Session 1 SEM 1

Question 1

What are the two main vehicles for pursuing a business for profit?

Answer 1

companies and partnerships

Question 2

What is a partnership?

Answer 2

Each partner becomes an agent of the other and can

therefore act to bind the partnership

Question 3

Where is Partnership law largely contained?

Answer 3

Partnership Act 1890

Question 4

Where is the law governing companies largely contained?

Answer 4

Companies Act 2006

Question 5

What is the key differences between companies and partnerships?

Answer 5

The presence or absence of limited liability.

Companies can have limited liability, while a standard partnership doesn’t.

Question 6

What is the hybrid form of business introduced by the Limited Liability Partnerships Act 2000?

Answer 6

Limited Liability Partnership (LLP)

• has separate legal personality and limited liability
• but for tax purposes and internal decision making process, operates like a partnership

Question 7

What are Community Interest Companies good for?

Answer 7

For purposes which don’t fall under legal definition of ‘charitable purposes’ and are in public interest, or are of private interest, but don’t seek to result in profit.

Question 8

If aims come under the definition of a charitable purpose then what is the company registered as?

Answer 8

As a charity under the Charities Act 2006.

Question 9

What are the two ways to limit liability in a company?

Answer 9

• Limit liability via purchasing of shares

- Limit liability by guarantee

Question 10

What is the r/s b/w Private companies and shares to the public?

Answer 10

Private companies are not allowed to offer their shares to the public (s.755)

Question 11

Is a public company and a publicly listed company the same?

Answer 11

No, even if you opt for a public company, it isn’t necessary that shares will be traded at an
exchange.

Statutory created bodies will create a number of regulations and the stock exchange rules will all apply in different ways to public/publicly listed companies.

Question 12

What is one consequence of limitation by guarantee?

Answer 12

In limitation by guarantee, one can leave the company by resigning. But, In a company limited by shares, one cannot resign a share but needs to find someone to transfer it to.

Question 13

Where is the regulatory framework for

public companies?

Answer 13

-The Financial Services Markets Act
2000
-Financial Services Act 2012.

Question 14

What mechanisms are there to deal with the situation regarding discouraged loans from creditors for companies with limited liability?

Answer 14

A creditor could:
1. take security over the company’s assets (eg via a floating charge -a charge that floats over all the company’s assets as they may be from time to time without preventing the running of the business, but ‘crystalising’ upon the coming of a specified event – this form of security is only available for bodies corporate and is a major reason why businesses
incorporate, so that they can get loans under such arrangements)
NOTE: This is what Salomon did. He sold his business to the company and gave
himself priority over future creditors by taking a debenture, secured by a floating
charge, for the purchase price! Sounds clever doesn’t it?
2. charge higher rates for the loan to a company
3. extract a personal guarantee from shareholders that circumvents limited liabilit

Question 15

What are the consequences of incorporation/separate legal personality?

Answer 15

• a company can own property
• sue
• sued.

Question 16

What does the UK Corporate Governance Code (formerly the Combined Code) set out?

Answer 16

Sets out standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations w/ shareholders. All companies with a Premium Listing of equity shares in the UK are required under the Listing Rules to report on how they have applied the Code in their
annual report and accounts.