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SQE2 > Business > Flashcards

Business Flashcards

1
Q

When does a partner have actual authority?

A
  1. Expressly in any partnership agreement
  2. Expressly, from a vote of the partners
  3. Impliedly, from the partners failure to object to past actions
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2
Q

Is an out-going partner liable for debts the partnership incurred prior to the partner retiring from the firm?

A

Yes

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2
Q

What is apparent authority and when will it bind a partnership?

A

A partner has apparent authority to carry on in the usual way of business of the kind carried on by the partnership UNLESS:

  1. The partner had no actual authority to act; AND
  2. The third party knew the partner lacked actual authority or did not know they were dealing with a partner

** Whether an act is carrying on in the usual way business of the kind carried on by the partnership is objective: would a reasonable third party think a business of this kind would usually do this act?

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2
Q

How can an out-going partner ensure that they are not liable on debts incurred after they retire?

A
  • Actual notice to existing creditors; AND
  • Publication notice in the London Gazette to everyone else
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2
Q

If a a partner lends money to the partnership what is the rate of interest they are entitled to unless otherwise agreed?

A

5%

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2
Q

What decisions in a partnership require unanimous consent?

A
  • Admission of a new partner
  • A change in the nature of the partnership
  • An alteration of the partnership agreement
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2
Q

What are the partner’s fiduciary duties to one another?

A
  • Duty to disclose relevant information to the firm
  • Cannot compete with the firm’s business
  • Must account to the firm for any benefit or profit from any transaction concerning the partnership, its business, or use of the partnership property
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2
Q

Under what circumstances will a partnership dissolve?

A

Expiration of the term or accomplishment of the goal
A partner gives notice of their intention to withdraw
Death or bankruptcy of a partner
If the partnership becomes unlawful
By court order

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2
Q

Do partners continue to bind the firm after dissolution in order to wind up the company?

A

Yes

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2
Q

Do partners continue to bind the firm after dissolution in order to wind up the company?

A

Yes

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2
Q

In what order are assets distributed on winding up of a partnership?

A

First: to repay debt owed to outside creditors
Second: to repay loans made by the partners to the firm
Third: to return the partner’s contributions

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2
Q

What must a registration for an LLP include?

A

The name of the LLP, which must end in LLP
The location and address of the LLP’s registered office
The names and addresses of the LLP’s members and who will serve as the designated members.
Details of people with significant control

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2
Q

How can a new member be added to an LLP?

A

Unanimous consent of all members.

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2
Q

When must Companies House be informed of changes to an LLP’s membership or in it’s designated members?

A

14 days

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2
Q

How can a member of an LLP cease to be a member?

A

By giving reasonable notice to the other members AND giving notice to Companies House within 14 days.

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3
Q

What is a person with significant control in respect of an LLP?

A
  • holding more than 25% of the surplus assets on a winding up
  • more than 25% of the voting rights
  • those holding the right to appoint or remove the majority of those entitled to take part in management
  • Someone who otherwise can exercise significant influence or control over the members
4
Q

What must the promotors of a company file to incorporate a company?

A
  • Memorandum of association
  • Application for registration
5
Q

What must the application for registration contain for a company?

A
  1. Proposed name
  2. The location of its registered office
  3. Details about the companies business
  4. Whether the company will be limited by shares or guarantee
  5. A statement of capital and initial shareholdings
  6. A statement of the proposed officers/directors
  7. Details of persons with significant control
  8. A statement of compliance with the companies act
  9. The relevant fee.
6
Q

What must a registration for an LLP include?

A

The name of the LLP, which must end in LLP
The location and address of the LLP’s registered office
The names and addresses of the LLP’s members and who will serve as the designated members.
Details of people with significant control

6
Q

If the shareholders make an alteration that no reasonable person would consider to be for the benefit of the company what can a shareholder do?

A

Challenge it in court.

NB: That an amendment adversely affects minority shareholders is not sufficient grounds for an objection if the alteration is made in good faith in the interests of the company

6
Q

How can a new member be added to an LLP?

A

Unanimous consent of all members.

7
Q

What are limited circumstances in which the veil of incorporation could be lifted to reach the assets of members?

A

If the company form is being used to carry out fraud or to avoid existing obligations

8
Q

Who can appoint new directors?

A

Ordinary resolution of either directors or members.

9
Q

In what tine scale must companies house be informed of either a new director appointment or changes of details of existing directors e.g., address

A

14 days

9
Q

How can companies execute documents?

A
  1. Affixing their seal
  2. Two directors signing
  3. A director and a secretary signing
  4. A single director if signed in the presence of a witness who attests the signature
9
Q

What common law fiduciary duty does a director have?

A

To act in good faith and in the best interest of the company as a whole.

10
Q

What is enlightened shareholder value?

A

In addition to maximising profits, directors may consider effects of decisions on the interests of shareholders, suppliers, customers and the community.

11
Q

What is the effect of any provision in the articles or a contract that purports to exempt a director for liability that would otherwise attach to the director for breach of duty, negligence, or breach of trust in relation to the company?

A

It is void

12
Q

How long before a meeting must notice to adopt a resolution to remove a director be given?

A

28 days and the director must be given notice and a right to respond in writing and orally at the meeting.

12
Q

What is a Bushell v Faith clause?

A

A clause giving weighted voting rights to a director who is also a shareholder

13
Q

What is the standard care of a director?

A

A director must exercise the higher of the care, skill and diligence that would be exercised by a reasonably diligent person with:

  1. The general knowledge, skill and experience that reasonably may be expected of a person carrying out the duties of a director (objective); OR
  2. The general knowledge, skill and experience the director in question actually has (subjective)
13
Q

What is a derivative claim?

A

If a shareholder believes that a director has or is about to breach a duty owed to the company and it appears the board will not assert the company’s rights to prevent or remedy the action, the shareholder may apply to bring a derivative claim against the director on behalf of the company.

14
Q

Who may bring a derivative claim?

A

Only a shareholder or a person to whom shares were transferred by operation of law (such as through inheritance).

It is permissible for a shareholder to assert a claim that arose before the shareholder became a shareholder.

15
Q

Who may a derivative claim be bought against?

A

A director or another person, or both. Third part e.g. assisting in breach of trust.

Shadow directors are treated as directors for purposes of derivative claims.

16
Q

If an application for a derivative claim do not show a prima facie case, what must the court do?

A

Dismiss the case.

17
Q

If a derivate claim shows a prima facie case and passes the permission stage, what does the court consider at the second stage?

A

The court must dismiss the case at the second stage if:

(1) it is satisfied a person acting to promote the best interests of the company would not seek to continue the claim; OR
(2) the action was authorised by the company or authorisation would be likely.

The court must also consider (among other things): whether the shareholder is acting in good faith, the importance, of the action in question to the success of the company, and whether the shareholder could seek a remedy in their own right rather than on behalf of the company.

18
Q

Who receives damages awarded in respect of a derivative claim?

A

The company. although the court could require the company to indemnify the shareholder.

19
Q

What registers are private companies required to keep?

A
  1. A register of members
  2. A register of directors
  3. A register of secretaries
  4. A register of charges against the company’s assets.
  5. A register of people with significant control.

SQE2 (11 decks)

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