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SQE2 - Legal Knowledge > Business > Flashcards

Business Flashcards

1
Q

What documents are required for a general meeting?

A
  1. Notice of general meeting
    (2. Consent to short notice by the shareholders)
  2. Minutes of the general meeting
  3. Ordinary/ special resolution filed at Companies House
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2
Q

What documents are required for a written resolution?

A
  1. Written resolution
  2. Ordinary/special resolution to be filed at Companies House
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3
Q

If a director has a personal interest in a transaction the director cannot be counted as forming part of the quorum needed for the directors to vote on the transaction

A
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4
Q

A director requires approval of the board to obtain a loan from the company

A
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5
Q

What is the quorum for board meeting to be valid?

A

Two

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6
Q

Approval of a ordinary resolution requires a majority vote of the directors

A
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7
Q

A company can amend its articles of association by special resolution

A
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8
Q

The articles of association serve as a contract between the company and the shareholders

A
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9
Q

Under the model articles either the directors or the shareholders (through an ordinary resolution) can appoint new directors

A
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10
Q

The company must notify the registrar of companies within 14 days of the appointment of a new director or any change of details of existing directors

A
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11
Q

A director has a duty to disclose their interest in proposed or existing transactions

A
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12
Q

Capital Gains

A

Profit realised when an individual, partner or company disposes of a capital asset e.g. land, buildings, shares, antiques etc.

Profit = difference between sale price and cost of acquiring and cost of improvements

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13
Q

Is a UK resident chargeable to CGT on the disposal of an asset outside of the UK?

A

Yes

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14
Q

Are non-UK residents charebale to CGT on the disposal of an asset in the UK?

A

No

Exception: disposal of interest in UK land

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15
Q

What property is exempt from CGT?

A

Wasting chattel: moveable property with life of less than 50 years

Non-wasting chattel disposed of for less than £6,000

Transfer of property upon death

Transfer between spouses

Transfer to charity

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16
Q

What reliefs are available for CGT?

A

Private residence relief

Business asset disposal relief

Holdover relief

Incorporation relief

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17
Q

How do you calculate capital gains tax?

A

Disposal proceeds - cost of acquisition - allowable costs (legal etc) = capital gain or loss

Deduct reliefs

Deduct annual exemption (£12,300)

Tax final figure

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18
Q

What is the annual exempt amount for capital gains tax?

A

£12,300

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19
Q

What are the CGT rates?

A

10% basic rate
20% higher and additional rate

Except for property:
18% basic rate
28% all other rates

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20
Q

Articles of assocaition

A

Prescribe the internal working of a company

A contract between company and shareholders

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21
Q

The model articles allow a company to pursue any object and to carry on business of any kind BUT this can be restricted

A
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22
Q

A provision purporting to prevent amendments of company’s articles will be ineffective

A
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23
Q

Can a company amend its articles of association? How?

A

Yes by special resolution of members = 75%

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24
Q

Shareholders can vote to entrench articles which means that to amend the articles the company must comply with additional conditions that go beyond the normal 75% approval required

A
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25
Q

What is the veil of incorportion?

A

A general rule that protects members against personal liability and is not lifted to reach the assets of the members UNLESS company is used to carry out fraud or avoid existing obligations

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26
Q

If an amendment to the articles adversely affects minority shareholders but is made in good faith in the interests of the company then there is not sufficient grounds for objection

A
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27
Q

Directors

A

Officers of the company

Responsible for day to day management

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28
Q

Who can appoint new directors?

A

Directors or shareholders

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29
Q

Who can change the articles of association?

A

Shareholders only

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30
Q

Directors are agents of the company and may bind the company in contract or tort liability

A
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31
Q

Directors are required by the model articles to exercise their powers collectively i.e. one director has no power to act alone

A
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32
Q

How does a company execute documents?

A
  1. Affixing a seal
  2. Signature of either:
    a. Two directors
    b. Director and secretary
    c. Signature of one director in presence of two witnesses who attest to signature
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33
Q

Can a company purchase insurance to protect directors against liability?

A

Yes

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34
Q

Can a company indemnify a director against liability they incur on claims by third parties against the directors?

A

Yes except criminal or regulatory fines

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35
Q

A director may not exploit property, information or opportunities which they became aware while a director

A
36
Q

What is enlightened shareholder value?

A

Directors may consider effects of decisions on interests of shareholders, suppliers, customers, the community etc

37
Q

A director has a common law fiduciary duty to act in good faith and in the interests of the company

A
38
Q

If a company is insolvent or about to become insolvent who must the directors act in the best interests of?

A

Creditors NOT shareholders

39
Q

Can a director seek independent advice of an expert?

A

Yes as long as the director makes the final decision

40
Q

If a director has a personal interest in a transaction can they be counted as part of the quorum?

A

No

41
Q

Can a director obtain a loan from the company? How?

A

Yes but it must be approved by a resolution of the members

42
Q

A director may call a board meeting by giving REASONABLE NOTICE and the notice need not be in writing but each director must be told the date, time, location etc.

A
43
Q

What is the quorum for a directors meeting?

A

Two

44
Q

Directors must avoid conflicts of interest but list some scenarios in which a duty is not breached?

A
  1. Conflict relates to a transaction with the company and the board knows the director has an interest
  2. The matter has been authorised by the directors after receiving full disclosure
  3. The situation won’t give rise to a conflict
45
Q

Can a director be counted towards a quorum of their service contract?

A

No

46
Q

Shareholders have the power to remove directors by a simple majority

A
47
Q

The shareholders right to remove a director cannot be overriden BUT the articles can be modified to require weighted voting to a director who is also a shareholder

A
48
Q

Although shareholders have a right to remove a director if it violates their service contract the company would be liable for breach of contract

A
49
Q

A director may be disqualified from office for misconduct in connection with the company e.g conviction for serious offence regarding promotion, formation, management, liquidation, fraudulent trading etc.

A
50
Q

Which type of companies require a company secretary?

A

Public companies

51
Q

The notice to adopt a resolution to remove a director must be given at least 28 days before the meeting and the director must be given notice and a right to respond either orally or in writing

A
52
Q

What type of companies must hold an annual general shareholders meeting?

A

Public companies

Private companies are not obligated but general shareholders meetings can be held as required

53
Q

Who can call a general meeting and how are they called?

A
  1. Directors of their own accord
  2. Shareholders owning shares of at least 5% of the paid up voting capital can demand a meeting
54
Q

If shareholders demand a meeting when must the directors call it and when must it be held?

A

Must call meeting within 21 days of the request

Must hold meeting within 28 days of request

55
Q

Notice of a general shareholders meeting must be given to all shareholders and directors, personal representatives of deceased shareholders and trustees in bankruptcy of any bankrupt shareholders

A
56
Q

How can notice of a general shareholders meeting be given?

A

In writing or electronically

By email

Via a website

57
Q

The normal method of voting is a show of hands but poll vote may be requested

A
58
Q

Written resolutions cannot be used to dismiss a director or auditor

A
59
Q

Normally the board will decide whether to circulate a written resolution

A
60
Q

When do written resolutions lapse?

A

28 days from and including the date of circulation

61
Q

Who are written resolutions circulated to?

A

All shareholders eligible to vote

62
Q

What is the procedure if both director and shareholder approval is required?

A
  1. Board meeting called
  2. Board meeting and resolution approving matter
  3. Board pass resolution to call general shareholders meeting or circulate written resolution
  4. Shareholders vote
  5. Board meeting reconvened
63
Q

List the matters that require shareholder approval by ordinary resolution

A

Appointment or removal of director or auditor

Adoption of annual accounts and reports of directors and auditors

Approval of declaration of dividends

Approval of directors decision to allot shares

Approval of substantial property transaction (directors with a personal interest in a transaction of £100,000+ OR £5,000+ and contract value exceeds more than 10% of company assets)

Ratification of directors breach of duty

Entering a service contract with a director for more than 2 years

Making a loan to a director

Giving a director a payment for loss of office

64
Q

List the matters that require shareholder approval by special resolution

A

Buy back of company shares

Changes to articles of association

Change to company name

disapplying pre-emption rights

65
Q

Directors have an absolute power to refuse to allow a transfer of shares

A
66
Q

List the registers a company must keep

A

Members

Directors

Secretaries

People with significant control

Charges against company assets

67
Q

Private companies must submit an annual confirmation statement to Companies House confirming information is up to date

Criminal offence if fail to file confirmation within 14 days of end of company’s review period

A
68
Q

What must be included in a company’s accounts?

A

Balance sheet

Profit and loss statement

69
Q

Who must approve a company’s accounts?

A

Directors

70
Q

What must be contained in a business letterhead for a company?

A

Name

Part of UK company is registered

Registered number

Registered office

Name of all directors

71
Q

What must be contained in a business letterhead for a partnership?

A

Name

Address

Members names

72
Q

What must be contained in a business letterhead for a sole trader?

A

Name

Address

Soletraders name

73
Q

Person with Significant Control

A

Holds more than 25% of shares

74
Q

Do articles of association have to be filed at Companies House to register a company?

A

No as model articles of association may be supplied

75
Q

What documents must be filed at Companies House?

A

Special resolutions

New articles of association

Notice of appointment or removal of a director

Changes in membership of designated members

If anyone ceases to be a member i.e. transfers/sell shares

Issuance of new shares

Register of a charge against company asset with copy of charge and fee

Approval of ordinary resolution giving directors powers to allot new shares

76
Q

What is the process for transfer of shares?

A
  1. Existing shareholder gives share certificate and completed stock transfer form to transferee
  2. Board resolve to register new member and issue new share certificate
  3. Register of members updated (no filing at Companies House necessary)

IF 25% of shares are transferred then the following also needs to be done:
1. File notice of ceasing to be a person with significant control at Companies House
2. File notice of person with significant control at Companies House
3. Update register of people with significant control

77
Q

Does the board have the power to borrow money?

A

Yes under the Model Articles, a board resolution is all that is needed to enter a loan agreement. No shareholder approval is needed.

78
Q

Who can appoint a director?

A

Directors or shareholders

79
Q

What is the procedure for transferring shares?

A

Board resolution to approve transfer and update register of members and issue new share certificate

Stock transfer form

80
Q

When shares are being transferred when does legal title to the shares transfer?

A

When register of members is updated

81
Q

What is capital gains tax?

A

Tax on the profit you make during period of ownership of an asset

Payable by an individual who disposes of a chargeable asset and makes a gain/profit over their period of ownership

Shares = chargeable asset

82
Q

CGT: Rollover relief doesn’t apply to shares

A
83
Q

CGT: investor relief - doesn’t apply to investor who is also an employee of the company who shares they are disposing of

A
84
Q

Where tax rates that can and do change regularly will be provided in exam e.g. annual exemption for CGT but rates which don’y change regularly will be provided e.g. IHT

A
85
Q

If I don’t know the correct tax rate guess! Marks are for knowing a rate exists and being able to carry out the calculation

A
86
Q

How are assets distributed when a company enters liquidation?

A

In accordance with the statutory order of priority

87
Q

What is a defence to clawback?

A

They faced commercial pressure

SQE2 - Legal Knowledge (7 decks)

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