m not sure. I\'m sure. How can you say hi? I don\'t think. So. And then by the time you. Know what it\'s like? Yeah. I like the change. Yeah, change. Yeah. It\'s the right one. Oh. I\'m sorry. Oh. No. Oh, no. I mean, I\'m not like that. No, I was just looking at it. It\'s not. All I did was. I was quite. Simple, Johnny Walker. He was like. This was like I was in the words Johnnie Walker. Yeah. It\'s like this fucking guy, right? I\'m drinking whisky. Yes. Oh, yeah. I was telling that story. Sounds a little more like that. Yeah. I\'m so irrelevant. I\'m sorry. I\'m not crazy. I\'m just so excited. Oh, you like that? That\'s good. You can tell her she\'s sympathetic. You like that? Like, deep down, she. Thinks it\'s funny. Anyway, the rest of you guys think of me, but she\'s on a slippery slope. No, no, no. It\'s not for you guys. It\'s also very difficult. Yeah. Hardly like on days like this. I don\'t think I\'m better than that. I\'ve been doing. That\'s what. Happened. How can you say it\'s better than me? I\'m saying you come from an accident. Come on. Oh, yeah. That\'s such a pity. Are we okay? Did you make me behave? Come on, buddy, we\'re better than that. Did you need a secret? No, I don\'t really know. That was. Awesome. Yeah. All right. Yeah. Good, good. Everything okay? Yeah, it\'s very slow, very incremental. We got there in the end. So we\'ve got a, um. Have you been in touch with your dissertation team? Uh, yeah. Yeah. Um, so the woman from Spain. Yeah. See you later. Yeah. Yeah, yeah. She she she. Yeah. Um, she\'s the second year. So these are the first years. Oh, yeah. So she, uh, brought by yesterday. I wanted to have a bit of a moment. She was just sort of saying, like, why do I have this pressure to go? I don\'t know. I don\'t know who he is. You know, you\'ve got an internationally recognised expert and come to me. Yeah. Yeah. I\'m sorry. Yeah. At least meet the government. Um. And I had no doubt that you\'d be able to tell him within yourself. It\'s quite natural. Yeah. That\'s okay. Um. So. Yeah, if you could just do your schtick with me. Just get on. Yeah. Yeah. Um, so essentially, once all the work is submitted Yeah. And yeah, they don\'t. Um. There\'s no. Do they have a. Reasonable expectation to have us look over the draft? No no no no no no no. I mean, I would say just get them to submit that, because the whole point is that\'s what we\'ve been marking. That\'s why they\'re because I want to kind of let it go. It\'s all good duplicating. And there\'s no, um, there\'s no mark allocated to me. No, no. It\'s just a formative thing. Um, there\'s a that\'s fine. There\'s a there\'s a, like, a formative feedback form. Yes. Yeah. Yeah. Yeah. So but essentially it just gives them a indicative grade. Yeah. It\'s mainly about the feedback. Um, was there anything in particular that you wanted to kind of go through today? Um. Just it was just a couple of things. Um, procedural stuff early, just organisation. And then. On the, on the project side. For the directors Just to get your take around. What what scope. Are you expecting. For that title? So I found out it was a little bit opaque compared to the greenwashing. Okay. Particularly by what you meant by restructuring. Right, right. I mean, I mean, bottom line is that you can take a very wide view of that. There\'s no one way to take it. And I would encourage you to get the student to think about what restructuring is. Because when I looked at the reading. We\'re going to focus on get out of here. Get out of here. How about us? That\'s right. Yeah. There was a yet another layer of coalesce on directors duties. You know, so I was thinking that. The focus, your focus is really on when a company is in financial difficulty rather than schemes of arrangements and all those things. It doesn\'t it doesn\'t have to be. I mean, that\'s just the way I\'ve interpreted it. But, you know, the student and you are entitled to take a different view. I mean, it would be boring if they all did it. No. Absolutely. No. Absolutely. No, no, we can we can have a chat. No. I won\'t stay for the second. I don\'t want to. I don\'t want to cramp your stuff. No, no, no. You\'re very welcome. You\'re welcome. They know what it\'s like to have somebody. Whoever they are. No, no. It\'s fine. Remind me what our room number is. Okay. So it\'s S.W. 309. So it\'s, um. Somerset House, floor three, room nine, essentially. Yes. I did when you got your card from from Tracy, did she activate it for access to Somerset House? Okay, fine. So you should have no problem. There\'s also visiting. Lecturers room as well. Okay. If you want access to. Yes. Um, but to be. Honest, it\'s very rare that all of us will be in anyway. So feel free to use that room which hasn\'t been seen yet. So I\'ll probably see you there. I\'ll see you there. To me. Amen. And some wonderful. Oh, okay. Fine. But. So we\'ve already invaded. Okay. So I\'ve got a I\'ve got students. On line 12. Okay. It shouldn\'t take too long. But you\'ll be able to take out. Yeah yeah yeah. Alright. So I\'ve already. Checked out water lilies down the road. Oh yeah. Which will be. It\'s all right now. Absolutely. So you\'ve done all you have? Yeah. No. Oh, yeah. Because you were asking me to show you how the system works. Oh, yeah. We can do that a little bit later. Yeah. Yeah. I just want to put my laptop. I just want to log in. Yeah. Yeah. No. Not really. I mean, the first thing I would say. Okay. No, no. So they\'ve given you a lot of work. Oh, yeah. And, um. They\'ve got My first was Wednesday. Yeah. Yeah. Love these guys. Yeah. Oh, yeah. Well, that shouldn\'t be a problem. It\'s like. It\'s not like me. Like it\'s pretty bad. I\'ll send you one. Uh, okay, everybody, let\'s, um. Let\'s resume. What am I supposed to do with them? I was afraid I was gonna play. Okay, everybody. Could we restart, please? Um. So we will continue from where we left off. Um, with limited liability partnerships. So just before we get on to companies, um, as I mentioned earlier, limited liability partnerships are a sort of hybrid between partnerships. Um, and for these purposes, I call partnerships, generally general partnerships just to distinguish them from limited liability partnerships or LPs. Okay, so LPs have some of the aspects of general partnerships, but with additions from company law as well. Okay. Now limited liability partnerships are governed by the LLP act 2000. So from that you can see that they are a relatively recent form of business organisation, especially when you compare them to general partnerships which are governed by the Partnership Act 1890. Okay. So what is an LLP? Well, an LLP is a partnership, but it\'s a partnership where the members have limited liability. Okay. That it\'s not a general partnership. It\'s not a company. It\'s a hybrid to whom rules from both worlds apply. Under the LLP act 2000 and associated regulations. So what do we know about LPs? Well, for a start, they need a minimum of two owners. Carrying on a lawful business with a view to a profit. Now, I mentioned this six month thing because if just one person carries on business for six months, then you automatically lose the protection of limited liability. So it\'s a form of business where at least two people need to be fully engaged in running the LLP. This is the point at which we start seeing more formalities. Okay, there are more formalities involved in setting up and running an LLP than a general partnership. More in common with a company. You need something called an incorporation document, which you need to file at companies House. The incorporation document is less onerous than the one you need for a company, but nevertheless, you do need to fill it in and file it to get set up as an LLP. There\'s a fee also to be paid for lodging this document. Once you do that, you get a certificate of incorporation, which is proof that your LLP has been formed properly. Okay. And then each year after that, you have to file a confirmation statement to keep the information regarding the LLP up to date. So you can see there more formalities. You\'ve got more set up and ongoing costs and not optional. These costs are not optional, so you have to pay the registration fee upfront. Um, there are also stationary printing costs as well. Um, because an LLP has to have its name printed on the letterhead, invoices, checks and so on. Um, you have to pay an annual fee. As I said, to keep your information up to date with companies House. Um, the members of the LLP are also going to want to pay solicitors to draw up the, uh, incorporation document and, and an LLP agreement so similar to a general partnership. Very much recommended that you have a partnership agreement. Uh, an accountant is not optional. Uh, you have to lodge an annual accounts prepared by an accountant, uh, and filed at companies House. Okay. Once, uh, the partnership is up and running. Um, you have, um, similar default partnership provisions under the LLP act to those under the Partnership Act 1890. Um, and this is the advantage, really, of having an LLP. You have freedom in terms of the management of the LLP. Um, this is actually a big difference between LPs and companies, because in companies who owns and who manages the company is very clearly demarcated in terms of directors and shareholders. The members in an LLP essentially have an unrestricted right to participate, participate in the management of the LLP. So unlike a company, members of an LLP have a great deal of freedom Over how they regulate their own affairs and decision making. Um. One advantage. Another advantage is that the LLP agreement is private. It does not need to be lodged at companies House, so nobody else can see it apart from the people within the LLP. Um, but the disadvantage, as I say, is that there are other things which you need to file at companies House. Uh, which means that, uh, this is more sort of formality heavy than a general partnership. You have to file it. You have to follow your accounts at companies, at companies House. Yeah. Yeah. So is it like, uh, common practice for a limited liability partnership to not have a separation? The parties themselves. There is no board of directors, so within LRP there is no board of directors. All you have is the partners. So in that sense, it\'s more similar to a partnership than a company. Okay. You just have the partners. People are the partners. We sometimes call the members in an LRP. They all have an unrestricted right to manage the LLP. Okay. The biggest difference between an LLP and a general partnership, of course, is the fact that the LLP has a separate legal personality from the people. The partners in the LLP, it\'s a body corporate. So that basically means that the law recognises that the business, the LLP, as a legal person in its own right, it can enter into contracts, it can sue and be sued, for example. Um, this is the main reason why professional partnerships, like lawyers and accountants pushed for this piece of legislation and then all pretty much moved over to it, because you get this protection of limited liability and separate legal personality, which you don\'t have in a general partnership. You get the benefit of the firm. We still call them firms. We still call them LLP firms. You still you get the benefit of the firm becoming a body corporate with its own legal personality, distinct from that of the partners. This means that if an LLP is sued, the individual assets of the partners in the LLP are safe. Okay. So that means that members of an LLP don\'t have unlimited personal liability. They have the protection of limited personal liability. Um, and it\'s worth saying one other big advantage of LPs is they are over partnerships and over sole traders is they have greater funding options. Not as wide a range as companies because they still can\'t issue shares, but they can, for example, create something called a floating charge over the assets of the LLP in favour of a lender. Um, so it\'s a form of security against which they can raise money, which is not open to sole traders or partnerships. Um, one last thing I just want to mention before I move off this onto companies is that you\'ll sometimes come across the term limited partnership. Limited partnerships are different from general partnerships and limited liability partnerships. So you\'ve got partnerships, you\'ve got LPs and you\'ve got LPs. Limited partnerships uh, limited partnerships have been around for a very long time. They\'ve been around for more than 100 years, but they are completely different from LPs. What a limited partnership allows you to do is it allows you to set up a normal partnership, and then it allows you to bring in what are called limited partners. Limited partners, basically, as the term implies, have a limited role in running the business. They\'ve usually been brought on just as investors now because we now have LPs. LPs Alps are far less common. And they have they\'ve kind of they\'ve been dying out over the years. Um, so other forms of business organisation have overtaken them in popularity, but they still exist. So I\'m just mentioning them now, just in case you come across the terminology limited partnership. Don\'t confuse them with LPs or ordinary partnerships. Okay. Are they more common if you have like a venture fund? Yes. Yes. But even there, you still have the ability, with a venture fund to just be a normal partnership or to be a limited liability partnership. And one of those forms or business is usually going to be more attractive because of the flexibility. Limited partnerships are very limited, as the term implies, because the minute a limited partner starts playing a role in the partnership, it stops being a limited partnership. Okay, so that\'s why they\'re not quite as popular. They\'re not extinct, but they\'re not quite as popular. Okay. So let\'s get on to. Limited companies then limited. So I will, I think briefly talk about PLCs in this lecture as well. But I\'m going to focus mainly on LCD. So LCDs private limited companies. Uh, the term LCD is the big giveaway in determining in identifying whether something is a private limited company or not. Um, they are governed by, again, their own piece of legislation. This time, the Companies Act 2006, the largest piece of legislation ever enacted, which is one of the reasons why, uh, this module is assessed by coursework rather than exam. I don\'t want you all to have to learn the Companies Act 2006. Okay. Um, so one thing that may surprise you is that you can set up a company with just one person. All right. Um. Now, when I use the term limited company in this module, I am usually going to be talking about companies limited by shares. There are two types of private limited companies you can have. Limited companies limited by shares and companies limited by guarantee. Um, companies limited by guarantee are very different. They\'re usually found in the not for profit sector, um, social or educational fears, for example. In fact, actually you\'re all part of a, uh, private limited company, which is limited by guarantee. Do you know what that is? Yeah. King\'s student union is limited by guarantee. Um. But essentially, uh, for these purposes, I\'m talking about a company limited by shares. So a private limited company that can issue shares. Okay. So, um, it essentially requires some sort of upfront financial contribution from the people who are setting it up. Um, many household names, you know, Iceland clerks, you know, whatever. Um, I\'m sure you can think of hundreds of other examples. Anything with LTV after it. You\'re talking about private company limited by shares. Okay. So as I said, all private companies are governed by the Companies Act 2006. Um, that is the piece of legislation which governs companies now. There were a number of predecessors to the Companies Act 2006. There was a Companies Act 1985, and before that there was another one, all the rest of it. Some companies were obviously set up by the earlier Companies Act. But as far as the legislation, which covers all companies now, it\'s this. Okay. So it\'s a very important piece of legislation, okay. It governs how companies can raise money right to profits and losses, participation in management. Who can access information? Uh, liability. It\'s a big one. All of those things are covered in the Companies Act 2006. So, um, as I said, a company can be formed by one or more persons. A single person, uh, can set up a company. In order to set up a company like with an LLP, you need to file incorporation documents at companies House. Companies are the most, um, formality heavy type of business. The most admin, um, is involved in setting up a company. Um, you basically have to set file a set of incorporation documents, which include, um, the constitution of the company, what we call the articles of association and other forms, uh, and, and documents, um, you can. Statutory requirement that outlines how, you. Know, not necessarily. And actually what you can have is, um, you can actually purchase off the shelf companies where all of this has been done for you, essentially, uh, if you don\'t want to spend a lot of time and money hiring lawyers and all the rest of it, you\'re very much recommended to do that, uh, to protect yourself. Um, but you can just buy an off the shelf, a shelf company, uh, which has already been set up, just needs to be adapted a little bit with your company name and so on. Um, rather than having to get lawyers involved, although that\'s that\'s very much recommended. Um, all TDs have to register at companies House, uh, in accordance with the requirements of the Companies Act 2006. And once you\'ve completed your registration, you get a certificate of incorporation, which is proof that your company has been set up properly. That\'s not the end of it. Unfortunately, there\'s many ongoing formalities. Uh, if you set up a company, you have to keep on submitting a confirmation statement every year just to make sure you know if anything changes or anything hasn\'t changed. Crucially, you have to prepare and file annual accounts at companies House, which have to be prepared by accountants and signed off by accountants. And by that, by that very nature. You can see that companies are probably the most expensive type of business to own and operate. Okay. Much more expensive, for example, than sole traders or general partnerships. Companies have to pay registration fees. Stationery printing costs as well. So you know any communications that you have with anybody else, you have to clearly state, you know, that you\'re a company. Um, you\'re most likely going to need, as I said, to pay solicitors, solicitors to draw up your incorporation document. Uh, especially if you\'re tailoring your articles of association. Um, having an accountant is not optional. If you\'re a company. And so on. This is the big difference between LPs and companies limited freedom over management. As we\'ve just seen with LPs, one of the big attractions is that you have an unrestricted right to participate in the management of the LLP. Okay. That\'s not the case. If you are a company, management of the company is left to directors. Whereas the owner of the company is essentially a shareholder or shareholders. Now the same person can be both a director and a shareholder. But still, you\'ve got this division between directors who have the power of management of the company and shareholders, who essentially have the rights of ownership in a company. But it\'s very, very important to establish in what capacity somebody is acting at any one time, even if they hold both those roles. And for lots and lots of reasons, the Companies Act goes into a great deal of detail about the way in which shareholders should act and the way in which directors should act, and what happens if they don\'t act in the right way. Okay. That\'s a lot of a lot of the module is going to be spent talking about that. Okay. Now it\'s possible. So so we\'ll talk about the constitution of the company, the articles of association in a couple of weeks time. But essentially the articles of association are the rulebook for the company. And it\'s possible, through adaptation of the articles of association to contract out of a lot of the sections of the Companies Act 2006, not all of them, but it is possible to adapt the companies act quite significantly to suit your company by amending the articles of association. There are again some articles that you can buy. You don\'t have to come up with the articles completely by yourself. There are some articles, uh, standard articles of association that you can buy. Um, but you are very free to come up with the articles yourself or adapt them heavily to suit your particular company. Now. The articles and the Companies Act basically provide a general framework, but companies will also have something called a shareholders agreement. The shareholders Shareholder\'s agreement essentially determines the relationship. It\'s a contractual document determining the relationship between the shareholders, their rights, responsibilities, and so on. The shareholders agreement is a private document. The articles of association are a public document. Okay. You as the company lawyer. One of your key roles is to tell your client what to put in the shareholders agreement, which is private, and what to put in the articles which are public. All right. So that\'s an important aspect that we\'ll be looking at. As the weeks go on. But I think it is fair to say that limited, limited companies are far more public, far more publicity than certainly than sole traders or partnerships. And even more so if you\'re a PLC or a listed company. You\'re even more public in that sense. Large companies have to, for example, publish their payment practices and internal policies, as well as other things as well. But, you know, the biggest reason why you incorporate is to get the benefit of separate legal personality and limited liability. Those are the key reasons why any sole trader incorporates and becomes a company. Because a company has separate legal personality from the people who own and run it. So there\'s a shield between what the business does and the people who own the business. A company is regarded as a person in law. So you might sometimes come across the terminology and company law of a natural person and a legal person. A natural person is a human being. I.e. you and me, a legal person we sometimes talk about as being a company, but essentially they can do a lot of the things that are natural person can do. They can enter into contracts, they can sue and be sued and so on. So you can talk about, for example, buying something from Asos or any other company, Asos or any other company rather than the people behind you know, the company. This is probably the most crucial aspect of company law. Separate legal personality and limited liability. And we\'ll come back to look at this in much more detail next week. In particular, what the full ramifications of separate legal personality are closely linked to separate legal of personalities. Limited liability. So essentially means that shareholders in a business, um, don\'t have unlimited personal liability. Liability is limited up to the extent of their initial investment once they\'ve made their initial investment in the business, once they\'ve paid into the business what they\'ve promised to pay, they can\'t be asked for any more money, generally speaking. Nothing else, no matter the extent of their liability, because they have the protection of separate legal personality and limited liability. So hopefully you can see from this why entering a limited company form is so attractive to businesses. This is why they\'re such a popular choice. This is why the company form is a popular choice. Another point I think worth mentioning is tax again, um, because limited companies are not taxable as individuals, so they don\'t have to pay income tax, they can pay much more favourable rates of corporation tax. Okay. So that\'s another reason why you might incorporate to pay a more favourable tax rate. And finally companies have the greatest range of funding options. Um main one being they can issue shares to uh people to borrow money. Okay. They can. Yep. So in the case of the shareholders of limited companies, um, the entire profits being taxed at a corporate level, and then they. Yeah yeah. No no. So dividends are different. Dividends are different. So if you\'re a shareholder and you get dividends that\'s individual income. So individual shareholders still have to pay tax on dividends received from the company. But we\'re talking about what the company gets is paid corporate corporation tax. Money. Possibly. Possibly. But one thing you have to bear in mind that is that any shareholder, when they enter into a company, usually the main thing they\'re looking for is dividends. So they want that personal income. Okay. Okay. Um, so as I said, companies have the widest range of funding options because not only can they issue shares to borrow money, they also have access to all of those other funding options we mentioned. So, um, banks floating charges, other other investors and so on. Now, you might think that this all of this makes companies by far the most attractive form of business. But the reality is what form of business you choose very much depends on the needs of the business. But the advantage of the company structure is that it offers certainty. Okay. Um, one other thing you can do with a business with a company is form a group of companies. Um, I\'ll talk about that in a second. But just before we talk about that, um, this is just to sort of summarise how you incorporate a company and what you need to incorporate a company. Uh, you have to follow your documents at companies House. Uh, so companies House is essentially it\'s the UK government\'s body, which is responsible for incorporating and dissolving companies and certain other types of businesses. Um, if you\'re looking for information about a company, you look on companies House, it\'s a website. You can just just go into it and find out all sorts of information about companies. Uh, filing can be done electronically. There\'s a small fee to pay and so on. Now, the key elements of your application are the following. So choosing a name. Now, this might sound very easy, but it isn\'t. Um, because there are things that you have to be very careful about when you\'re choosing a name. Just think about what you can\'t do when you\'re choosing a name. You can\'t choose the name of an existing business. You can\'t choose a name which implies some sort of link with His Majesty\'s Government. So you can\'t just call yourselves the Royal Fish and Chip shop or whatever it may be. Um, there are certain other terms which you can\'t use as well. You can\'t use terms which are offensive. Okay. So you have to be very, very careful about choosing the name of the business, okay? You only need one person, one share. Yeah. So curiosity, how do they define what constitutes dependency? It\'s an objective test I would say. But, um, companies House would reject anything they viewed as objective. So common sense at the discretion of companies House. Okay. Yeah. Okay. And I\'m not going to give any examples of what my answer is, if that\'s what you\'re wondering. I\'m sorry. Um, okay. So as I said, you only need one shareholder. There can be more, but you only need one to start off with. You only also need one On director as well. Okay. Only one director. Only one shareholder. Uh, you can also have what\'s called a company secretary. Company secretary is quite an important role within a company, but you don\'t need to have them. It\'s essentially somebody within the company who can be responsible for all of the administration. You\'re well advised to have a company secretary. The bigger your company is. But you don\'t have to. The company also has to specify a registered office. Okay. So, um, the registered office has to be a physical location, but it hasn\'t. It doesn\'t have to be where you trade for. Okay. The registered office might be, I don\'t know, it might be the home address of one of the directors, for example. It doesn\'t need to be the shop or store where you trade from your accountants. It could be. Absolutely. It could be the accountant. It could be the company secretary\'s address. It could be, but it needs to be some sort of actual physical address. Um, you can adopt what we call the model articles. Yeah. What then is your, uh, determined by where your registrar\'s office is? No, no, no. Nothing like that. If you\'re a company, you pay corporation tax. Okay. Um, yeah. So standard articles are the model articles. Um, so you do not have to. As I said earlier, you don\'t have to draft all the articles yourself. You have the ability to adopt, uh, what we call the the model articles. Um, and those model articles, you can either adopt completely or you can adapt and amend as you see fit. So the the registered office is important, by the way. Um, for a number of reasons, but one of the main reasons is anything legal. When it comes to things like entering into contracts, suing or being sued, etc., that\'s why you need a registered address. Okay, so I talked just now actually, about the fact that, um, one of the advantages of a company is that you can start setting up groups of companies. Um, so this is an example of a very simple group structure. So you would have something called the parent company or the holding company at the head. Head of the snake if you like. Um, and essentially the shareholders in the holding company can also be shareholders, um, of what we call the subsidiaries of the company, of the holding company. And the subsidiaries are called, you know, sister companies as well. So you\'ve got the parent and the children, if you like. Um, subsidiaries can also have their own subsidiaries as well. Okay. So, um, this may all seem very strange, but this is done for a reason. Can anyone think of the reason why we have company groups? Yeah, not so much avoiding tax, but, um, related to that. On a similar theme, it\'s essentially a way of managing risk. It\'s a way of minimising risk because essentially. Yep. Also. Um, not I mean, not so much because essentially what you could have this holding company could essentially be almost inactive. Um, but the benefit is, is that the shareholders in it, they benefit from several layers of limited liability and separate legal personality, because not only is it do you have to sue one company to get at them, you have to sue another one and another one. So this is a very simplified company structure, but in reality you could have several layers of protection, which makes it very hard to get behind, you know, the mastermind behind a company. But also it expands the opportunity for different directors to come in at different points, not necessarily the. Director of the entire entity. Yeah, I mean, I mean. So yeah. Yeah. So it\'s a similar point. It\'s about protecting the directors as much as the shareholders. Yeah. I think you\'re trying to get all the money as well. Sorry. What was that? If you\'re trying to obscure the beneficial ownership of whether. Or not it is important. Well, yeah, I mean, I mean, you know, I would like to think that\'s not the main reason, but in reality, in reality, that could be a way of doing it. Okay. Um, on a on a more positive point, on a more positive point, uh, having a group structure helps to create internal lending opportunities as well. So it\'s a way of of growing companies. Uh, also. Um, a couple of last points about companies. Ltda are not the only form of company possible. So, um, you\'ve got private public and listed companies. So we\'ve just been talking about Ltda. Private limited liability companies. Um, nearly all companies are Ltda. Ltda are the most common type of company. Um, nearly all companies are known as private limited company. Um, the way that Ltda are defined under the Companies Act is any company that is not a public company, which isn\'t particularly helpful. Definition. Yeah. So just to clarify what you\'re saying, the company structure is that to do with the LCP? It\'s I mean we will look at this more next week. But separate legal personality and limited liability aren\'t necessarily a complete protection against being sued or having your personal assets gone after. Okay. There are a number of exceptions. Limited exceptions. But those exceptions exist. So if you are a very prudent or shrewd director, or if you\'re very well advised, this is a way of kind of minimising your risk to your own assets being, you know, being gone after it\'s open to every sort of company. Yeah, yeah, yeah I guess. Yeah. Okay. So, um, we\'ll come back to what a public company is in a second. But essentially, private limited companies, any company that\'s not a public company. Okay. But the the aspects of a private limited company that we\'ve identified so far is that members, shareholders benefit from limited liability. You have a full statutory regime that applies in terms of filing ongoing formalities and so on. Uh, you have to disclose some aspects of your company, um, about the people involved in the company. Who are the owners, who are the managers, and so on. Um, the private limited company is not able to offer shares to the public. That\'s the biggest difference between a private limited company and a public limited company. If you want to, um, offer shares to the general public, you have to float your company and become a public limited company, a PLC. And you can probably think of examples of companies that have done that in recent years. Okay. So essentially this means that there\'s a pool of investors that private limited companies cannot access, but public limited companies can access. Now, for the most part, most private limited companies won\'t need to access. But when you get to a certain level, a certain size, you might want to start issuing shares to the general public to raise more money. Or because the circle of people you can reach as a private limited company is too small, or any number of other reasons you want to reach a broader investment base. So you offer shares to the general public. And to do that, you have to convert from an MTD into the next type of company, which is a PLC. Okay. So the way this is defined as any company limited by shares or guaranteed with share capital that\'s registered as a public company is a PLC. Okay. Um, the way you identify whether something is a public listed company is that have the word plc after the name. Um, shareholders benefit from limited liability, much like a limited. But because it\'s a public limited company, a lot more you have to worry about there\'s a much more onerous statutory regime. They\'re much more tightly regulated because their activities affect the general public. Much more disclosure as well. Um, but the biggest advantage is that they can offer shares to the, to the public to raise money. So they have the greatest range of funding options. So that\'s why companies go from LTA to PLC. Okay. And then last company I\'ll mention very quickly. Here is the listed company. So listed company is essentially a type of public listed company which is listed on the stock exchange. So it\'s an even wider range of investors available by floating on the stock exchange. In the UK we\'ve got two main listing agencies. You\'ve got the London Stock Exchange. Um, and you\'ve got other stock exchanges around the world which give you access to very sophisticated, uh, investors. Okay. Um, like any other limited company, you\'ve got the benefit of limited liability. You\'re subject to all the regulation that applies to PLC\'s plus, um, more. And you have even more publicity requirements than for PLC\'s listed companies. A subsection of. Yes. Yes. Exactly, exactly. Public companies listed on stock exchanges or just. No. No. So only so all all listed companies are public companies. But not all public companies are listed companies, if that makes sense. Okay. And the benefit of being a listed company is you essentially have a ready marketplace for issuing shares to the public. Okay. I think that\'s quite a lot we\'ve gone through. So I\'ll probably leave it there. So these are the things we\'ve covered today. We\'ll pick all of this up in the workshop. And next week\'s lecture will cover, um, separate legal personality. Just very quickly here\'s the careers slide. Sorry it\'s so small. Oh, I wonder how to do that. I\'m sorry. I mean. When you say that.