Business Flashcards
(57 cards)
A shareholder in a company passes away, leaving shares in the company as part of their estate. The PR of the deceased wishes to transfer these shares to a beneficiary of the estate but is not currently a member of the company.
How can the PR of the deceased execute the share transfer, and what is the legal effect of this action?
The PR can create an instrument of transfer for the shares and it is as effective as if they were a member fo the company
Man purchased business from a plc through a sale agreement.
Agreement stated the company’s shareholders would settle the “current” liabilities of the business, but it did not expressly identify any third party or class of third parties by name.
The man also undertook to complete outstanding customer orders and to assume responsibility for any liabilities incurred after the purchase.
A dissatisfied customer, who had placed an order before the business was sold, brought a claim against the man. The customer argued that the sale agreement conferred a benefit on him under the Contracts (Rights of Third Parties) Act 1999 and that he should be entitled to enforce the agreement against he man to recover for his loss.
Is the customer likely to succeed in his claim against the man?
The customer is unlikely to succeed, because he was not expressly identified in the sale agreement as required by the Act.
For a third party to enforce a term of contract, the contract must…
the contract must expressly identify the third party by name, as a member of class, or by description.
What is the Duomatic principle
allows for the informal assent of shareholders to govern corporate decisions without the need for formal resolutions or meetings, provided these shareholders unanimously agree
How many people are required to set up a private limited company?
Just one
What are the formalities for a sole trader?
There are none
What are the formalities to create a partnership?
There are none.
When does a partnership exist?
Where there are two or more persons in business with a view of profit
What is the only way a company and an LLP can be brought into existence?
Formal registration process at Companies House
Difference between the way partnerships and companies and LLPs are formed?
Partnerships are the product of agreement; companies and LLPs are creatures of statute.
What is the legal distinction between a sole trader and their business?
There is no legal distinction. A contract with the business is effectively a contract with the sole trader.
How does the legal position of a partnership compare to a sole trader?
There is no distinction between the business and the partners. A contract with the firm is a contract with all the partners.
What is meant by separate legal personality in the context of companies and LLPs?
Companies and LLPs have legal status independent of the persons who set them up. Dealings are with the company/LLP, not the individual owners or managers.
What happens when a company or LLP commits an unlawful or illegal act?
The consequences apply to the company or LLP, not to the individuals behind it.
What happens when a sole trader or partnership commits an unlawful act?
The unlawful act is seen as an act of the sole trader or the partners themselves.
What is the legal status of people involved in an LLP?
They are members, with management rights but no direct legal entitlement to LLP assets or business.
How is ownership in an LLP determined?
Each member has a defined stake in the business, rather than direct entitlement to assets.
Who manages and owns a company?
Directors manage the company, shareholders own it. Shareholders have a stake defined by their shareholding size.
Do directors or shareholders have direct rights over the company’s assets?
No. They have management rights or ownership stakes, but no direct entitlement to company assets.
Which structure allows an individual to manage and control the business but also creates an entitlement to a share of the business without personal liability for debts?
LLP
Do shareholders have direct control over company assets?
No. Shareholders have ownership rights (via shares) but no direct control over assets.
What is limited liability in the context of a company?
Shareholders are only liable for the amount unpaid on their shares. Once shares are fully paid, they stand to lose only the value of their shares.
How does limited liability work in an LLP?
Members agree contractually on the amount they will contribute on insolvency, which may be zero. However, their stake’s value may be worthless if the LLP fails.
What is the liability of partners in a partnership?
Partners are jointly and severally liable for all partnership debts. They can lose personal assets beyond what they invested.
