Business Law Flashcards

Question

What does the Partnership Act 1890 govern?

Answer 1

It sets out specific rules about how partnerships are to run and operate. ## Footnote Partners can modify these rules through a partnership agreement.

Answer 2

An LLP combines benefits of a limited company with the flexibility of a general partnership. ## Footnote Liability is limited to the amount agreed in the LLP agreement.

Answer 3

Has two categories of partners: general partners with unlimited liability and limited partners with liability limited to their capital contribution. ## Footnote Limited partners must not participate in management to retain limited liability.

Answer 4

LPs must be registered under the Limited Partnership Act 1907. ## Footnote Governed by the LPA 1907, Partnership Act, and relevant common law.

Answer 5

General partners are responsible for managing the business and have unlimited liability. ## Footnote They actively participate in the business operations.

Answer 6

controls, flexibility. ## Footnote This structure allows for more operational freedom compared to traditional companies.

Answer 7

Economic Crime and Corporate Transparency Act 2023 (ECCTA). ## Footnote It amends provisions of the Limited Partnership Act 1907.

Answer 8

False. ## Footnote Limited partners must not partake in management to maintain limited liability.

Answer 9

An agreement that governs the relationship between partners and can supplement or displace provisions of the Partnership Act. ## Footnote It allows partners to create their own operational rules.

Answer 10

Consent of all parties including the new company. ## Footnote This is necessary to relieve the promoter of personal liability after company formation.

Answer 11

Confirmation statement and office and email addresses ## Footnote LPs must file this information through an authorised agent registered with Companies House.

Answer 12

A body corporate treated as an artificial legal person ## Footnote A company has a separate legal personality, independent of its owners and managers.

Answer 13

* Companies limited by shares * Companies limited by guarantee * Unlimited companies

Answer 14

A company where the liability of its members is limited by its constitution ## Footnote The constitution is a set of rules for the company's operation and decision-making.

Answer 15

Limited to the unpaid amount on any shares held by them ## Footnote Members have no liability if their shares are fully paid up.

Answer 16

Members' liability is limited to a specified amount they agree to contribute if the company is wound up ## Footnote For example, this amount could be £1.

Answer 17

No limit on the liability of members ## Footnote Unlimited companies are rare and must be private, not offering shares to the public.

Answer 18

False ## Footnote Unlimited companies must be private.

Answer 19

A company is a legal person separate from its members and officers, allowing it to: * own property * be liable for its own debts * sue its debtors * be a party to a contract ## Footnote This separation ensures continuity of existence, meaning the company does not cease to exist if a member dies.

Answer 20

The liability of a company’s members is limited to: * any unpaid amount on the shares they purchased (in a company limited by shares) * the amount they guaranteed to contribute (in a company limited by guarantee) ## Footnote This protects shareholders from personal liability for the company's debts unless specific circumstances arise.

Answer 21

It is when a court sets aside the company's separate legal personality and holds the owners or directors personally liable for the company's debts. ## Footnote This is rare in practice and usually occurs under specific circumstances.

Answer 22

A court may ignore separate legal personality when: * A public company enters contracts before obtaining a trading certificate * A company is wound up with evidence of fraudulent or wrongful trading * A company is used to commit fraud or wrongdoing ## Footnote These situations allow the court to hold individuals personally liable.

Answer 23

Share capital is the funds invested by members or shareholders in the company, treated as a special fund within the company. ## Footnote The first shareholders are called subscribers.

Answer 24

Share capital must be reserved for the benefit of creditors if the company becomes insolvent and should not be used for general expenses. ## Footnote This doctrine provides extra protection for the capital invested in the company.

Answer 25

False ## Footnote Directors generally cannot be held personally liable unless specific legal exceptions apply.

Answer 26

own property ## Footnote This principle is fundamental to the operation of companies as legal entities.

Answer 27

The identity of the company’s directors and members, the company’s constitution, the company’s accounts, and information on certain decisions taken by shareholders ## Footnote This includes resolutions made by shareholders.

Answer 28

Companies House ## Footnote The register can be accessed online.

Answer 29

To assist third parties in making informed decisions about dealing with the company.

Answer 30

It may be used for fraudulent purposes.

Answer 31

Certain protected information such as date of birth and signatures will not be publicly available.

Answer 32

All new and existing directors and people with significant control.

Answer 33

Detailed verification information for certain individuals.

Answer 34

An appropriate registered office address and a registered email address.

Answer 35

Costs and formality of setting up, desire for flexibility, attitude to risk, desire for privacy, need and ability to borrow funds, tax.

Answer 36

It is the internal rules that govern how the company is run.

Answer 37

A person conducting business on their own, who owns all assets of the business personally. ## Footnote Sole traders have unlimited personal liability.

Answer 38

A relationship which exists between persons carrying on a business in common with a view to profit. ## Footnote General partnerships have no separate legal personality.

Answer 39

No separate legal personality.

Answer 40

One person.

Answer 41

Partners hold partnership assets in their own names as agents and trustees for the partnership.

Answer 42

No incorporation formalities.

Answer 43

Sole trader will enter into business contracts in their own name and is personally liable under the contract.

Answer 44

A body corporate formed by at least two members, with no limit on the number of members. ## Footnote LLPs have separate legal personality.

Answer 45

Two people (at least two being designated members); no maximum.

Answer 46

LLP owns its assets.

Answer 47

Legal personality separate from shareholders and directors.

Answer 48

One shareholder; no maximum.

Answer 49

Unlimited personal liability for all debts and other obligations of the business.

Answer 50

Partners jointly liable for debts and obligations of the partnership business.

Answer 51

Sole decision-maker.

Answer 52

No need to make any information publicly available.

Answer 53

Personal funds and borrowing.

Answer 54

Generally limited to the amount they contributed or agreed to contribute.

Answer 55

Taxed as an individual.

Answer 56

limited company

Answer 57

Must be incorporated and registered at Companies House.

Answer 58

Taxed as a separate entity from its owners – the shareholders.

Answer 59

Partnership Act 1890 ## Footnote The Partnership Act 1890 outlines the legal framework for partnerships in the UK.

Answer 60

* How a partnership is set up * Default provisions in the Partnership Act * What happens when a partner leaves the firm * How a partnership is dissolved ## Footnote These topics provide a comprehensive overview of the formation and regulation of partnerships.

Answer 61

A partnership is formed when two or more people carry on a business in common with a view to making a profit ## Footnote This is outlined in Partnership Act s 1.

Answer 62

Every trade, occupation, or profession ## Footnote Defined in Partnership Act s 45.

Answer 63

Firms ## Footnote Partnerships can include individuals and corporate bodies, but not other partnerships.

Answer 64

No ## Footnote Partnerships do not have separate legal personality.

Answer 65

Whether the parties are receiving a share of the profits of the business ## Footnote This is considered prima facie evidence of partnership as per Partnership Act s 2(3).

Answer 66

When the partners begin to carry on business with a view to profit ## Footnote This is unlike a company, which exists upon registration.

Answer 67

False ## Footnote Courts look at the substance of the arrangements, not just the parties' stated intentions.

Answer 68

That the partnership has started to trade ## Footnote The term 'carrying on business' refers to the intention to operate for profit, not actual trading activity.

Answer 69

To displace the default provisions of the Partnership Act when desired ## Footnote This agreement is tailored to the specific needs of the partners.

Answer 70

Varies depending on individual circumstances ## Footnote Reasons can include personal decisions, disputes, or business changes.

Answer 71

The formal termination of the partnership agreement ## Footnote This involves settling debts and distributing assets among partners.

Answer 72

A partnership has no separate legal status and liability cannot be assigned to it.

Answer 73

Partners have unlimited liability for the debts of the partnership.

Answer 74

A creditor can choose to pursue an individual partner or all partners together to recover debts.

Answer 75

The relationship is governed by common law and equitable principles.

Answer 76

Partners have a fiduciary duty towards one another.

Answer 77

No, a partnership cannot own assets or grant security as it has no separate legal personality.

Answer 78

A partnership can sue and be sued in the partnership name.

Answer 79

No, general partnerships do not require registration at Companies House.

Answer 80

No, there is no legal requirement to have a written partnership agreement.

Answer 81

The Partnership Act implies terms into the partnership.

Answer 82

A partnership agreement should ideally be in writing for evidential purposes and certainty.

Answer 83

Carrying out searches at the Intellectual Property Office and Companies House.

Answer 84

Names comprising the surnames, forenames, initials of partners, or corporate names of partners.

Answer 85

It will be counted as a business name, and disclosure provisions will apply.

Answer 86

To ensure that those doing business with the partnership can discover the identity of the partners.

Answer 87

The business name, all partners’ names, and an address in the UK for serving documents ## Footnote This applies to invoices and letterheads. Partnerships with more than 20 partners can state that full names are available at the principal place of business.

Answer 88

It is an offence punishable by a fine and may render contracts unenforceable ## Footnote This emphasizes the importance of compliance with the Partnership Act.

Answer 89

Income tax in England and Wales, and corporation tax if involving corporate partners ## Footnote The nominated partner is responsible for submitting the partnership tax return.

Answer 90

Individual partners ## Footnote Each partner must submit their own tax return in addition to the partnership tax return.

Answer 91

Partnerships that can be ended at any time by one partner giving immediate notice ## Footnote This is in contrast to fixed-term partnerships which end according to specific terms.

Answer 92

Death of a partner, bankruptcy of a partner, illegality, or a court order ## Footnote These conditions define the circumstances under which a fixed-term partnership can terminate.

Answer 93

In accordance with specified grounds or once the business activity is completed ## Footnote This applies to partnerships formed for a single adventure or undertaking.

Answer 94

A partnership is a partnership at will unless there is an express or implied agreement to the contrary ## Footnote This is stated in Partnership Act s 26(1).

Answer 95

How the partnership can be brought to an end ## Footnote This helps to displace the default position of a partnership at will as per ss 26(1) and 32(c).

Answer 96

Between fixed capital amounts and varying assets ## Footnote This is important for understanding the financial structure of the partnership.

Answer 97

The business name, all partners’ names, and an address in the UK for serving documents ## Footnote This applies to invoices and letterheads. Partnerships with more than 20 partners can state that full names are available at the principal place of business.

Answer 98

It is an offence punishable by a fine and may render contracts unenforceable ## Footnote This emphasizes the importance of compliance with the Partnership Act.

Answer 99

Income tax in England and Wales, and corporation tax if involving corporate partners ## Footnote The nominated partner is responsible for submitting the partnership tax return.

Answer 100

Individual partners ## Footnote Each partner must submit their own tax return in addition to the partnership tax return.

Answer 101

Partnerships that can be ended at any time by one partner giving immediate notice ## Footnote This is in contrast to fixed-term partnerships which end according to specific terms.

Answer 102

Death of a partner, bankruptcy of a partner, illegality, or a court order ## Footnote These conditions define the circumstances under which a fixed-term partnership can terminate.

Answer 103

In accordance with specified grounds or once the business activity is completed ## Footnote This applies to partnerships formed for a single adventure or undertaking.

Answer 104

A partnership is a partnership at will unless there is an express or implied agreement to the contrary ## Footnote This is stated in Partnership Act s 26(1).

Answer 105

How the partnership can be brought to an end ## Footnote This helps to displace the default position of a partnership at will as per ss 26(1) and 32(c).

Answer 106

Between fixed capital amounts and varying assets ## Footnote This is important for understanding the financial structure of the partnership.

Answer 107

Certain terms into the partnership arrangement and management.

Answer 108

Equally in respect of their rights and duties.

Answer 109

Yes, by agreement of the partners.

Answer 110

That the share of the profits may be unequal and/or different ratios for capital profits to income profits.

Answer 111

The default provision will still apply.

Answer 112

By oral agreement or conduct, but it's best to vary them in writing.

Answer 113

No, they may choose not to do so.

Answer 114

A partner who does not take part in the management.

Answer 115

By a majority of the partners.

Answer 116

Unanimous consent of all existing partners.

Answer 117

The partnership automatically dissolves.

Answer 118

Yes, by giving notice at any time, unless it's a fixed term contract.

Answer 119

No, unanimous consent of the other partners is required.

Answer 120

The new partnership will be a partnership at will.

Answer 121

They will not be liable unless agreed to the contrary.

Answer 122

It dissolves the existing partnership.

Answer 123

The business carries on without a break.

Answer 124

Unanimous consent of all partners, including the partner proposed for expulsion. ## Footnote This is stated in Partnership Act s 25.

Answer 125

Conditions include: * No longer holds relevant professional qualifications * Neglects to perform duties * Prolonged mental or physical ill health ## Footnote It is advisable to stipulate grounds for expulsion in a written agreement.

Answer 126

Termination of the partnership relationship. ## Footnote It can be classified as general or technical dissolution.

Answer 127

Occurs when one partner leaves or another joins, but the business continues under a new partnership arrangement. ## Footnote The old firm is dissolved and replaced by a new firm.

Answer 128

Refers to dissolution leading to the winding up of the business and distribution of its assets.

Answer 129

Whether the default provisions of the Partnership Act apply.

Answer 130

A partnership is dissolved on: * Retirement/dissolution on notice * Expiry of fixed term * Termination of the purpose * Death * Bankruptcy * Charging order. ## Footnote These are outlined in Partnership Act ss 32–35.

Answer 131

By having a written partnership agreement with relevant terms or by coming to an agreement that is express or implied.

Answer 132

They are taken on by the new firm of partners.

Answer 133

Consent from all partners, either through a written agreement or an implied agreement from a course of dealing.

Answer 134

Consent of all the partners ## Footnote A partner cannot retire unilaterally unless agreed upon by all partners.

Answer 135

It dissolves the partnership ## Footnote This is based on Partnership Act ss 26 and 32(c).

Answer 136

On the expiration of that term ## Footnote This is according to Partnership Act s 32(a).

Answer 137

Ends the entire partnership ## Footnote This is stated in Partnership Act s 33(1).

Answer 138

No ## Footnote According to Partnership Act s 36(3), the estate is not liable for post-death debts.

Answer 139

Remains severally liable ## Footnote This liability is outlined in Partnership Act s 9.

Answer 140

Automatically terminates the partnership ## Footnote This is defined in Partnership Act s 33.

Answer 141

A way of enforcing a judgment ## Footnote It allows a judgment creditor to place a charge against a debtor's property.

Answer 142

Dissolve the partnership ## Footnote This is allowed under Partnership Act s 33(2).

Answer 143

Produces certainty and clarity ## Footnote It outlines the parties’ intentions about managing the partnership.

Answer 144

Provisions for running and managing the business ## Footnote Specific provisions can vary based on the partnership's needs.

Answer 145

The date when the partnership officially begins operations ## Footnote This is often specified in the partnership agreement.

Answer 146

Fixed term, specific venture, or indefinite duration ## Footnote These terms should be clearly defined in the partnership agreement.

Answer 147

Death, bankruptcy, retirement, or expulsion of a partner ## Footnote Specific conditions should be listed in the agreement.

Answer 148

Majority vote or after a fixed term/specific business venture ## Footnote The dissolution process should be outlined in the partnership agreement.

Answer 149

The agreement should specify procedures for each scenario ## Footnote This ensures clarity and continuity in operations.

Answer 150

Amount contributed by each partner and future contribution methods ## Footnote This prevents disputes over financial contributions.

Answer 151

All partners have beneficial ownership but not necessarily in equal shares ## Footnote This should be clearly defined in the agreement.

Answer 152

Skills and experience of partners ## Footnote Salaries can vary based on individual contributions.

Answer 153

Proportions for sharing profits and losses, and whether capital or income ## Footnote Clear terms help prevent conflicts regarding profit distribution.

Answer 154

How partners can draw profits and handling over/under payments ## Footnote This should be outlined in the partnership agreement.

Answer 155

Amount of time partners will devote to the firm, including holidays and maternity/paternity rights ## Footnote Clarity on time commitments aids in planning and expectations.

Answer 156

Utmost good faith towards each other and the partnership ## Footnote This is essential for maintaining trust among partners.

Answer 157

Restrictions on engaging in competing business during and after the partnership ## Footnote This clause protects the business interests of the partnership.

Answer 158

Confidentiality during and after the partnership ## Footnote Protects sensitive information related to the partnership.

Answer 159

Specific limits on decision-making powers of partners ## Footnote Helps prevent overreach by any single partner.

Answer 160

Terms must be specified in the partnership agreement ## Footnote This can include unanimous consent or specific conditions.

Answer 161

Partnership Act does not provide specific requirements for retirement ## Footnote This may need to be negotiated and included in the agreement.

Answer 162

Unanimous consent, including from the partner being expelled ## Footnote A non-exhaustive list of grounds for expulsion should be included.

Answer 163

Automatic dissolution unless specified otherwise ## Footnote Remaining partners can continue by buying out the partner's share.

Answer 164

Circumstances specified in the Partnership Act ## Footnote This provides a legal framework for resolving disputes.

Answer 165

Two or more persons (individuals/companies) carrying on business in common with a view to profit. ## Footnote It includes every trade, occupation, or profession.

Answer 166

Profit and loss sharing indicates partnership (prima facie evidence) ## Footnote Ownership of common property does not create existence of partnership.

Answer 167

Each partner is an agent of the firm, and their acts will bind all partners, unless a partner had no authority.

Answer 168

The firm is not bound unless the transaction is authorized.

Answer 169

Unlimited, joint and several liability. ## Footnote The Civil Liability (Contribution) Act 1978 allows one person to contribute towards the judgment debt of another.

Answer 170

Liability for negligent/fraudulent acts or dishonest breach of fiduciary duty in the ordinary course of business or with authorization of the partners.

Answer 171

Outgoing partners remain liable for debts/obligations incurred before retirement. ## Footnote Incoming partners are not liable for anything previously done by the firm.

Answer 172

Consent of all parties can vary the rights and duties of partners.

Answer 173

Property bought exclusively for the purpose of partnership, held on trust for partners.

Answer 174

A judgment creditor may charge partnership assets to recover debt owed in a partner’s personal capacity.

Answer 175

Partners share equally in capital and income and capital profits/losses.

Answer 176

No, partners are not entitled to interest on subscribed capital before profits are ascertained.

Answer 177

All partners must consent before a new person is introduced as a partner.

Answer 178

No, the Partnership Act does not permit expulsion unless there is an express agreement of all partners.

Answer 179

A partner must give notice of intention to all other partners.

Answer 180

It is presumed to continue on the same terms.

Answer 181

A partner must account for any benefits derived from transactions concerning the partnership without the consent of other partners.

Answer 182

Dissolution can occur by fixed term expiring, death or bankruptcy of any partner, or unlawful business operation.

Answer 183

Partners continue to have authority to wind up affairs after dissolution.

Answer 184

The partnership can be rescinded.

Answer 185

Liabilities are paid first out of profits, then out of capital, and finally by the partners individually.

Answer 186

1. Pay debts to persons who are not partners 2. Pay to each partner proportionately as to advances made 3. Pay to each partner proportionately as to capital investment 4. In proportion to which profits were divisible.

Answer 187

This chapter will introduce you to the fundamental principles that will underpin your knowledge of partners’ responsibilities and liability towards each other and towards third parties.

Answer 188

It implies the relationship between partners, unless those provisions are superseded by an agreement.

Answer 189

The chapter will address the SRA’s functioning legal knowledge requirements by explaining the legal obligations and responsibilities imposed on partners within a firm.

Answer 190

A firm will be liable for contractual obligations and debts incurred by individual partners doing business with third parties.

Answer 191

Partners must divulge to one another true accounts and all relevant information connected with the business.

Answer 192

The Partnership Act imposes a duty of utmost fairness and good faith between partners.

Answer 193

Partners are accountable for any private profits they make and must share any profit or benefit received in connection with the partnership unless they have the consent of the other partners.

Answer 194

Partners have a duty not to compete with the partnership without the consent of the other partners and must account for and pay over to the firm all profits made from the competing business.

Answer 195

[partners]

Answer 196

The earnings belong to the partnership.

Answer 197

Prior approval from the other partners.

Answer 198

Partnership Act ss 28–30.

Answer 199

A partnership is not a legal entity separate from the partners.

Answer 200

The firm refers to the partners collectively.

Answer 201

From the terms of their partnership agreement, if there is one, and may be express or implied.

Answer 202

A duty of utmost fairness and good faith between partners.

Answer 203

True accounts and all relevant information connected with the business.

Answer 204

Any private profits that they make connected with the partnership.

Answer 205

The earnings belong to the partnership unless consent is obtained from the other partners.

Answer 206

Partners have a duty not to compete without consent and must account for profits from competing businesses.

Answer 207

the competing business.

Answer 208

Each partner has a responsibility to bear a share of any losses made by the business ## Footnote Refer to s 24(1) of the Partnership Act

Answer 209

In the absence of an agreement, it is implied that each partner will share any losses equally ## Footnote Refer to s 24(1) of the Partnership Act

Answer 210

* All partners will equally share the capital and profits and losses of the partnership * The firm has an obligation to indemnify fellow partners against bearing more than their share of any liability or expenses ## Footnote Refer to s 24(2) of the Partnership Act

Answer 211

Disagreements may arise as to who is responsible for debts or other obligations incurred by a partner ## Footnote This includes issues such as breaches of contract

Answer 212

* Did the partner have actual authority to enter into the contract or transaction? * Was the transaction of the type usually carried out by the firm? ## Footnote These questions help determine partnership liability

Answer 213

Every partner is an agent of the firm and their other partners for the purpose of the business of the partnership ## Footnote Refer to s 5 of the Partnership Act

Answer 214

Any transaction related to the firm’s business done in the firm’s name by an authorised person will bind the firm and all the partners ## Footnote Refer to s 6 of the Partnership Act

Answer 215

The firm will be bound by that agreement if the transaction relates to the firm’s ordinary course of business ## Footnote Refer to s 7 of the Partnership Act

Answer 216

True ## Footnote Refer to s 7 of the Partnership Act

Answer 217

equally ## Footnote Refer to s 24(1) of the Partnership Act

Answer 218

Transactions entered into contrary to the agreement will not bind the firm with respect to any person having notice of the agreement. ## Footnote This is outlined in s 8 of the Partnership Act.

Answer 219

Actual authority and apparent authority. ## Footnote Both types of authority help determine if the firm or the partner is liable for a transaction.

Answer 220

Authority given by the other partners to enter into transactions, which makes the firm liable for those obligations. ## Footnote Actual authority can arise from express or implied authority.

Answer 221

Express authority is where a partner is explicitly given authority to represent the firm in specific transactions. ## Footnote This can pertain to particular types of transactions or a specific transaction.

Answer 222

Authority that arises when partners have accepted that one or more of them can represent the firm in a particular type of transaction without explicit discussion. ## Footnote This can be inferred from regular dealings or active roles without imposed limitations.

Answer 223

Actual authority will be a question of fact in each case. ## Footnote Determining actual authority depends on the specific circumstances surrounding the transaction.

Answer 224

Apparent authority occurs when a partner appears to have authority to act on behalf of the firm, even if they do not have actual authority. ## Footnote This protects third parties who believe they are dealing with an authorized partner.

Answer 225

The firm will be liable if: * The transaction relates to the firm's business * The transaction is of a kind typically expected to have partner authority * The third party was unaware of the partner's lack of authority * The third party dealt with someone they knew or thought was a partner. ## Footnote This is governed by Partnership Act s 5.

Answer 226

The third party can: * Sue the partner with whom they made the contract * Issue proceedings against the firm, making all partners jointly liable * Pursue individual members of the firm who were partners at the time. ## Footnote These options are outlined in Partnership Act ss 9 and 17.

Answer 227

False ## Footnote The partner who acted without authority will be personally liable under the contract.

Answer 228

They remain liable for debts and obligations pursuant to contracts already entered into, even when the debt has not yet become payable. ## Footnote This is outlined in Partnership Act s 17(2).

Answer 229

By negotiating and agreeing with fellow partners and the firm’s creditors to settle any liabilities through a novation agreement. ## Footnote This is specified in Partnership Act s 17(3).

Answer 230

A tripartite agreement between the departing partner, the firm, and each of the firm’s creditors. ## Footnote It is used for settling liabilities when a partner retires.

Answer 231

To seek agreement from remaining partners for release from liabilities incurred up to the date of retirement and obtain an indemnity for existing or future liabilities. ## Footnote This agreement does not impact creditor rights.

Answer 232

The departing partner will still be liable for the debts. ## Footnote This liability persists despite any agreement with remaining partners.

Answer 233

A person admitted as a partner does not become liable to the firm’s creditors for anything done before they became a partner unless they agree to it.

Answer 234

Provide notice to everyone they had dealings with prior to leaving the firm and to the public. ## Footnote This includes notifying via the London Gazette.

Answer 235

* Sending notification to those with whom they had dealings * Putting a notice in the London Gazette ## Footnote These actions are required under Partnership Act s 36.

Answer 236

No, notice is not required, and the departing partner will not be personally liable for debts incurred with that third party after retirement.

Answer 237

No notice is required as the estate of the deceased or bankrupt partner is not liable for debts incurred after the event.

Answer 238

Holding out ## Footnote Holding out can be oral, in writing, or inferred by conduct.

Answer 239

* The person held themselves out as a partner * The third party relied on that representation * The third party advanced credit to the firm as a result

Answer 240

Privity of contract doctrine

Answer 241

The firm has liability

Answer 242

The firm has no liability, but the contracting partner will be liable and must indemnify other partners

Answer 243

If there were restrictions on acts that bind the firm and the third party had notice of that agreement

Answer 244

They can be sued if there was holding out or if notice of departure was not provided

Answer 245

A three-party agreement where the creditor releases the outgoing partner from existing liabilities

Answer 246

Persons carrying on business in common with a view to profit

Answer 247

If a person receives a share of the business’ profits

Answer 248

* Receiving debt by instalment * Contract for remuneration of servant or agent * Receiving annuity of partner’s portion of profits * Advance of money as loan * Selling goodwill and receiving annuity of portion of profits

Answer 249

Every partner is an agent of the firm and binds the partnership

Answer 250

The firm is not bound

Answer 251

Each partner is liable without limit for the debts of the firm

Answer 252

Everyone representing themselves as a partner is liable as a partner

Answer 253

The outgoing partner must cover any loss arising from exceeding their authority

Answer 254

Unanimous consent needed, including from the partner to be expelled

Answer 255

Partners must render true accounts and give full information affecting the partnership

Answer 256

It is dissolved unless a new agreement is made

Answer 257

* If a partner becomes permanently incapable * If a partner is guilty of conduct affecting the business * If a partner commits a persistent breach of the partnership agreement * If the business can only be carried on at a loss * If it is just and equitable to dissolve the partnership

Answer 258

* Give actual notice to third parties * Place notice in the London Gazette

Answer 259

* Losses paid out of profits first * Then out of capital * Individual contributions to repay losses in proportion to shared profits

Answer 260

A very simple document that is a snapshot of the company and its promoter(s) who are subscribing for shares at the time the company is formed.

Answer 261

It states that the subscribers wish to form a company and agree to become members.

Answer 262

At least one person must be willing to subscribe to the share capital.

Answer 263

The company’s internal rules governing how the company will operate, effectively the company’s constitution.

Answer 264

They are essential for companies and every company must have them.

Answer 265

Default articles of association provided by the Companies Act.

Answer 266

In Sch 1 to the Companies (Model Articles) Regulations 2008.

Answer 267

* Interpretation and limited liability of shareholders * Directors (powers, decision-making, and appointments) * Shares and distribution of dividends * Decision-making by shareholders * Administrative arrangements

Answer 268

Register its articles at Companies House, unless it adopts the Model Articles in full and without amendment.

Answer 269

Model Articles.

Answer 270

Amend and/or delete particular Model Articles.

Answer 271

Entirely custom articles adopted by a company, although this is unusual.

Answer 272

* Limit a company’s objects * Increase the quorum for board meetings * Remove the chairperson’s right to a casting vote * Allow directors to vote on issues in which they have an interest * Alter directors’ powers for shareholder control * Remove the requirement for a company to change its name by special resolution * Alter the directors’ authority to allot and issue shares * Alter statutory pre-emption rights of shareholders

Answer 273

To improve transparency and more accurate and trusted information on the registers held at Companies House.

Answer 274

On 26 October 2023.

Answer 275

* New rules for appropriate registered office addresses * Provision of a registered email address * Confirmation from the subscribers that the company is being formed for a lawful purpose

Answer 276

The company’s intended future activities are lawful ## Footnote This ensures compliance with legal requirements.

Answer 277

Query and challenge information that appears to be incorrect or inconsistent, and remove inaccurate, incomplete, false, or fraudulent information ## Footnote This aims to maintain the integrity of company records.

Answer 278

Stronger checks on names that may give a false or misleading impression to the public ## Footnote This is to prevent deceptive practices.

Answer 279

Financial penalties, annotation to a company’s record, or prosecution ## Footnote This emphasizes the importance of compliance.

Answer 280

Crime prevention or detection ## Footnote This is part of broader regulatory reforms.

Answer 281

From 1 May 2024 ## Footnote This increase will fund new powers and reforms.

Answer 282

Compulsory identity verification and streamlining accounts filing options for small and micro entity companies ## Footnote These changes aim to enhance regulatory compliance.

Answer 283

Articles of association, Form IN01 and a fee, name of the company, statement of type of company and its intended business activity, confirmation of lawful purpose, details of appropriate registered office, details of appropriate registered email address, statement of persons having initial significant control, statement of proposed officers, statement of capital and initial shareholdings, statement of compliance, election to keep information on a central register for private companies only ## Footnote Each document serves a specific regulatory purpose.

Answer 284

Register its articles at Companies House unless adopting the Model Articles in full ## Footnote This ensures that the company's governance framework is legally recognized.

Answer 285

The application form to register a company that must be submitted with the relevant fee ## Footnote It collects essential information for the Registrar of Companies.

Answer 286

Cannot be offensive or imply an association with government/public authority without relevant consent ## Footnote This is to protect the public and maintain trust in company names.

Answer 287

* Intended to facilitate an offence of dishonesty * Gives a false impression of a connection with a foreign government or international organisation * Consists of or includes a computer code * Is similar to a name used by another company which has been directed to change it ## Footnote Provisions under ECCTA ensure that company names do not mislead or cause legal issues with existing companies.

Answer 288

* Limited * Ltd * The Welsh equivalent ## Footnote This requirement is mandated by section 59 of the relevant legislation.

Answer 289

The place of registration must be stated, specifically England and Wales ## Footnote This form is essential for the incorporation process of a company.

Answer 290

* A document delivered there would come to the attention of a representative of the company * The delivery of documents can be acknowledged ## Footnote An appropriate address is crucial for effective communication and compliance.

Answer 291

It does not meet the criteria for an 'appropriate address' ## Footnote The regulations require that the address allows for proper acknowledgement of received documents.

Answer 292

It could be struck off the register ## Footnote Companies must provide evidence of a link to an appropriate address within 28 days to avoid this consequence.

Answer 293

A registered appropriate email address ## Footnote This email must ensure that communications from the Registrar are received by a representative of the company.

Answer 294

True ## Footnote This allows for efficient management of communications without the need for separate addresses for each company.

Answer 295

It is an offence punishable by a fine ## Footnote This applies to both the company and every officer of the company in default.

Answer 296

28 ## Footnote This is a critical timeline for compliance to avoid being struck off the register.

Answer 297

A register of its members, directors, directors’ residential addresses, people with significant control, and its company secretary. ## Footnote This information is available for public inspection.

Answer 298

At the company’s registered address or electronically at Companies House. ## Footnote If kept at Companies House, details including addresses would be public.

Answer 299

They eliminate the need for registers, secretaries, and people with significant control to be held at the company, making them available as public registers at Companies House. ## Footnote Some information will be protected to prevent fraud.

Answer 300

Forename, surname, and service address. ## Footnote This aligns with the objectives of ECCTA.

Answer 301

Form AD02 (notification of a single alternative inspection location).

Answer 302

A statement of the type of company it is and its intended principal business activities. ## Footnote This requirement was added by the Small Business, Enterprise and Employment Act 2015.

Answer 303

They are forming the company for a lawful purpose.

Answer 304

Documents if the statements of lawful purpose have not been confirmed.

Answer 305

That its intended future activities are lawful.

Answer 306

Details of people who have significant control over the company, defined by specific criteria. ## Footnote Criteria include having more than 25% of shares or voting rights.

Answer 307

Details of initial people with significant control and a statement of their qualification under directors’ disqualification legislation.

Answer 308

More than 25% of shares, voting rights, the right to remove or appoint a majority of directors, or significant control/influence.

Answer 309

The statement must include the name(s) of the initial director(s) and the company secretary (if applicable) ## Footnote This is mandated by section 541 and section 270 for private companies.

Answer 310

* Full name and any former names * Month and year of birth * Country or state of residence * Nationality * Occupation * Service and residential address(es) ## Footnote The residential address will not appear on the public register.

Answer 311

No, it is optional ## Footnote Refer to section 270 for details.

Answer 312

The obligation will be abolished and details will be kept on a register at Companies House ## Footnote This change is a result of the provisions in ECCTA.

Answer 313

* Total number of shares taken by subscribers * Class(es) of shares and rights attached * Shares’ aggregate nominal value * Any premium paid for the shares * Total unpaid amount on shares (if applicable) ## Footnote This information is crucial for the formation of the company.

Answer 314

It confirms that the registration requirements of the relevant legislation have been complied with ## Footnote This is included in Form IN01.

Answer 315

A certificate of incorporation ## Footnote This serves as proof of registration.

Answer 316

* Company’s name * Registered number * Date of incorporation ## Footnote This certificate is critical for the company's legal recognition.

Answer 317

It becomes a separate legal person ## Footnote This allows the company to exercise its powers independently.

Answer 318

The subscriber(s) to the memorandum ## Footnote They are also the proposed director(s) and company secretary, if applicable.

Answer 319

It is set as the last day of the month of incorporation annually ## Footnote For example, if incorporated on 11 June, the date will be 30 June.

Answer 320

One year after the accounting reference date ## Footnote For a company incorporated on 11 June, accounts would be due by 30 June the following year.

Answer 321

A shelf company is an already incorporated company that has not yet traded, available for acquisition.

Answer 322

* Already exists, avoiding incorporation delays * Secures a specific incorporation or accounting reference date * Provides a faster process than standard incorporation steps * Can enter into contracts immediately, avoiding personal liability issues

Answer 323

* Certificate of incorporation * Statutory company books * Memorandum and articles of association * Stock transfer form * Letters of resignation from first director(s) and company secretary * Certificate confirming the company has not traded

Answer 324

* Form AP01 for appointing replacement director(s) * Form AP03 for appointing company secretary (if applicable) * Form AD01 for changing registered office (if required)

Answer 325

* Approval of executed stock transfer forms * Issuance of new share certificate(s) * Update of the register of members * Supply updated information for the register of persons having significant control * Appointment of further directors and company secretary (if relevant) * Change of registered office and email address if necessary

Answer 326

personal liability

Answer 327

To transfer the shares from the subscribers to the new shareholders

Answer 328

A collection of registers that document the company's important details and activities.

Answer 329

It confirms that the shelf company has not engaged in any business activities prior to acquisition.

Answer 330

Form AA01 ## Footnote This change can occur by board resolution.

Answer 331

Written shareholders’ special resolution and Form NM01 ## Footnote A copy of the special resolution and requisite fee must also be filed.

Answer 332

File Form SH01 within one month of the allotment ## Footnote Directors have automatic authority to allot the same type of shares.

Answer 333

Verify their identity.

Answer 334

Form IN01.

Answer 335

Form AD01.

Answer 336

Form AD02.

Answer 337

Form AD03.

Answer 338

Form AP01.

Answer 339

Form AP02.

Answer 340

Form AP03.

Answer 341

Form CS01.

Answer 342

Form SH01.

Answer 343

Form TM01.

Answer 344

Form TM03.

Answer 345

Form CH01.

Answer 346

Form CH03.

Answer 347

Form AA02.

Answer 348

Form MR01.

Answer 349

Form MR02.

Answer 350

Form MR04.

Answer 351

Form PSC01.

Answer 352

Form PSC04.

Answer 353

Form PSC07.

Answer 354

Form SH03.

Answer 355

Certain resolutions ## Footnote These resolutions form part of the company’s constitution along with the company’s articles.

Answer 356

* All special resolutions (and specified ordinary resolution) * Unanimous agreements that would have required a special resolution had the agreement not been unanimous * Shareholder agreements that bind a class of shareholders * Resolutions of all the members of a class of shareholders

Answer 357

A fine on summary conviction

Answer 358

Failing to file specified company resolutions and agreements ## Footnote This includes sections 29 and 30.

Answer 359

* Annual accounts and related reports * The confirmation statement * Notice of appointments of or changes in directors’ particulars * Notice of appointments or changes in company secretary * Return of allotment of shares

Answer 360

Terms that have specific meanings within a legal framework ## Footnote Defined terms clarify the interpretation of contractual obligations and rights.

Answer 361

Members of the company can be held liable under certain conditions ## Footnote Liability may depend on the structure of the company and its governing documents.

Answer 362

Directors have the authority to make decisions on behalf of the company ## Footnote This authority is subject to the company's constitution and laws.

Answer 363

Shareholders have reserve powers to make certain decisions ## Footnote These powers can include voting on significant changes to the company.

Answer 364

Yes, directors may delegate their powers to committees or other individuals ## Footnote Delegation must comply with the company's regulations.

Answer 365

Directors must take decisions collectively ## Footnote This ensures that decisions reflect the consensus of the board.

Answer 366

A minimum number of directors must be present to conduct a meeting ## Footnote The specific number is usually defined in the company's articles.

Answer 367

A casting vote is a tiebreaker vote used by the chairperson ## Footnote This vote is used when there is an equal number of votes for and against a motion.

Answer 368

Directors must keep records of decisions made during meetings ## Footnote This ensures transparency and accountability within the board.

Answer 369

Directors can be appointed through various methods including election or nomination ## Footnote The specific method should be outlined in the company's governing documents.

Answer 370

A director's appointment can be terminated under specific conditions ## Footnote Conditions for termination are typically defined in company bylaws.

Answer 371

All shares must be fully paid up ## Footnote This ensures that the company receives full value for its shares.

Answer 372

Companies have the power to issue different classes of shares ## Footnote Different classes may carry different rights and privileges.

Answer 373

There is a specific procedure for declaring dividends ## Footnote This procedure must comply with legal requirements and company policies.

Answer 374

Unclaimed distributions may be treated according to specific regulations ## Footnote Companies often have policies for handling unclaimed funds.

Answer 375

A minimum number of shareholders must be present to constitute a quorum ## Footnote The quorum requirements are usually specified in the company's articles.

Answer 376

The chair is responsible for conducting the meeting and ensuring order ## Footnote The chair may also have a casting vote in case of ties.

Answer 377

A proxy notice allows a shareholder to appoint someone else to vote on their behalf ## Footnote This is important for shareholders who cannot attend meetings.

Answer 378

Specific means of communication are mandated for company notices ## Footnote These can include electronic communications or physical mail, as determined by company policy.

Answer 379

Directors' indemnity protects directors from personal liability for actions taken in their role ## Footnote This is often outlined in the company's articles or bylaws.

Answer 380

Directors' insurance provides coverage against potential legal claims ## Footnote This helps to safeguard directors' personal assets while serving the company.

Answer 381

A flexible entity that incorporates elements of a company and a partnership.

Answer 382

As a separate legal entity from its members, benefiting from limited liability.

Answer 383

Contract on its own behalf, own property, and grant security over its assets.

Answer 384

Changes to its membership do not affect its continued existence.

Answer 385

Professional partnerships such as lawyers and accountants.

Answer 386

Two or more persons associated for carrying on a lawful business with a view to profit.

Answer 387

All trades, professions, and occupations requiring some commercial activity.

Answer 388

Form LL IN01.

Answer 389

Details of the proposed name, registered office, registered email, members' designation, members' details, significant control details, public register election, consent to act, authentication, and presenter information.

Answer 390

It cannot be registered with a name already registered to an existing company or LLP.

Answer 391

'LLP' or 'limited liability partnership' or the Welsh equivalents.

Answer 392

With the consent of all members or as per the membership/LLP agreement.

Answer 393

The jurisdiction (England, Wales, Scotland, or Northern Ireland) and an appropriate address.

Answer 394

An address where documents delivered can be expected to come to the attention of a person acting on behalf of the LLP.

Answer 395

An offence is committed by the LLP and every designated member in default.

Answer 396

It must be appropriate and expected to receive communications from the Registrar.

Answer 397

At least two members.

Answer 398

Administrative functions and obligations similar to those of company directors or secretaries.

Answer 399

Signing and filing annual accounts, appointing auditors, filing confirmation statements, and notices about membership changes.

Answer 400

An agreement between the members or between the LLP and its members. ## Footnote If not covered by agreements, the Limited Liability Partnership Regulations 2001 apply.

Answer 401

The default provisions of the Limited Liability Partnership Regulations 2001 will apply.

Answer 402

* Death * Agreement with other LLP members * Giving notice to other LLP members * Dissolution if the member is a body corporate

Answer 403

The LLP agreement or the LLP Regulations as the default position.

Answer 404

No, it is a private agreement and not required to be filed.

Answer 405

* Members share equally in capital and profits * LLP indemnifies members for personal liabilities * Every member may participate in management * Consent required for new members or assignment of membership * Ordinary decisions by majority; changes to business require unanimity * Books and records must be available for inspection * Members must provide true accounts and full disclosure * Competing members must account for profits * Duty to account for benefits from transactions * No power of expulsion by majority unless provided in agreement

Answer 406

By the LLP agreement.

Answer 407

The LLP must file notification at Companies House within 14 days using Form LL AP01.

Answer 408

Notification must be filed at Companies House within the same deadline using Form LL TM01.

Answer 409

Reasonable notice under the LLP Regulations.

Answer 410

Verify their identity.

Answer 411

Notification to Companies House and updates to any PSC registers.

Answer 412

A statutory contract ## Footnote This statutory contract is based on the company's articles of association, which form the company's constitution.

Answer 413

Privity of contract ## Footnote This means a third party cannot enforce the articles as the contract is only between the shareholders and the company.

Answer 414

Yes ## Footnote While third parties cannot enforce the statutory contract, shareholders can enforce breaches against each other.

Answer 415

Shareholders’ agreement ## Footnote The company can be a party to the agreement but is usually not.

Answer 416

* Arrangement for resolving deadlock in decision-making * Agreement not to compete with the business * Agreement on future financing of the company

Answer 417

No ## Footnote Such agreements would be inappropriate as they could affect their duties as directors.

Answer 418

Fettering the company's powers ## Footnote Care must be taken to ensure that the company is not a party to any agreement that limits its powers.

Answer 419

It is a private contract that does not have to be filed at Companies House, thus its terms remain confidential.

Answer 420

Several important rights, including the right to receive a share certificate.

Answer 421

Within 2 months.

Answer 422

* Allotment of freshly issued shares * Lodging the stock transfer form for existing shares.

Answer 423

Prima facie evidence that the shareholder’s name is in the share register.

Answer 424

A register of those who own shares in it.

Answer 425

* Shareholder's name and address * Date the shareholder was registered * Date the shareholder ceased to be a shareholder (if applicable) * Number and class of shares held by the shareholder * Amount paid or agreed to be considered as paid on the shares.

Answer 426

To identify and record those who own or control the business.

Answer 427

Yes, the requirement also applies to dormant companies.

Answer 428

Within 14 days from the day after it became aware of the change.

Answer 429

It may constitute an offence by the company and every officer will be in default.

Answer 430

The obligation for companies to maintain their own register will be abolished; details will be kept on a register at Companies House.

Answer 431

Verify their identity.

Answer 432

More than 25% of shares in the company ## Footnote PSC stands for Persons with Significant Control.

Answer 433

More than 25% of voting rights in the company

Answer 434

The right to appoint or remove the majority of the board of directors

Answer 435

Can exercise influence over the company

Answer 436

Notify Companies House accordingly

Answer 437

• 25% or less • more than 25% but not more than 50% • more than 50% but not more than 75% • more than 75%

Answer 438

It is how shareholders exercise their powers and take decisions about how the company should be run

Answer 439

Any business undertaken at the meeting will be invalid

Answer 440

Either by a show of hands or on a poll

Answer 441

Demanded by shareholders with at least 10% of the company’s voting shares

Answer 442

Only in limited circumstances

Answer 443

A majority shareholder voting for an ordinary resolution on a show of hands while others vote against it

Answer 444

The right to appoint another person to vote on their behalf

Answer 445

At least 5%

Answer 446

A written statement of not more than 1,000 words detailing the subject matter

Answer 447

• The company’s current statement of capital • The directors’ service contracts and any directors’ indemnities • All of the company’s statutory registers • The memorandum and articles of association • Contracts in respect of the company’s purchase of own shares • The minutes of all general meetings

Answer 448

At the company’s registered address or at an alternative location available for inspection

Answer 449

The outcome of disagreements between shareholders is determined by the majority vote

Answer 450

Duties set out in the Companies Act ss 171–177

Answer 451

They can hold directors accountable and remove them (Companies Act s 168)

Answer 452

The company is the proper claimant to bring proceedings against directors for loss, not the shareholders

Answer 453

Double recovery of compensation

Answer 454

Courts are reluctant to interfere in a company's internal management unless the company instigates proceedings

Answer 455

Shareholders cannot commence court proceedings for an irregularity that can be remedied by majority ratification

Answer 456

* Company’s affairs are prejudicial to their interests * Breach of the company’s constitution by directors or other shareholders

Answer 457

The directors do not have an incentive to act. ## Footnote This creates a conflict as directors are the same individuals against whom claims would be made.

Answer 458

A claim for unfair prejudice under Companies Act s 994. ## Footnote Other remedies include derivative claims and petitions for winding up on just and equitable grounds.

Answer 459

Unfairness and prejudice due to actual or proposed acts or omissions of the company. ## Footnote This includes conduct that breaches the company’s constitution, law, or shareholder agreements.

Answer 460

* The company’s affairs are conducted in a manner unfairly prejudicial to shareholders. * Any actual or proposed act or omission is, or would be, prejudicial.

Answer 461

* Shares are transferred or allotted in bad faith. * Dividends have been unreasonably withheld. * Majority shareholders award themselves excessive benefits. * Company assets have been improperly transferred. * Statutory pre-emption rights have not been followed. * Minority shareholders are excluded from management.

Answer 462

The petitioning shareholder’s shares are purchased by other shareholders or the company. ## Footnote The court determines the fair value of the shares with an independent market valuation.

Answer 463

False. ## Footnote Shares in a private limited company cannot generally be sold to the public.

Answer 464

[unfairness to shareholders causing prejudice].

Answer 465

Regulate how the company is subsequently run. ## Footnote The court has discretionary powers to manage the company's future operations.

Answer 466

Past, present, or anticipated future events and conduct.

Answer 467

A claim brought by shareholders on behalf of the company against company directors for conduct that harms the company. ## Footnote The remedy or money awarded goes to the company, not the individual shareholders.

Answer 468

Shareholders can bring a derivative claim if: * a director has behaved dishonestly * a director has prevented shareholders from bringing proceedings due to majority control.

Answer 469

Sections 260–264 of the Companies Act. ## Footnote These sections specify the rights of shareholders to bring claims against directors.

Answer 470

Actions arising from: * negligence * default * breach of duty * breach of trust.

Answer 471

A director may include a former director or a shadow director.

Answer 472

Shareholders can still bring a derivative claim if directors refuse to take action on behalf of the company.

Answer 473

Yes, it can be brought against the director, a third party, or both.

Answer 474

Any shareholder, including those who have not yet been formally registered as a shareholder.

Answer 475

A paper submission to the court where evidence is considered to establish a prima facie case.

Answer 476

The court must dismiss the claim.

Answer 477

The court decides whether to grant permission for the derivative claim to continue.

Answer 478

If: * a director acting in accordance with their duty would not seek to continue the claim * the act was pre-authorised * the act has been ratified by the company.

Answer 479

* Whether the shareholder is acting in good faith * The importance a director would attach to continuing the action * Whether the relevant act or omission could be pre-authorised or ratified * Whether the company has decided not to pursue the claim * Whether the shareholder could bring a personal claim * The views of shareholders with no personal interest ## Footnote These factors help the court determine if the derivative claim should proceed.

Answer 480

It will proceed to a full trial of all substantive issues. ## Footnote The trial will address the merits of the case in detail.

Answer 481

Yes, the court may give permission subject to conditions or limited permission until more information is available. ## Footnote This allows for a clearer understanding of the merits of the case.

Answer 482

The remedy will be awarded to the company, not the shareholder bringing the claim. ## Footnote This emphasizes that derivative claims are made on behalf of the company.

Answer 483

Due to significant procedural hurdles and the nature of the remedy awarded to the company. ## Footnote These challenges make it difficult for derivative claims to be successful.

Answer 484

Section 122(1)(g) of the Insolvency Act 1986. ## Footnote This section outlines the legal grounds for winding up a company.

Answer 485

* Management deadlock * Inability to meet specified company objects * Justified loss of confidence in company management * Exclusion of a shareholder from management despite legitimate expectation ## Footnote These grounds illustrate situations where winding up may be considered just and equitable.

Answer 486

A court will not dissolve a potentially viable company if another reasonable remedy exists, such as a claim for unfair prejudice. ## Footnote This principle encourages the exploration of less drastic remedies before opting for winding up.

Answer 487

They must show a tangible benefit from the winding up. ## Footnote This requirement can be challenging if other remedies are available.

Answer 488

A claim made by a shareholder seeking to rectify wrongs for themselves personally if directors or majority shareholders abuse their position. ## Footnote This claim is specifically for minority shareholders.

Answer 489

Court proceedings brought by a shareholder, including a minority one, for an act or omission of a director that has harmed the company. ## Footnote This allows shareholders to act on behalf of the company.

Answer 490

If it is just and equitable to do so, as stated in s 122(1)(g) of the Insolvency Act. ## Footnote This provides a statutory right for minority shareholders.

Answer 491

At least 5% of shares owned. ## Footnote This allows minority shareholders to have a say in company decisions.

Answer 492

At least 5% of the shares owned. ## Footnote This empowers minority shareholders to initiate meetings.

Answer 493

More than 25% of voting shares owned. ## Footnote This provides a mechanism for minority shareholders to protect their interests.

Answer 494

Owning over 50% of voting rights in the company. ## Footnote Majority shareholders have the majority of votes.

Answer 495

Owning less than 50% of the company’s shares. ## Footnote They have a lesser influence in decision-making.

Answer 496

The owner of the majority of voting shares decides the outcome in case of disagreement among shareholders. ## Footnote This principle governs shareholder decision-making.

Answer 497

The company must bring a claim, not an individual shareholder, for wrongs done to the company. ## Footnote This rule protects the company's interests.

Answer 498

The court will not interfere with the internal management of a company acting within its powers. ## Footnote This maintains the autonomy of company management.

Answer 499

Bars shareholders from commencing court proceedings regarding an irregularity that can be remedied by ratification by the majority of shareholders. ## Footnote This principle encourages resolution through majority approval.

Answer 500

No, minority shareholders cannot bring a derivative action if acts or omissions have been authorized or can be ratified by majority shareholders. ## Footnote This limits minority shareholders' rights in certain situations.

Answer 501

They have the right to petition the court for a remedy. ## Footnote This is based on the belief that the conduct is unfair and prejudicial to them.

Answer 502

Past, present, or anticipated future events. ## Footnote This indicates that the timing of the events is flexible.

Answer 503

It must be both unfair and prejudicial. ## Footnote Unfairness may involve breaching agreements between shareholders.

Answer 504

Those affected by the conduct. ## Footnote This requirement is interpreted broadly.

Answer 505

Examples include: * Non-payment of dividends * Directors awarding themselves excessive remuneration * Directors exercising powers for improper purposes * Exclusion from management in small companies ## Footnote These examples highlight various forms of unfair treatment.

Answer 506

For the company/other shareholders to purchase the shareholder’s shares for a reasonable price. ## Footnote This remedy aims to compensate the affected shareholder fairly.

Answer 507

Courts may disallow claims if: * There is a binding agreement for arbitration * A shareholder voluntarily severs links with the company ## Footnote These conditions limit access to the unfair prejudice process.

Answer 508

At least one director ## Footnote According to Companies Act 2006 s 154(1)

Answer 509

At least two directors ## Footnote According to Companies Act 2006 s 154(2)

Answer 510

A director includes any person occupying the position of director, by whatever name called ## Footnote See Companies Act s 250

Answer 511

Running the company and ensuring proper preparation of accounts and reports

Answer 512

16 years old

Answer 513

Disqualified from being a director

Answer 514

Part 10 of Chapter 1 of the Companies Act

Answer 515

To decide on directors’ remuneration under the Model Articles

Answer 516

Shareholder approval

Answer 517

An ordinary resolution

Answer 518

A statement of the company’s proposed officers, a statement by subscribers consenting to act, and particulars about each director

Answer 519

Name, service address, country of usual residence, date of birth, and nationality

Answer 520

Those named on the statement of proposed officers as directors are deemed to have been appointed to that office.

Answer 521

The appointment procedure is usually set out in the company’s articles.

Answer 522

Appointment can be by: * Resolution made by the board of directors at a board meeting * Shareholder ordinary resolution passed at a general meeting * Written board resolution or shareholder resolution

Answer 523

Shareholders have an inherent power to appoint directors by ordinary resolution.

Answer 524

They are elected by shareholders in a general meeting.

Answer 525

Yes, directors can resign or retire at any time, subject to the articles.

Answer 526

They must comply with the terms of their contractual service contract regarding notice periods.

Answer 527

A director's appointment terminates on their death or if specific events occur as stipulated in the company's articles.

Answer 528

By calling a general meeting and passing an ordinary resolution.

Answer 529

It does not deprive the director of compensation for loss of office or damages for termination.

Answer 530

A general meeting must be held where the ordinary resolution is passed.

Answer 531

They must give special notice of the proposed ordinary resolution at least 28 clear days before the meeting.

Answer 532

Send a copy to the director concerned immediately.

Answer 533

Give notice when notifying of the general meeting or advertise in a newspaper if impractical.

Answer 534

The director is entitled to make representations at the meeting.

Answer 535

Send a copy of those written representations to the shareholders.

Answer 536

More than 5% ## Footnote This is specified under Companies Act s 303.

Answer 537

Call a general meeting ## Footnote This requirement is outlined in Companies Act s 304(1).

Answer 538

28 days ## Footnote This is from the date the notice is sent to shareholders.

Answer 539

Call a general meeting themselves ## Footnote They must give the usual 14 days' notice and set out the details of the ordinary resolution.

Answer 540

Ordinary resolution ## Footnote This requires a simple majority of votes cast.

Answer 541

Reasonable expenses ## Footnote The company may recover these expenses from the directors personally.

Answer 542

A clause that gives a shareholder who is a director weighted votes ## Footnote This allows them to have more votes on certain resolutions, potentially protecting against removal.

Answer 543

By passing a special resolution to change the articles ## Footnote This may involve removing the weighted voting rights clause.

Answer 544

Notify the Registrar of Companies ## Footnote This is done by sending a form TM01.

Answer 545

To amend the public information on the register ## Footnote This is held at Companies House under ECCTA.

Answer 546

False ## Footnote Directors cannot vote in that capacity, affecting their voting power if they are also shareholders.

Answer 547

A court has the discretionary power to disqualify a person from acting as a director and managing a company without permission from the court.

Answer 548

The period of disqualification can range from 2–15 years.

Answer 549

The court’s powers derive from the CDD Act.

Answer 550

An appointed director ceases to be a director.

Answer 551

Conviction of an indictable offence.

Answer 552

* Persistent breaches of the companies legislation * Fraudulent or wrongful trading

Answer 553

A director is expected to have a prudent businessperson’s sense of reality.

Answer 554

fiduciary duties owed to the company.

Answer 555

* Any misfeasance or breach of fiduciary duty * Any material breach of laws or obligations * The frequency of any conduct by the director

Answer 556

A director's conduct makes them unfit to be involved with the management of a company.

Answer 557

It extends the scope to include former directors of dissolved companies and their conduct.

Answer 558

Conduct of directors who were directors of insolvent companies that were dissolved without entering into insolvency proceedings.

Answer 559

Seeking investment in the company knowing its liabilities outweigh its assets.

Answer 560

It can be a ground for disqualification.

Answer 561

accounting records

Answer 562

Fraudulent or wrongful trading

Answer 563

The facts of each case, including deliberate misconduct or total failure to discharge duties.

Answer 564

Apply for permission from the court ## Footnote If granted, a qualified board member must supervise the director, and the director accepts personal liability for the company's debts.

Answer 565

A disqualified person ## Footnote They can only be appointed if they have court permission or a government license.

Answer 566

The appointment is void.

Answer 567

Persistent breaches of companies' legislation or sanctions legislation.

Answer 568

A voluntary agreement from a director to expedite the disqualification process ## Footnote This can result in a shorter disqualification period and avoidance of court costs.

Answer 569

Personal liability for all relevant debts of the company.

Answer 570

Make a compensation order or accept a compensation undertaking.

Answer 571

In the following circumstances: * When they cease to be a director by any provision in the Companies Act 2006 or are prohibited by law * Upon bankruptcy or composition with creditors * They resign * A doctor's opinion states they are incapable of acting as a director for more than 3 months.

Answer 572

A director may resign at any time by giving notice to the company ## Footnote Refer to Model Article 18(f) for specifics on resignation procedures.

Answer 573

They must comply with any contractual/implied notice periods and procedures to avoid liability for breach of contract.

Answer 574

If provided for in the articles, the board may dismiss a director by majority vote.

Answer 575

A director may be removed for not exercising powers for proper reasons, such as gross negligence or failure to perform duties.

Answer 576

Shareholders can remove a director by passing an ordinary resolution at any time.

Answer 577

No, shareholders cannot be deprived of this right by a contrary clause in a director’s service contract.

Answer 578

Special notice must be given to the company at least 28 clear days before the general meeting.

Answer 579

Formal notice to the company of the intention to propose the resolution at least 28 clear days before the meeting.

Answer 580

A simple majority (over 50%) of shareholder votes cast at the general meeting is required.

Answer 581

The director remains in office.

Answer 582

At least 14 clear days’ notice of the removal resolution must be given to shareholders.

Answer 583

Shareholders must own 5% or more of the voting shares.

Answer 584

Directors have 21 days to call the general meeting.

Answer 585

Not more than 28 days after the decision to call the meeting.

Answer 586

Shareholders may call the general meeting themselves if they own over half of the total voting rights.

Answer 587

The director has the right to make written representations and to speak at the general meeting.

Answer 588

The company must circulate them to shareholders prior to the general meeting.

Answer 589

They should check the articles, shareholders' agreement, director's outstanding loans, service contract, and employment law position.

Answer 590

A director's outstanding loan may be repayable, and there may be compensation for loss of office payments.

Answer 591

Potential compensation for breach of contract from a long fixed-term contract.

Answer 592

The court has discretionary powers to disqualify a person from being a director under the CDD Act. ## Footnote Disqualification periods range from 2 to 15 years.

Answer 593

The director’s previous behaviour and seriousness of any current actions or omissions may be relevant. ## Footnote This assessment is crucial in determining the disqualification duration.

Answer 594

The director is expected to have a prudent businessperson’s sense of reality – ignorance is no defence. ## Footnote This emphasizes the need for diligence and awareness in business operations.

Answer 595

Factors include: * Misfeasance * Voidable transactions * Failure to comply with Companies Act provisions * Insolvency * Pre-dissolution insolvency without formal procedure * Failure to supply goods paid for * Failures under ECCTA * Preferences or transactions at undervalue. ## Footnote These factors are outlined in Schedule 1 to the CDD Act.

Answer 596

The director may not, without court permission or government license, be: * A director * Involved with the promotion, formation or management of a company. ## Footnote This restriction is crucial for maintaining corporate governance.

Answer 597

Yes, a disqualified director may apply for permission from the court to act as a director during the period of disqualification with conditions attached. ## Footnote This allows for some flexibility in exceptional circumstances.

Answer 598

General duties that directors owe to the company ## Footnote Only the company can enforce these duties, although shareholders may have a derivative claim.

Answer 599

Seven general duties ## Footnote These duties are detailed in Companies Act ss 171–177.

Answer 600

To declare an interest in an existing transaction or arrangement ## Footnote This is specified in Companies Act s 182.

Answer 601

Directors must act in accordance with the company’s constitution ## Footnote Directors should be aware of the content of the company's constitution and all resolutions affecting it.

Answer 602

Factors include: * Likely consequences of any decision in the long term * Interests of the company’s employees * Need to foster business relationships * Impact on the community and environment * Desirability of maintaining a reputation for high standards * Need to act fairly between members

Answer 603

False ## Footnote Only the company can enforce the duties, though shareholders may have a derivative claim.

Answer 604

members as a whole

Answer 605

The following factors: * Likely long-term consequences * Interests of employees * Business relationships * Community and environmental impact * Reputation for high standards * Fairness between members

Answer 606

It is a non-exhaustive list of factors.

Answer 607

No, no single factor is stated to have any more weight than any other.

Answer 608

Relevant factors related to the decision at hand.

Answer 609

Ensure discussions are minuted for evidential purposes.

Answer 610

Long-term increase in value of the company.

Answer 611

Section 173.

Answer 612

Blindly following advice or instructions from third parties.

Answer 613

If they are using their own judgment on whether to follow the advice.

Answer 614

To exercise a standard of care expected of a reasonably diligent person.

Answer 615

Objective test and subjective test.

Answer 616

General knowledge, skill, and experience expected of a person in the same role.

Answer 617

The director's actual experience, knowledge, skills, and specialisms.

Answer 618

The standard expected of a reasonably diligent qualified accountant.

Answer 619

Whether it is reasonable to base their decision on the advice received.

Answer 620

Situations where they have, or may have, a direct or indirect interest that conflicts, or may conflict, with the interests of the company.

Answer 621

Exploitation of the company’s property, information, or a corporate opportunity for personal purposes.

Answer 622

No, it does not matter.

Answer 623

A director being an adviser to the company, or a customer or supplier of the company.

Answer 624

Yes, it could arise where the director is a significant shareholder.

Answer 625

An objective test.

Answer 626

No, the duty will not be breached.

Answer 627

A director accepting reasonable hospitality from a company they do business with.

Answer 628

Both the quorum is met for making that decision and the agreement is made without counting any interested director.

Answer 629

A direct or indirect interest in the transaction or arrangement.

Answer 630

It requires directors to declare interests before entering into a transaction or arrangement.

Answer 631

Directors must declare their interest in existing transactions.

Answer 632

A person other than a company, an associated body corporate, or a person acting on behalf of the company.

Answer 633

Directors from exploiting their position for personal benefit and making a secret profit.

Answer 634

No, they must not accept benefits that are directly due to their position.

Answer 635

If it cannot reasonably be regarded as likely to give rise to a conflict of interest.

Answer 636

Whether it could reasonably be regarded as likely to give rise to a conflict of interest.

Answer 637

Yes, shareholders can ratify the breach after the director has already received the benefit.

Answer 638

An interest in a proposed transaction in relation to the company ## Footnote This includes both direct and indirect interests, such as interests held by connected persons.

Answer 639

No ## Footnote The sole director does not need to declare an interest as there are no other directors.

Answer 640

As soon as reasonably practicable ## Footnote This applies to both new interests and changes in existing interests.

Answer 641

In the following cases: * It cannot reasonably be regarded as likely to cause a conflict * Other directors are already aware of it * It concerns the director's service contract already considered * The director is not aware of the interest or transaction ## Footnote Directors are expected to be aware of matters they ought reasonably to know.

Answer 642

The contract could be voidable ## Footnote Additionally, the director may have to account for profits made from the transaction.

Answer 643

Directors with an interest in a matter cannot count towards the quorum or vote on that matter ## Footnote This rule can be disapplied by an ordinary resolution or removed permanently by a special resolution.

Answer 644

As soon as reasonably practicable ## Footnote This applies to both direct and indirect interests in existing transactions.

Answer 645

When the company was already involved in a transaction when the person became a director ## Footnote Additionally, if a director failed to disclose their interest during a proposed transaction.

Answer 646

[voidable]

Answer 647

False ## Footnote Directors are considered to be aware of matters they ought reasonably to know.

Answer 648

• It cannot reasonably be regarded as being likely that a conflict will arise • The other directors are already aware of it, or ought reasonably to be aware • It concerns the director’s service contract already considered by a meeting or committee • The director is not aware of any such interest or transaction themselves ## Footnote Directors are treated as being aware of matters they should reasonably have been aware of.

Answer 649

Another declaration needs to be made ## Footnote This applies even if someone connected to the director, like a spouse, is involved.

Answer 650

It is a criminal offence on indictment to a fine or summary conviction to a fine not exceeding the statutory maximum ## Footnote This differs from section 177.

Answer 651

• At a meeting of the directors • By a written notice (Companies Act s 184) • By general notice (Companies Act s 185) ## Footnote These are the three methods stipulated for declarations.

Answer 652

Shareholders can condone a director’s breach of duty by passing an ordinary resolution ## Footnote This allows for a director's actions to be approved post-factum.

Answer 653

Their votes and the votes of connected persons will be disregarded ## Footnote This ensures fairness in the voting process for ratification.

Answer 654

• The director acted honestly • The director acted reasonably • The circumstances of the case justify excusing the director ## Footnote This is in accordance with Companies Act s 1157(1).

Answer 655

[written notice] ## Footnote This follows the stipulations of Companies Act s 184.

Answer 656

False ## Footnote It is classified as a criminal offence.

Answer 657

An SPT occurs when a director or a connected person acquires a substantial non-cash asset from the company or vice versa.

Answer 658

Approval from shareholders passing an ordinary resolution is required.

Answer 659

Yes, approval can be obtained after the transaction is agreed if it was conditional on obtaining shareholder approval.

Answer 660

Shareholders of both the subsidiary and holding company may need to approve the transaction.

Answer 661

Approval is not needed if the company is a non-UK registered company or a wholly owned subsidiary.

Answer 662

The contract is voidable by the company, subject to affirmation.

Answer 663

A non-cash asset is substantial if its value exceeds £100,000, or exceeds 10% of the company's asset value and is more than £5,000.

Answer 664

A non-cash asset is any property or interest in property other than cash.

Answer 665

* Land * Machinery * Vehicles * Equipment * Boats * Stock

Answer 666

The SPT is voidable at the company's choosing unless certain exceptions apply.

Answer 667

* Restitution is no longer possible * The company has been indemnified * Rights acquired in good faith for value without notice of contravention

Answer 668

The director of the company, the director of its holding company, any person connected to them, and any other director who authorized the transaction ## Footnote This is related to the accountability for gains made from transactions that are not approved.

Answer 669

They must account for any gain and indemnify the company for any loss or damage ## Footnote This ensures that directors cannot benefit at the expense of the company.

Answer 670

No, they are not liable ## Footnote This provision protects directors who acted without knowledge of wrongdoing.

Answer 671

They can affirm the transaction by passing an ordinary resolution ## Footnote This allows the transaction to be validated post-factum.

Answer 672

It cannot be avoided by the company at a later date ## Footnote Affirmation solidifies the validity of the transaction.

Answer 673

Approval by an ordinary resolution of the company’s shareholders ## Footnote This is to ensure transparency and accountability in financial dealings with directors.

Answer 674

The shareholders of the holding company ## Footnote This reflects the interconnected nature of company governance.

Answer 675

A memorandum outlining relevant matters ## Footnote This ensures that shareholders are fully informed before making decisions.

Answer 676

Before or at the time the proposed written ordinary resolution is sent out ## Footnote This is to ensure timely access to information for decision-making.

Answer 677

The memorandum must be available for inspection at least 15 days prior to the meeting ## Footnote This promotes transparency and allows shareholders to review the information in advance.

Answer 678

At the meeting itself ## Footnote This ensures that shareholders can refer to the memorandum during discussions.

Answer 679

The memorandum should disclose the: * nature of the transaction * amount of the loan and the purpose for which it is required * extent of the company’s liability under any transaction connected with the loan ## Footnote These disclosures are essential for transparency and compliance with corporate governance.

Answer 680

A claim that the director is in breach of their duties ## Footnote This could lead to legal consequences for the director and the company.

Answer 681

The loan would be voidable, and the director may be liable to account for any gain made from the loan and indemnify the company’s loss ## Footnote This emphasizes the importance of obtaining shareholder approval to avoid legal issues.

Answer 682

The board may resolve to approve a loan: * up to £50,000 for a director’s expenditure for the company’s business * to fund a director’s defence against proceedings for alleged breach of duty * for minor and business transactions up to a total of £10,000 ## Footnote These exceptions allow for flexibility in certain business scenarios.

Answer 683

No approval is needed from the shareholders of a non-UK registered company or a wholly owned subsidiary of another company ## Footnote This provision simplifies processes for certain company structures.

Answer 684

Any such transaction is voidable at the company’s choosing unless: * restitution is no longer possible * the company has been indemnified * rights have been acquired in good faith for value ## Footnote These conditions provide safeguards for the company and third parties.

Answer 685

The following people: * the director of the company * the director of its holding company * any person connected with the transaction ## Footnote This highlights the potential broad impact of a voided transaction.

Answer 686

Any gain made directly or indirectly from the transaction or arrangement ## Footnote Directors must also indemnify the company for any loss or damage resulting from the transaction or arrangement.

Answer 687

If they did not know at the time that there was a contravention

Answer 688

By passing an ordinary resolution by the shareholders ## Footnote This may involve shareholders of either the company or the holding company.

Answer 689

It cannot be avoided by the company later

Answer 690

Duty to act within the company’s powers

Answer 691

Duty to promote the success of the company

Answer 692

Duty to exercise independent judgment

Answer 693

Duty to exercise reasonable care, skill and diligence

Answer 694

Duty to avoid conflicts of interest

Answer 695

Duty not to accept benefits from third parties

Answer 696

Duty to declare an interest in a proposed transaction or arrangement

Answer 697

Duty to declare an interest in an existing transaction or arrangement

Answer 698

They must show and explain transactions, show financial position, and satisfy accounting requirements

Answer 699

Directors, in their capacity as directors

Answer 700

They must be available to be accessed and viewed by the company’s officers

Answer 701

For a minimum length of time

Answer 702

3 years ## Footnote This is the standard retention period unless specified otherwise.

Answer 703

6 years plus the current tax year ## Footnote Tax records have a longer retention period compared to other documents.

Answer 704

* Names of directors and company secretaries * Directors’ residential addresses * Members/shareholders * People with significant control * Debenture holders ## Footnote These registers are required under ECCTA regulations.

Answer 705

At the company’s offices or at Companies House ## Footnote The decision is subject to provisions of ECCTA.

Answer 706

Nine months after the end of the accounting period ## Footnote Public companies have a shorter deadline of six months.

Answer 707

Penalties on the company and fines on the directors ## Footnote Timely filing is crucial to avoid these penalties.

Answer 708

Details of shareholders, directors, and people with significant control ## Footnote This statement is signed by a director to confirm the accuracy of the information.

Answer 709

Depending on the size of the company ## Footnote Larger companies may have more extensive reporting requirements.

Answer 710

The Companies Act 2006, the company’s articles of association, and common law ## Footnote These three elements together dictate the decision-making framework for companies.

Answer 711

Directors collectively ## Footnote Directors generally manage the business of the company and exercise all its powers.

Answer 712

Directors must be invited or summoned and given reasonable advance notice ## Footnote The exact notice period can vary based on the company's circumstances and the nature of the business being discussed.

Answer 713

Two directors ## Footnote If fewer than two directors are present, the board is considered inquorate, and decisions are not valid.

Answer 714

Yes, if they unanimously agree to a decision ## Footnote Directors can also pass written resolutions without a formal meeting if all agree.

Answer 715

They have the right to demand another meeting ## Footnote Proper notice is crucial for the validity of the board meeting.

Answer 716

Having a personal interest in a matter ## Footnote Directors with a conflict of interest cannot count for decision making purposes unless specified otherwise.

Answer 717

They must declare or give a general notice of any interest ## Footnote This applies whether or not they are permitted to vote at the board meeting.

Answer 718

Amend Model Article 11(2) ## Footnote Companies have the option to change their quorum requirements as needed.

Answer 719

7.8.3 ## Footnote This section outlines the governance and procedures for decision-making.

Answer 720

False ## Footnote Directors with a personal interest in a matter cannot count towards the quorum.

Answer 721

A simple majority vote in favour, unless a unanimous vote is agreed upon ## Footnote Unanimous votes require all directors to agree for the resolution to pass.

Answer 722

The chairperson has the casting vote to resolve the deadlock ## Footnote This is outlined in Model Article 13(1).

Answer 723

10 years ## Footnote Failure to keep minutes is an offence under Companies Act s 248.

Answer 724

An alternative method for directors to make decisions without being physically present ## Footnote Requires unanimity for the resolution to be validly passed.

Answer 725

They cannot participate in a decision by written resolution either ## Footnote This is referenced in Model Article 14(1).

Answer 726

By passing resolutions at a general meeting or using the written resolution procedure

Answer 727

Directors or shareholders holding at least 5% of voting shares ## Footnote This is outlined in Companies Act s 302 and s 305(1).

Answer 728

21 days to pass a resolution and the meeting must be held within 28 days ## Footnote If directors fail to do so, shareholders can call the meeting themselves.

Answer 729

14 clear days

Answer 730

Reasonable expenses of the general meeting ## Footnote The company will subsequently claim those expenses back from the directors.

Answer 731

All shareholders, all directors, and the company’s auditors ## Footnote Companies Act s 310

Answer 732

The meeting will be invalidated ## Footnote Companies Act s 310

Answer 733

Hard copy form, electronic form, or on a website ## Footnote Companies Act s 308

Answer 734

The date, place, time, and general nature of the business ## Footnote Companies Act s 311

Answer 735

The full text of the resolution and a statement that it is a special resolution ## Footnote Companies Act s 283(6)

Answer 736

No, but it is common and good practice to do so.

Answer 737

At least 14 clear days’ notice ## Footnote Companies Act s 307

Answer 738

The day the notice is given and the day the meeting is to be held are not counted ## Footnote Companies Act s 360(2)

Answer 739

Tuesday 13 July.

Answer 740

Monday 26 July.

Answer 741

Majority of shareholders in number must agree ## Footnote Companies Act s 307(4)

Answer 742

The majority of shareholders in number must agree to holding the meeting at short notice ## Footnote Companies Act s 307(5)(a)

Answer 743

3 shareholders must consent.

Answer 744

The majority in number must hold at least 90% of the voting shares.

Answer 745

Any business conducted at the general meeting will be invalid ## Footnote Companies Act s 301

Answer 746

At least two shareholders ## Footnote Companies Act s 318

Answer 747

One person will be quorate.

Answer 748

A simple majority of shareholders or their proxies voting at the meeting in favour ## Footnote Companies Act s 282(1)

Answer 749

Majority in number of shareholders present agrees, each shareholder has one vote ## Footnote Example: If 6 shareholders are present, 4 must vote in favour.

Answer 750

One vote per share, unless there are weighted voting rights ## Footnote Example: If 5 shareholders hold 20% each, 3 must vote in favour.

Answer 751

At least a 75% majority ## Footnote Companies Act s 283(1)

Answer 752

At least 75% of the number of shareholders or their proxies present and voting ## Footnote This applies to the number of people voting, not shares.

Answer 753

75% of the votes cast by those entitled to vote in person or by proxy ## Footnote This ensures the resolution has significant backing.

Answer 754

No, the chairperson does not generally have a casting vote ## Footnote This is different from a board meeting.

Answer 755

To take shareholder decisions without calling a general meeting ## Footnote Written resolutions are a common method for private companies to streamline decision-making processes.

Answer 756

When voting on whether to dismiss a director or an auditor ## Footnote In these cases, a meeting must be called to address the decision.

Answer 757

All eligible members and the company auditor ## Footnote Eligible members are shareholders entitled to vote on the resolution.

Answer 758

How shareholders are to signify their agreement ## Footnote This ensures clarity on the voting process for the shareholders.

Answer 759

28 days from the circulation date unless specified otherwise ## Footnote Votes received after this date will not be counted.

Answer 760

If more than 50% of total voting rights of eligible members agree by the cut-off date ## Footnote This is a key requirement for the validity of the resolution.

Answer 761

On the basis of one vote per share, unless stated otherwise in the company's articles ## Footnote The Model Articles do not provide different provisions for voting rights.

Answer 762

As soon as the required majority of eligible members signify their agreement ## Footnote The company does not need to wait for all votes to be returned.

Answer 763

More than 50% of eligible members ## Footnote This threshold allows for efficient decision-making.

Answer 764

At least 75% of eligible members ## Footnote Special resolutions typically involve more significant decisions.

Answer 765

Copies of all special resolutions ## Footnote This includes resolutions made by general meetings or written resolutions.

Answer 766

Not normally, except for specific cases such as allotting shares ## Footnote This highlights a distinction in reporting requirements between ordinary and special resolutions.

Answer 767

Debt finance is where a company borrows money to raise the capital required to fund its business operations. ## Footnote Various types of debt finance are examined in section 7.10.

Answer 768

Equity finance is where a company issues shares in return for cash that it can use for its growth, leading to an increase in profits. ## Footnote A share is defined as a share in a company’s share capital (Companies Act 2006 s 540(1)).

Answer 769

A share is an item of personal property that represents a portion of equity ownership in a company, giving the shareholder various rights. ## Footnote This is outlined in Companies Act s 541.

Answer 770

Shareholders will be given a share certificate as evidence of their title once the shares are issued to them. ## Footnote This applies specifically to private companies limited by shares.

Answer 771

No, shareholders do not have a right over the assets of the company due to the principle of separate legal identity. ## Footnote The company itself owns its own assets.

Answer 772

A company’s share capital is made up of: * Subscriber shares issued on incorporation * Any subsequent shares issued to existing shareholders or outsiders.

Answer 773

Authorised share capital (ASC) refers to the limit on the number of shares a company could allot in its memorandum of association if it was incorporated prior to 1 October 2009. ## Footnote This limit was removed with the Companies Act coming into force.

Answer 774

Anything contained in a memorandum of association of a company incorporated before 1 October 2009, such as its ASC, automatically transferred into its articles. ## Footnote This was enacted by virtue of s 28 of the Companies Act.

Answer 775

Shareholders could remove the ASC by passing an ordinary resolution, notwithstanding that it was amending the articles, which usually requires a special resolution. ## Footnote This was part of a transitional provision enacted to preserve the status quo.

Answer 776

No, there is no limit on the number of shares a company is permitted to allot unless its articles expressly state otherwise. ## Footnote A private company with Model Articles has no restriction on the number of shares it can allot.

Answer 777

Subscribers to the memorandum of association

Answer 778

Statement of capital (contained in Form IN01)

Answer 779

The capital must be maintained and cannot be eroded or returned to shareholders

Answer 780

To ensure there is a fund for the company’s creditors if the company becomes insolvent

Answer 781

The difference between the nominal value and the purchase price when shares are sold

Answer 782

Share premium account

Answer 783

Different types or classes of shares

Answer 784

Ordinary shares

Answer 785

* Vote at general meetings * Participate in distributable profits * Participate in capital on winding up

Answer 786

Yes, subject to authority in the articles of association

Answer 787

A fixed return of both a dividend and capital

Answer 788

Other creditors

Answer 789

The right to vote

Answer 790

Shares that do not entitle the holder to a dividend or surplus assets in liquidation

Answer 791

Redeemable at the outset

Answer 792

A company cannot be formed solely with redeemable shares

Answer 793

There would be no shares left in the company

Answer 794

The rights that attach to the shares

Answer 795

Class rights can be varied if: * Articles with a variation clause allow alteration per specified method * Articles without a variation clause require approval from three quarters of shareholders in nominal value or a special resolution at a separate meeting.

Answer 796

'Allotted' shares refer to the unconditional right to be included in the register of members, while 'issued' shares are those that have been registered in that register.

Answer 797

A share certificate is evidence that the shareholder’s name appears in the register of members.

Answer 798

Directors can only allot shares if they have been given specific authority under Companies Act ss 549–551.

Answer 799

Under s 550, directors of private companies incorporated on or after 1 October 2009 can allot shares without shareholder permission unless prohibited by the company’s articles.

Answer 800

Directors needed shareholder authority to allot shares by way of an ordinary resolution.

Answer 801

Yes, they need shareholder permission to allot shares according to Companies Act s 551.

Answer 802

1 October 2009

Answer 803

Shareholder approval via an ordinary resolution or provision in the company’s articles of association ## Footnote Companies Act s 551(1) specifies these methods.

Answer 804

Maximum number of shares to be allotted and the date on which the authority will expire ## Footnote An authority can last for a maximum of 5 years.

Answer 805

5 years ## Footnote Starting from the date of the shareholders’ resolution or the date of incorporation.

Answer 806

Ensure the time limit has not expired and the number of shares to be issued has not been reached ## Footnote Any ordinary resolutions giving authority must be filed at Companies House.

Answer 807

Existing shareholders are given the first right to purchase new equity securities ## Footnote Companies Act ss 560–577 outlines these rights.

Answer 808

Ordinary shares ## Footnote Ordinary shares carry specific rights under s 560.

Answer 809

Shares other than those with fixed rights to participate in dividends and capital ## Footnote If a share has fixed rights, it is not considered an ordinary share.

Answer 810

Maintain their percentage shareholding in the company ## Footnote This prevents dilution when new shareholders purchase shares.

Answer 811

14 days ## Footnote This is before it can be offered to third parties on no less favorable terms.

Answer 812

Statutory pre-emption rights ## Footnote Conditions include non-cash consideration, exclusions under Companies Act s 567 or s 568, or waivers by all entitled shareholders.

Answer 813

Section 567 ## Footnote Exclusion can be general or for a specific allotment of shares.

Answer 814

A pre-emption provision corresponding with the statutory rights ## Footnote This is under Companies Act s 568.

Answer 815

Requirements of Companies Act s 568 ## Footnote Applies when there's a corresponding pre-emption provision in the articles.

Answer 816

To allot shares without applying pre-emption rights or with modifications ## Footnote This is under Companies Act s 569.

Answer 817

Indefinitely ## Footnote As per Companies Act s 569.

Answer 818

Section 551 ## Footnote This applies if directors have been given authority to allot shares.

Answer 819

Power may be given under the articles or by special resolution ## Footnote This is specified in Companies Act s 570.

Answer 820

By way of a special resolution ## Footnote This is stated in Companies Act s 571.

Answer 821

The authority to allot shares ## Footnote Duration of disapplication is tied to the allotment authority.

Answer 822

Detailed procedural steps for seeking shareholder approval ## Footnote This includes the processes for disapplying the rules.

Answer 823

A special resolution of the shareholders to insert the rights attaching to those new types of shares ## Footnote This is in accordance with Companies Act s 21.

Answer 824

Preference shares ## Footnote This is an example of a different type of share that could be issued.

Answer 825

Update the register of members and PSC register if relevant ## Footnote PSC stands for Persons with Significant Control.

Answer 826

Minutes of any board or shareholder resolutions or any written resolutions

Answer 827

Any relevant PSC forms ## Footnote This is necessary if there are changes in those with significant control.

Answer 828

An ordinary resolution

Answer 829

A special resolution

Answer 830

A special resolution to amend the articles and the amended articles

Answer 831

Companies cannot allot shares at a price lower than their nominal value ## Footnote This section emphasizes the legal constraints on share pricing to protect the company's value.

Answer 832

The contract is void and the purchaser is liable to pay the company an amount equal to the discount including interest ## Footnote This protects the company from losses due to undervalued shares.

Answer 833

The company and every director or other officer in breach will commit a criminal offence ## Footnote This highlights the seriousness of adhering to share allotment laws.

Answer 834

Public companies must obtain an independent valuation ## Footnote This requirement ensures fair pricing and protects shareholders' interests.

Answer 835

No, private companies are not required to obtain an independent valuation ## Footnote This creates a potential loophole in share pricing regulations.

Answer 836

If it overvalues the consideration, it is effectively selling its shares at a discount ## Footnote This can lead to financial irregularities and legal issues.

Answer 837

Shares are transferred by the shareholder selling or gifting them to someone else ## Footnote This process does not increase the share capital of the company.

Answer 838

A stock transfer form must be signed by the transferor and given to the transferee along with the share certificate ## Footnote This formalizes the transfer of ownership.

Answer 839

0.5% of the consideration ## Footnote This is a tax imposed on the transfer of shares.

Answer 840

No, stamp duty is not payable ## Footnote This encourages gifting of shares without additional financial burden.

Answer 841

Directors have absolute discretion to refuse to register a transfer of shares ## Footnote This allows the company to control its shareholder base.

Answer 842

The new shareholder’s name must be entered onto the members’ register and a new share certificate issued ## Footnote This ensures proper documentation and recognition of ownership.

Answer 843

Transmission occurs whereby their shares automatically vest in their personal representative or trustee in bankruptcy ## Footnote This ensures continuity of ownership despite personal circumstances.

Answer 844

The articles of the company ## Footnote This is crucial for understanding any specific rules the company may have in place.

Answer 845

A requirement to offer shares to existing shareholders first before transferring them to a third party ## Footnote This can limit external ownership and maintain control among current shareholders.

Answer 846

Equity securities with voting rights and rights to dividends if declared ## Footnote Ordinary shares may share in surplus assets if the company is wound up.

Answer 847

Voting rights and rights to dividends if lawfully declared ## Footnote They may also share in surplus assets if the company is wound up.

Answer 848

Any shares in the company are considered ordinary shares ## Footnote Model Articles set the default rights and structure for shares.

Answer 849

By creating different classes, such as Ordinary A and Ordinary B shares ## Footnote This requires an amendment to the Model Articles.

Answer 850

Any share with priority over ordinary shares for capital or dividend payment ## Footnote Preference shares usually do not have voting rights.

Answer 851

Usually no, but it depends on the agreement set out in the articles ## Footnote Voting rights can vary based on company agreements.

Answer 852

Incorporated before 1.10.2009 ## Footnote This date distinguishes 'Old company' from 'New company'.

Answer 853

Incorporated on or after 1.10.2009 ## Footnote This date signifies the regulatory differences between company types.

Answer 854

Check if it is too low; remove restriction by ordinary resolution ## Footnote This ensures that the company can operate effectively with sufficient capital.

Answer 855

Remove restriction by changing articles with a special resolution ## Footnote This allows for greater flexibility in share allotment.

Answer 856

There is no authorised share capital, allowing for an unlimited number of shares to be allotted ## Footnote This reflects a shift in regulatory framework for newer companies.

Answer 857

Statement of capital on incorporation – Form IN01 ## Footnote This form is crucial for regulatory compliance.

Answer 858

Check for any upper limit restrictions ## Footnote This is important to ensure compliance with company regulations.

Answer 859

None ## Footnote This supports flexibility in share issuance.

Answer 860

Remove it by changing articles with a special resolution ## Footnote This allows for adjustments to be made to meet business needs.

Answer 861

Authority to allot shares ## Footnote This authority can be express in articles or granted through a resolution.

Answer 862

Number of shares and duration of authority ## Footnote If authority is absent or inadequate, further steps are needed.

Answer 863

No authority to allot needed ## Footnote This is stipulated under Companies Act s 551.

Answer 864

Ordinary resolution or special resolution ## Footnote Authority can be granted under s 550 or s 551.

Answer 865

Maximum number of shares that can be allotted ## Footnote This must be specified in the articles or resolution.

Answer 866

5 years ## Footnote This period is renewable as per s 551(3).

Answer 867

Use s 551(4) ## Footnote This section provides guidance on renewing authority.

Answer 868

It must be filed with the registrar of companies ## Footnote This is mandated under s 551(9).

Answer 869

Authority may be removed by special resolution ## Footnote This is necessary to allow for the allotment of shares.

Answer 870

It outlines the requirements for granting and renewing authority ## Footnote This section is crucial for compliance with allotment regulations.

Answer 871

Require new shares to be offered to existing shareholders first, in proportion to their existing holdings for a period of 14 days before being offered elsewhere. ## Footnote Refers to section 561 of the Companies Act.

Answer 872

Whether they have been removed and any time limits; if not, pass a special resolution to remove the right or amend articles. ## Footnote Special resolution is a formal decision made by a company's shareholders.

Answer 873

Yes, they can expressly exclude them in their articles as per section 567. ## Footnote Articles of association govern the company's internal management.

Answer 874

Directors can be given power under articles or by special resolution to allot shares, disapplying or modifying pre-emption rights. ## Footnote This is covered under sections 569 and 570.

Answer 875

They can disapply pre-emption rights, subject to detailed provisions beyond the basic materials. ## Footnote This is outlined in sections 570–571.

Answer 876

100% agreement among shareholders is required to waive their rights. ## Footnote This ensures unanimous consent for such decisions.

Answer 877

These need to be inserted into the articles of association by way of a special resolution of the shareholders. ## Footnote Refers to section 21 of the Companies Act.

Answer 878

Raising money through borrowing with the promise to repay later with interest.

Answer 879

Equity finance and debt finance.

Answer 880

* The size of the loan * The term over which the money is required * The company’s financial position

Answer 881

Directors.

Answer 882

They have the general power to borrow and give security.

Answer 883

Restrictions on the directors’ ability to borrow and grant security over the company’s assets.

Answer 884

* Overdraft facilities * Term loans * Revolving credit facility (RCF)

Answer 885

A form of borrowing when payments exceed the credit balance available in the company’s business account.

Answer 886

* Short-term needs * Easing pressure on working capital * A safety net for unexpected expenditure

Answer 887

On demand.

Answer 888

They are usually unsecured and therefore riskier for the bank.

Answer 889

* Annual arrangement or maintenance fee * Interest on the overdrawn amount, calculated daily

Answer 890

A loan that is repayable at the end of a set term.

Answer 891

As principal repayment or interest-only.

Answer 892

* Financing start-up capital * Large purchases such as land or machinery.

Answer 893

* Short-term (up to 1 year) * Medium-term (1–5 years) * Long-term (5–10 years).

Answer 894

A loan between two parties: the borrower and the lender.

Answer 895

A loan between a borrower and a group of lenders.

Answer 896

The terms and conditions surrounding the loan.

Answer 897

* Payment terms * Interest charged * Security details * Events of default * Representations and warranties.

Answer 898

A hybrid of an overdraft and a term loan that allows borrowing and repaying amounts up to a pre-agreed maximum.

Answer 899

Interest is only payable on the amount actually borrowed.

Answer 900

When a borrower requires a large amount of money, not just a temporary cash injection.

Answer 901

* A mortgage * A charge * A lien * A pledge.

Answer 902

A guarantee provided by a director to secure a loan on behalf of the company.

Answer 903

A promise in a loan agreement not to create another security for a different lender.

Answer 904

To manage risk and increase the chance of repayment in case of default.

Answer 905

The most secure form of security that transfers the title of the asset to the mortgagee (lender) ## Footnote Usually applies to land or buildings and must be executed by deed as per Law of Property Act 1925 s 87.

Answer 906

It transfers back to the mortgagor (borrower) ## Footnote The company is prohibited from dealing with the asset until the debt is repaid.

Answer 907

The right to take possession of the land and sell it ## Footnote This includes the right to prevent the borrower from dealing with the asset.

Answer 908

An equitable right over the charged property in the event of default on the loan ## Footnote Does not give the lender a proprietary interest in the asset.

Answer 909

The lender with the charge takes priority over unsecured creditors ## Footnote Unsecured creditors did not take security against their lending.

Answer 910

Fixed charge and floating charge ## Footnote Each has different characteristics and implications for lenders and borrowers.

Answer 911

An alternative to a mortgage taken over a specific identifiable asset ## Footnote Examples include machinery or vehicles.

Answer 912

The charge holder can sell the charged asset to recover the outstanding amount ## Footnote Multiple fixed charges can be granted over the same asset, with older charges having priority.

Answer 913

A fixed charge takes priority over a floating charge irrespective of when the charges were created ## Footnote This is crucial in determining the order of claims in insolvency.

Answer 914

A charge that floats over a class of assets that fluctuates ## Footnote Allows the company to deal with the assets in the usual course of business.

Answer 915

The process by which a floating charge converts into a fixed charge ## Footnote This occurs on specified events such as default or insolvency.

Answer 916

It attaches to those assets and becomes enforceable as a fixed charge ## Footnote However, it isn't classed as a fixed charge for the purposes of the order of priority of payments.

Answer 917

Only a company or an LLP ## Footnote They are separate legal entities capable of owning assets.

Answer 918

A security or charging document between a lender and borrower

Answer 919

'Fixed and floating charges'

Answer 920

A fixed charge and/or a floating charge over the company’s assets

Answer 921

Deed pursuant to the Law of Property Act 1925

Answer 922

The facility (loan) agreement

Answer 923

* Type of security being created * Covenants made by the borrower * Negative pledge * Circumstances constituting default

Answer 924

* Failure to make timely instalment payments * Payment overdue by a certain number of days or amount * Unpaid sums will crystallise on default

Answer 925

A clause allowing them to appoint a receiver

Answer 926

Right to appoint an administrator

Answer 927

[fixed or floating]

Answer 928

Since April 2013 ## Footnote The Companies Act 2006 provides for a voluntary system of registration.

Answer 929

A statement of particulars and a certified copy of the instrument creating the charge, along with a fee ## Footnote The statement of particulars is contained in Form MR01.

Answer 930

It is used to submit the statement of particulars for registering a charge ## Footnote Form MR01 must be submitted within 21 days of the charge creation.

Answer 931

21 days from the day after the charge was created ## Footnote Failure to comply may result in penalties.

Answer 932

A certificate that provides conclusive evidence that the charge is properly registered

Answer 933

At the company’s registered address, available for inspection ## Footnote Failure to keep these documents is a criminal offence but does not affect the validity of the charge.

Answer 934

It must also be registered at the Land Registry

Answer 935

Twice: once at the Land Registry and once at Companies House

Answer 936

The buyer will take the land free from the fixed charge ## Footnote This applies even if the buyer knows about the charge.

Answer 937

The charge will be void against the liquidator or administrator and the company’s other creditors

Answer 938

They will rank as an unsecured creditor in terms of the order of priority of payment of their debt

Answer 939

A pledge where a borrower undertakes not to create or allow another security to a different lender over its assets ## Footnote Negative pledges help to protect floating charges by ensuring that future lenders are aware of existing claims on the borrower's assets.

Answer 940

A fixed charge takes priority over a floating charge over the same asset, even if the floating charge was created earlier ## Footnote For example, a fixed charge created in 2021 will take priority over a floating charge created in 2010.

Answer 941

A negative pledge clause ## Footnote This clause shows actual knowledge of the negative pledge for future lenders.

Answer 942

A section within Form MR01 ## Footnote This informs future lenders when they conduct a search at Companies House.

Answer 943

They will have actual notice of the negative pledge ## Footnote This results in subordinating their loan to the original floating-charge holder.

Answer 944

Priority is determined by the date of creation, not by the date of registration ## Footnote For instance, a fixed charge created in 2001 takes priority over one created in 2020.

Answer 945

Priority is determined by the date of creation ## Footnote The date of registration does not affect the priority of floating charges.

Answer 946

The relevant date for priority purposes is the date of registration ## Footnote Registration changes the priority dynamics, although fixed charges still rank ahead of floating charges.

Answer 947

True ## Footnote This is true as long as the fixed charge is properly registered.

Answer 948

The right to physical possession of the debtor’s goods by the creditor until the debt is repaid. ## Footnote A lien does not allow the creditor to sell the asset to use the proceeds to pay the debt.

Answer 949

Sell the asset to use the proceeds of sale to extinguish or partially extinguish the debt. ## Footnote This means the creditor can hold the asset but cannot liquidate it for debt repayment.

Answer 950

An enforceable promise by a third party (the guarantor) to repay the money to the lender if the company defaults. ## Footnote This provides additional security to the lender.

Answer 951

A parent company or a director of the company. ## Footnote This means that if the company defaults, the guarantor is personally liable for the loan.

Answer 952

Each director may be personally liable for the loan as guarantor. ## Footnote This allows the lender to pursue another person for repayment if the company cannot pay.

Answer 953

True. ## Footnote It serves as an additional assurance for the lender against default.

Answer 954

Highly flexible facility ## Footnote Allows for instant access to funds and can be re-borrowed once paid back.

Answer 955

Expensive and repayable to bank on demand ## Footnote No notice is required for repayment.

Answer 956

Term loan ## Footnote Aids budgeting and must make funds available once agreed.

Answer 957

Can be time-consuming and expensive to arrange ## Footnote Must be accepted quickly once approved.

Answer 958

Highly flexible facility ## Footnote Easier and faster to secure than a loan.

Answer 959

Usually required to clean down, maintaining a £0 balance for specified time ## Footnote Commitment fee may apply to keep the facility open.

Answer 960

True ## Footnote Unpaid interest is added to capital, and interest is charged on the total amount.

Answer 961

Can draw down and then repay funds to reduce interest payments ## Footnote Provides certainty and control compared to overdraft.

Answer 962

re-borrowed

Answer 963

Provides certainty ## Footnote Once agreed, the bank must make funds available.

Answer 964

Overdraft facility ## Footnote Each withdrawal attempt is treated as an offer to the bank.

Answer 965

Security usually required ## Footnote This can include collateral for the loan.

Answer 966

False ## Footnote It is not repayable on demand unless the borrower defaults.

Answer 967

The new shareholder may be granted voting rights, holding significant power over company decision-making. ## Footnote Preference shares with no voting rights can be issued but may be expensive.

Answer 968

The company's ability to manage itself independently is limited by the terms of the loan agreement. ## Footnote Lenders do not have direct control but can impose conditions.

Answer 969

There is potential for capital growth, although shares can decrease in value. ## Footnote This creates a risk for shareholders.

Answer 970

Capital will not be repaid unless the company is wound up, typically in insolvency situations.

Answer 971

Buying shares involves greater risk in terms of income.

Answer 972

The capital must be repaid with interest, either in installments or as a lump sum.

Answer 973

The interest rate depends on: * the amount being borrowed * the profitability of the company * the value of the security offered * prevailing economic conditions.

Answer 974

The cost of allotting and issuing new shares is often harder to quantify than the cost of debt.

Answer 975

A share issue requires board and possible shareholder resolutions.

Answer 976

There is no statutory procedure to follow for debt finance, though company articles may specify one.

Answer 977

The lender can take security to protect its lending, giving it higher priority.

Answer 978

Existing shareholders may experience dilution of their shares due to new dividend payments or increases in share value.

Answer 979

Directors can refuse to register the transfer of shares, and restrictions may exist in the articles or a shareholders' agreement.

Answer 980

To be paid back in full, in priority to other creditors.

Answer 981

It may drastically reduce the price of borrowing.

Answer 982

The highest form of protection for high-value assets.

Answer 983

Legal ownership of the property.

Answer 984

Only if the borrower defaults on payment terms.

Answer 985

A separate mortgage.

Answer 986

Transfer legal ownership to the charge holder.

Answer 987

Fixed on certain assets requiring charge holder’s consent for dealing.

Answer 988

To maintain the asset in good condition.

Answer 989

Right to sell the asset and be paid from the proceeds of sale.

Answer 990

Fixed charges, irrespective of when created.

Answer 991

Floats over a group of fluctuating assets and only fixes on assets if a default event occurs.

Answer 992

Operates like a fixed charge but does not turn into one.

Answer 993

Freedom to deal with assets until the charge crystallises.

Answer 994

A charge holder that may appoint an administrator without petitioning the court.

Answer 995

All creditors, not just the charge holder.

Answer 996

If it is expressed as one or the security document gives power to appoint an administrator.

Answer 997

Protects floating charges by ensuring no fixed charge created later takes priority.

Answer 998

By detailing it on Form MR01 and within the charging document sent to Companies House.

Answer 999

Tort of inducing breach of contract.

Answer 1000

A commitment by the guarantor to pay if the borrower defaults.

Answer 1001

Whether it will promote the success of the company.

Answer 1002

Minutes of the board meeting.

Answer 1003

Symbiotic trading relationship or dividends for parent from subsidiary.

Answer 1004

Pt 23 of the Companies Act 2006 ## Footnote The Companies Act outlines the legal framework for distributions to members.

Answer 1005

Every description of distribution of a company’s assets to its members, whether in cash or otherwise ## Footnote This definition is stated in Companies Act s 829(1).

Answer 1006

The company’s last annual accounts ## Footnote Justification is necessary to ensure the distribution is compliant with legal requirements.

Answer 1007

Interim accounts or initial accounts ## Footnote Interim accounts can be used if the last annual accounts are not sufficient for justification.

Answer 1008

A reasonable judgment to be made as to the amount of the distribution ## Footnote This ensures that the distribution amount is justified and appropriate.

Answer 1009

A type of distribution made to shareholders from a portion of a company's net profits ## Footnote Dividends reward shareholders for their investment in the company's equity.

Answer 1010

Generally in cash or as a dividend in kind (non-cash asset) ## Footnote The focus here is on cash dividends.

Answer 1011

According to the number of shares held by each shareholder, provided those shares are fully paid up ## Footnote This is stipulated in Model Article 30(4) of the Companies (Model Articles) Regulations 2008.

Answer 1012

It must be properly declared and authorised ## Footnote Proper declaration and authorisation are essential for compliance with company law.

Answer 1013

A company’s articles ## Footnote This refers to the specific rules and regulations set out in the company's governing documents.

Answer 1014

The directors ## Footnote Directors are typically responsible for financial decisions within a company.

Answer 1015

By passing an ordinary resolution of the shareholders ## Footnote An ordinary resolution requires a simple majority of votes from shareholders.

Answer 1016

No ## Footnote Shareholders can only declare an amount equal to or less than the recommended amount.

Answer 1017

It becomes a debt of the company owed to the shareholders ## Footnote This means that the company is legally obligated to pay the declared dividend.

Answer 1018

Pay the dividend out to shareholders ## Footnote This step involves distributing the declared amount to the shareholders.

Answer 1019

According to the differing class rights of shares but equally within each class ## Footnote Preference shareholders are typically paid before ordinary shareholders.

Answer 1020

A dividend declared by the directors if profits permit ## Footnote It is a distribution made before the annual financial statements are finalized.

Answer 1021

No ## Footnote Model Article 30(1) specifies that consent is not needed for interim dividends.

Answer 1022

Their statutory duties under the Companies Act ## Footnote This includes acting within their powers, promoting the company's success, exercising reasonable skill and care, and declaring an interest in the proposed payment.

Answer 1023

Act within their powers ## Footnote This means in accordance with their company’s relevant articles.

Answer 1024

The company’s success for the benefit of its members as a whole ## Footnote Different classes of shareholders do not need to be treated equally.

Answer 1025

Reasonable skill and care ## Footnote This includes taking relevant advice.

Answer 1026

An interest in the proposed payment ## Footnote Relevant if a director is also a shareholder.

Answer 1027

Safeguarding the company’s assets ## Footnote They must also consider the company’s future financial requirements before recommending or declaring a dividend.

Answer 1028

Directors cannot lawfully pay a dividend out of capital ## Footnote This is to protect the company’s creditors on insolvency.

Answer 1029

To protect the company’s creditors on insolvency ## Footnote It ensures creditors cannot pursue shareholders or directors for sums owed.

Answer 1030

Whether the company has incurred losses that have eroded the profits available for distribution ## Footnote This consideration must happen at the time of proposing and making the distribution.

Answer 1031

The company’s balance sheet ## Footnote This is based on the relevant accounts.

Answer 1032

The company’s most recent annual accounts ## Footnote These accounts help assess the profit available for distribution.

Answer 1033

Advice from an accountant or auditor ## Footnote This is generally sought to ensure compliance with financial regulations.

Answer 1034

A company's profits available for distribution are its accumulated, realised profits less its accumulated, realised losses. ## Footnote This ensures the company has sufficient distributable reserves.

Answer 1035

Accumulated refers to the inclusion of previous years’ losses when calculating profits. ## Footnote This means a company can offset past losses against current profits to determine overall profitability.

Answer 1036

Realised profits are profits that the company has received in the form of cash or other assets that are readily realisable. ## Footnote Profits must be based on actual gains and losses, not estimates.

Answer 1037

Estimation of profits is not allowed because if those profits are not achieved, declared dividends would have to be paid out of capital, which is unlawful. ## Footnote This rule helps protect the financial integrity of the company.

Answer 1038

Any shareholder who knew or had reasonable grounds to believe that the distribution was unlawful is required to repay it to the company. ## Footnote Shareholders are not obligated to repay if they were unaware of the improper payment.

Answer 1039

Directors who authorised the unlawful distribution may be personally liable to repay the money to the company if they knew or ought to have known it was unlawful. ## Footnote They are jointly and severally liable for the total amount of the dividend payment.

Answer 1040

A court may excuse a director for breach of duty if they have not acted dishonestly and considering all circumstances. ## Footnote This is outlined in Companies Act s 1157.

Answer 1041

Directors could be liable if: * the company was insolvent * there were no reasonable grounds for believing the dividend would benefit the company * the company later goes into insolvent liquidation or administration. ## Footnote These conditions help ensure directors act in the best interest of the company.

Answer 1042

The auditor could be liable to repay the company if the unlawful distribution arose from the director’s reliance on incorrect accounts prepared by the auditor, and the auditor was negligent. ## Footnote This emphasizes the importance of accurate auditing in corporate governance.

Answer 1043

Re-invest for further growth by: * Buying more factories * Purchasing machinery or equipment * Investing in more stock * Expanding market share through advertising * Researching other markets * Investing in research and development * Meeting future tax liabilities * Increasing liquidity ## Footnote These actions fulfill directors' statutory duties under Companies Act s 172.

Answer 1044

A buyback of shares is when a company agrees to buy some of its own shares from existing shareholders. ## Footnote The shares are generally cancelled after being bought back, resulting in no tangible return for the company.

Answer 1045

Reasons for a buyback include: * Removing a shareholder who is also a director * Enabling a retiring shareholder to realize their investment * Returning surplus cash to shareholders ## Footnote This is especially common in private limited companies.

Answer 1046

Share buybacks reduce the total number of shares, which concentrates the value of shares for existing shareholders, potentially increasing earnings per share. ## Footnote This occurs because there are fewer shares in issue.

Answer 1047

A public company may buy back shares to: * Increase the return per share * Make the company more financially attractive to outside investors * Address perceived undervaluation of shares ## Footnote This is often due to having access to a wider range of potential purchasers.

Answer 1048

[statutory duties]

Answer 1049

False ## Footnote The transaction has little intrinsic value as shares are usually cancelled post-buyback.

Answer 1050

Part 18 of the Companies Act and the company’s articles ## Footnote Companies Act s 690

Answer 1051

* Shares were fully paid up at the time of purchase (Companies Act s 691(1)) * It is an off-market purchase approved in advance (Companies Act s 693(1)) * Shares are paid for by the company on purchase unless for an employees’ share scheme (Companies Act s 691(2))

Answer 1052

Off-market purchase ## Footnote Companies Act s 693

Answer 1053

A buyback using cash that does not exceed the lower of £15,000 or 5% of the company’s share capital ## Footnote Companies Act s 692(1ZA)

Answer 1054

£15,000 or 5% of the company’s share capital

Answer 1055

The articles must permit the de minimis procedure ## Footnote Model Articles do not provide for a buyback by cash without amendment

Answer 1056

Shareholders must approve the buyback contract by passing an ordinary resolution

Answer 1057

It is simpler than procedures for a buyback out of distributable profits or capital

Answer 1058

Accumulated realised profits less all realised losses ## Footnote Distributable profits are the profits that a company can use for share buybacks.

Answer 1059

Shareholder approval via an ordinary resolution ## Footnote The buyback contract must outline the terms of the purchase.

Answer 1060

The terms of the buyback contract or memorandum ## Footnote This ensures informed decision-making regarding the vote.

Answer 1061

Not less than 15 days ending with the day of the meeting ## Footnote This allows shareholders adequate time to review the documents.

Answer 1062

The contract or memorandum must be sent to every eligible member ## Footnote This can occur either before or with the proposed written resolution.

Answer 1063

Generally, yes, except for the buyback purchase contract ## Footnote Under Companies Act s 695, shareholders cannot vote on shares being bought back.

Answer 1064

They are discounted and the resolution will be ineffective if passed ## Footnote This applies to both written procedures and general meetings.

Answer 1065

Shares are not cancelled and are held for future reissue ## Footnote This is possible if the purchase is fully funded by distributable profits, per Companies Act s 724.

Answer 1066

Accumulated realised profits less all realised losses ## Footnote Distributable profits are the profits that a company can use for share buybacks.

Answer 1067

Shareholder approval via an ordinary resolution ## Footnote The buyback contract must outline the terms of the purchase.

Answer 1068

The terms of the buyback contract or memorandum ## Footnote This ensures informed decision-making regarding the vote.

Answer 1069

Not less than 15 days ending with the day of the meeting ## Footnote This allows shareholders adequate time to review the documents.

Answer 1070

The contract or memorandum must be sent to every eligible member ## Footnote This can occur either before or with the proposed written resolution.

Answer 1071

Generally, yes, except for the buyback purchase contract ## Footnote Under Companies Act s 695, shareholders cannot vote on shares being bought back.

Answer 1072

They are discounted and the resolution will be ineffective if passed ## Footnote This applies to both written procedures and general meetings.

Answer 1073

Shares are not cancelled and are held for future reissue ## Footnote This is possible if the purchase is fully funded by distributable profits, per Companies Act s 724.

Answer 1074

The board must resolve to approve the terms of the purchase.

Answer 1075

The board needs to resolve to enter into the approved purchase contract and authorise signatories.

Answer 1076

At the company’s registered office.

Answer 1077

Return of purchase of own shares (form SH03) and notice of cancellation of shares with a statement of capital.

Answer 1078

Cancel shares or place them in treasury, and update the register of members and any register of PSC if relevant.

Answer 1079

Any relevant PSC forms.

Answer 1080

Public companies.

Answer 1081

A buyback out of capital occurs when a private company uses its existing share capital to fund a buyback when it cannot use distributable profits or proceeds from a fresh issue of shares. ## Footnote This is permissible only if the company's articles allow it and there are no restrictions in the Model Articles.

Answer 1082

Companies Act s 709.

Answer 1083

The maintenance of capital rule.

Answer 1084

Approval of the use of capital by a special resolution.

Answer 1085

A solvency statement.

Answer 1086

An auditor’s report.

Answer 1087

Advertising in the London Gazette to allow for objections to be raised.

Answer 1088

The buyback must be completed within a limited time while the financial information about the company is still current.

Answer 1089

Personal and even criminal liability for the directors.

Answer 1090

Companies Act ss 710–720.

Answer 1091

Companies Act ss 710–720 ## Footnote These sections outline the consequences for directors failing to comply with the regulations.

Answer 1092

Approval by an ordinary resolution of the shareholders ## Footnote This includes ensuring that the terms of the purchase are available for inspection.

Answer 1093

A solvency statement (DS) and an auditor’s report (AR) ## Footnote The DS must state that the company is solvent and will remain so for the next 12 months.

Answer 1094

They will be guilty of an offence ## Footnote This is outlined in Companies Act s 715.

Answer 1095

A special resolution of the shareholders ## Footnote This is required under Companies Act s 716.

Answer 1096

They cannot vote on the special resolution ## Footnote This applies whether the resolution is passed using the written procedure or at a general meeting.

Answer 1097

Votes attaching to the shares being bought back ## Footnote This is stated in Companies Act s 717.

Answer 1098

solvency statement (DS) ## Footnote This statement must be in a prescribed form.

Answer 1099

The special resolution must be passed ## Footnote The special resolution allows the company to use capital for buybacks.

Answer 1100

With the written special resolution or at a general meeting ## Footnote DS stands for Directors' Statement and AR stands for Accountants' Report.

Answer 1101

A public notice specifying the details of the special resolution ## Footnote This includes the resolution date, amount of capital used, and creditor rights.

Answer 1102

They can apply to court for an order to prevent the payment ## Footnote This is outlined in Companies Act s 719.

Answer 1103

A notice in a national newspaper or written notice to each creditor ## Footnote This is also mandated by Companies Act s 719.

Answer 1104

The DS and AR ## Footnote This filing is required under Companies Act s 719.

Answer 1105

5 weeks ## Footnote This requirement is outlined in Companies Act s 720.

Answer 1106

Resolve to enter into the purchase contract and make the payment ## Footnote The payment must occur not less than 2 weeks after the objection period.

Answer 1107

10 years ## Footnote This includes the resolutions passed during those meetings.

Answer 1108

10 years ## Footnote This is a requirement for record-keeping.

Answer 1109

Return of purchase of own shares (form SH03) and notice of cancellation of shares ## Footnote This also includes a statement of capital.

Answer 1110

Register of members (shareholders) and register of PSC if relevant ## Footnote PSC stands for Persons with Significant Control.

Answer 1111

Any relevant PSC forms ## Footnote This is to ensure compliance with transparency regulations.

Answer 1112

15 days ## Footnote Timely filing is crucial for regulatory compliance.

Answer 1113

Directors have the power to decide to pay an interim dividend and recommend an amount to pay as a final dividend. ## Footnote This is outlined in Model Article 30(1)

Answer 1114

Shareholders approve or reject the proposed recommended dividend by passing an ordinary resolution. ## Footnote This process is governed by Model Article 30(3)

Answer 1115

No, shareholders cannot decide to pay themselves more than the directors have recommended. ## Footnote They can, however, take a smaller amount than recommended.

Answer 1116

Distributable profit = all realised profits – all realised losses.

Answer 1117

Directors who authorised the dividend are jointly and severally liable to the company for the full amount. ## Footnote This may also be a breach of their duties.

Answer 1118

Shareholders are liable to refund the full amount if they knew or had reasonable grounds to believe it was improperly authorised and unlawful.

Answer 1119

Directors should recommend the amount of the dividend. ## Footnote This recommendation should align with their duties to promote company success.

Answer 1120

Shareholders must declare the dividend or reject/reduce it by passing an ordinary resolution.

Answer 1121

Dividends must be paid to shareholders in accordance with their respective rights. ## Footnote This requires checking the articles carefully.

Answer 1122

Dividends are paid in proportion to the number of shares that each shareholder holds.

Answer 1123

To report on financial activity and determine tax payable ## Footnote Accounts also inform stakeholders about financial performance and health.

Answer 1124

* Informing owners and potential investors about financial performance and health * Establishing the amount of profit available for distribution to owners * Indicating the type of liabilities and level of debt the business may be servicing

Answer 1125

To prepare a balance sheet and profit and loss account that provide a true and fair view of the company's state of affairs ## Footnote This duty is outlined in Companies Act s 396(2).

Answer 1126

Accounting documents prepared under the Companies Act 2006, including balance sheet and profit and loss account ## Footnote These documents should provide a true and fair view of the company's financial state.

Answer 1127

* UK GAAP * IAS

Answer 1128

False ## Footnote Different account rules apply depending on the size and type of the company.

Answer 1129

[distribution to owners]

Answer 1130

A true and fair view of the state of affairs of the company as at the end of the financial year

Answer 1131

Revenue or income, costs, and how much profit or loss the business made over the period of the statement or financial year.

Answer 1132

Show all sales (or turnover), less the direct cost of sales (for example, stock).

Answer 1133

All indirect overheads, such as wages, business rates, and electricity.

Answer 1134

A negative figure or a figure to subtract.

Answer 1135

It has made a profit.

Answer 1136

It has made a loss.

Answer 1137

Only those items should appear on the profit and loss account.

Answer 1138

Assets and liabilities which appear on the balance sheet.

Answer 1139

gross profit or a loss figure

Answer 1140

An accounting document that provides a snapshot of the business’s financial health on the last day of its accounting record.

Answer 1141

The assets represent the resources owned by the business, listed from least liquid to most liquid.

Answer 1142

Liabilities repayable within 12 months, such as an overdraft or trade creditors.

Answer 1143

Liabilities that are not expected to be settled within 12 months, such as a term bank loan.

Answer 1144

Total assets minus total liabilities.

Answer 1145

Where the money has come from to fund the net asset position.

Answer 1146

Because the net assets must equal the owners’/shareholders’ equity and any retained profits.

Answer 1147

The amount owed to the owners/shareholders in undistributed profits.

Answer 1148

Sums payable in the short term, such as tax and dividends.

Answer 1149

The excess amount received for shares issued above their nominal value, recorded separately.

Answer 1150

net asset figure

Answer 1151

The amount owed to the owner/shareholders, separate from liabilities owed to third parties.

Answer 1152

A true and fair view

Answer 1153

Payment of rent in advance

Answer 1154

To give an accurate picture

Answer 1155

• Depreciation and revaluation • Accruals • Prepayments • Bad and doubtful debts

Answer 1156

A mechanism to account for the decrease in value of an asset over time

Answer 1157

Overstating the value of the asset

Answer 1158

It reduces the profit figure

Answer 1159

[useful life]

Answer 1160

An accrual is an item of expenditure incurred that has not yet been paid by the business, but the benefit was used in the relevant accounting period. ## Footnote Accruals appear on the balance sheet as a liability and in the profit and loss account as an expense, reducing profit figures.

Answer 1161

Expenses increase, reducing any profit figure. ## Footnote The accrual reflects obligations that the business has incurred.

Answer 1162

A prepayment is when a business has paid for something in advance, requiring apportionment between accounting periods. ## Footnote This contrasts with an accrual.

Answer 1163

It reduces expenses and increases profit figures. ## Footnote The advance payment is credited back to the relevant expense account.

Answer 1164

Current assets increase by the amount of the prepayment.

Answer 1165

Bad debts are those that will not be paid, while doubtful debts are those with uncertainty about payment. ## Footnote Both are accounted for as potential expenses in the profit and loss account.

Answer 1166

They reduce current assets (debtors or receivables).

Answer 1167

Additional information is needed due to at least two different people owning it. ## Footnote This includes records of capital contributions and profits owed to partners.

Answer 1168

Partnership capital is provided by the partners to the partnership.

Answer 1169

Capital contributions, profits owed, and any sums withdrawn over the accounting period.

Answer 1170

Each partner will receive an equal share of the profits. ## Footnote This can be altered by a partnership or LLP agreement.

Answer 1171

Partners may agree to receive a salary or be entitled to interest on their capital contributions. ## Footnote Salary or interest payments are treated as profits in the context of partnership accounts.

Answer 1172

To record how the net profits of the partnership are divided between the partners. ## Footnote It shows how each partner's share is made up by interest on capital, salary, or simple profit.

Answer 1173

An account for each partner to which the appropriated net profit is allocated and from which drawings are paid out. ## Footnote This helps preserve each partner’s contributed capital.

Answer 1174

At the bottom half of the balance sheet in the capital section. ## Footnote This is to avoid overcomplicating the balance sheet.

Answer 1175

The share of net profit will be calculated before and after the change in partners. ## Footnote An appropriation account is drawn up for each period to ascertain the net profit share.

Answer 1176

To keep the amount of capital easily identifiable. ## Footnote It allows for entitlement to interest payments.

Answer 1177

Details of current and capital accounts can be annexed to the balance sheet. ## Footnote This provides transparency on transactions that have taken place.

Answer 1178

Adequate accounting records ## Footnote It is an offence not to maintain these records.

Answer 1179

The Companies Act and relevant legislation ## Footnote These provisions apply to all companies and LLPs.

Answer 1180

The directors of every company and the members of every LLP ## Footnote This requirement applies unless they are a small company/LLP or a micro-entity.

Answer 1181

A 12-month period for which accounts are prepared ## Footnote For new companies or LLPs, it starts on the date of incorporation.

Answer 1182

On the first anniversary of its accounting reference date ## Footnote This date is crucial for determining reporting obligations.

Answer 1183

It is an offence ## Footnote Company officers or designated members may have potential criminal liability.

Answer 1184

Directors may be guilty of a breach of statutory duty ## Footnote Proving that loss has been suffered by the company can be difficult.

Answer 1185

The directors (or designated members in an LLP) ## Footnote This includes the accounts, directors'/strategic report, and any auditor's report.

Answer 1186

Every shareholder, debenture holder, and any other entitled persons ## Footnote This ensures transparency and compliance with statutory obligations.

Answer 1187

True ## Footnote Small companies/LLPs or micro-entities have different reporting requirements.

Answer 1188

accounting reference date ## Footnote This is important for new entities in determining their financial reporting cycle.

Answer 1189

The anniversary of the last day of the month in which the company was incorporated.

Answer 1190

By the directors passing a board resolution and sending the relevant form AA01.

Answer 1191

More than 18 months from the start date of the period.

Answer 1192

Entries showing all money received and spent, a record of assets and liabilities, and a balance sheet.

Answer 1193

The balance sheet.

Answer 1194

filing deadline.

Answer 1195

An income and expenditure account.

Answer 1196

Statements of stock held at the end of each financial year.

Answer 1197

The statement from which the statements of stock were prepared.

Answer 1198

An itemised statement.

Answer 1199

The ARD can be shortened to under 12 months if the company is in administration once in a 5-year period.

Answer 1200

Accounts, strategic reports, directors’ reports, directors’ remuneration, and auditors' reports

Answer 1201

Meets at least two of the following conditions: * Annual turnover not more than £10.2m * Balance sheet total not more than £5.1m * Average number of employees not more than 50

Answer 1202

Do not have to deliver a copy of the directors’ report or the profit and loss account

Answer 1203

Notes on: * Accounting policies * Details of fixed assets * Fair value of assets and liabilities * Details of debts * Information about guarantees and financial commitments

Answer 1204

Has any two of the following: * Turnover of £632,000 or less * Balance sheet of £316,000 or less * 10 employees or less

Answer 1205

Can prepare simpler accounts and benefit from exemptions available to small companies

Answer 1206

Within 9 months of the end of the relevant accounting period

Answer 1207

Within 6 months of the end of the relevant accounting period

Answer 1208

Must file its accounts and any reports within 9 months of the end of the relevant accounting period

Answer 1209

directors’ report

Answer 1210

It is a criminal offence and incurs a civil penalty for late filing.

Answer 1211

The extent of the filing delay and whether the company is private or public.

Answer 1212

The company or LLP could be struck off the register and dissolved.

Answer 1213

3 years from their creation.

Answer 1214

6 years from their creation.

Answer 1215

At the company’s or LLP’s registered office.

Answer 1216

The company’s officers or designated members if an LLP.

Answer 1217

A snapshot of the assets and liabilities on a particular day.

Answer 1218

It could be a seasonal business and therefore subject to fluctuations.

Answer 1219

* How it has been valued * Whether stock is outdated * If stock is overstated, which can distort gross profit figure.

Answer 1220

Potentially not all debtors of the business will pay, leading to cash flow problems.

Answer 1221

Many small debtors spreads risk, while few large debtors increases risk of bad debts.

Answer 1222

Fixed assets often lose value.

Answer 1223

Assets may be overstated.

Answer 1224

An increase in value of fixed assets should be acknowledged for realistic asset valuation.

Answer 1225

Accounts may show higher return from company’s share capital investment.

Answer 1226

Whether the business has enough liquid assets to pay its creditors.

Answer 1227

They will be difficult to realize.

Answer 1228

Profits are falling in real terms.

Answer 1229

* The nature and size of the business * Dependence on particular product lines * Expansion or contraction of market share due to internal/external factors.

Answer 1230

The percentage of revenue the business retains after paying expenses

Answer 1231

The business’s profitability for a specific period

Answer 1232

They can be compared against previous years’ figures and against competitors to establish trends

Answer 1233

Wider commercial and economic issues which may influence the business in the future

Answer 1234

profitability

Answer 1235

Gross profit margin (%) = Gross profit x 100 / Sales ## Footnote Indicates how well business is operating; higher % = higher profitability of products.

Answer 1236

Higher profitability of the business’ products ## Footnote Represents profit made per £1 of goods/services sold.

Answer 1237

Put prices up or cut cost of sales ## Footnote Both actions aim to increase profitability.

Answer 1238

Net profit margin (%) = Net profit x 100 / Sales ## Footnote Shows profitability of business after considering expenses.

Answer 1239

It takes into account other expenses of the business ## Footnote Excludes loan/debenture interest payments and tax.

Answer 1240

Reducing expenses and changing sale and purchase prices ## Footnote This can help improve profitability.

Answer 1241

Return on capital employed (%) = Net profit / Capital employed x 100 ## Footnote Capital employed includes owner/shareholder funds and long-term loans.

Answer 1242

Profit being made on resources available to the business ## Footnote Helps assess performance against competitors.

Answer 1243

As high as possible ## Footnote Indicates efficient use of capital.

Answer 1244

Asset turnover = Sales x 100 / Capital employed ## Footnote Isolates one element of profit only.

Answer 1245

More sales generated by the amount of capital employed ## Footnote Suggests the business is likely more profitable.

Answer 1246

Every £1 invested is converted into £[X] of turnover ## Footnote Indicates efficiency in generating sales from capital.

Answer 1247

The efficiency of capital utilization ## Footnote Indicates a potential issue in generating sales from increased capital.

Answer 1248

Food retailers ## Footnote Typically have higher turnover compared to many other sectors.

Answer 1249

A business’s ability to pay debts as they fall due ## Footnote Liquidity ratios are essential for assessing financial health.

Answer 1250

The relationship between current assets and current liabilities ## Footnote Liquidity ratios do not account for profit.

Answer 1251

Other sources of available cash (fixed asset sales/share/debenture/bonds) ## Footnote This limitation can impact financial assessments.

Answer 1252

It can become insolvent if it runs out of funds to meet debts as they fall due ## Footnote Profitability does not guarantee liquidity.

Answer 1253

Current ratio (X:1) = Current assets / Current liabilities ## Footnote This ratio assesses liquidity by comparing assets to liabilities.

Answer 1254

That current liabilities can be met by realizing all current assets ## Footnote A ratio of 1.5:1 is generally considered good.

Answer 1255

The business has a liquidity problem ## Footnote This suggests potential cash flow issues.

Answer 1256

Funds are tied up in working capital ## Footnote This may indicate inefficiency in asset utilization.

Answer 1257

They have a very high turnover of stock with vast amounts of cash being injected ## Footnote This operational model allows for lower liquidity thresholds.

Answer 1258

Acid test ratio (X:1) = (Current assets - Stock) / Current liabilities ## Footnote This ratio provides a stricter measure of liquidity.

Answer 1259

The business’s liquidity, as stock can be difficult to shift ## Footnote Stock is considered the least liquid of current assets.

Answer 1260

0.8 ## Footnote This may vary depending on the type of business.

Answer 1261

Whether the ratio is improving or deteriorating ## Footnote Trends in the ratio can indicate financial health.

Answer 1262

The business does not have many other current assets to pay off current liabilities other than stock ## Footnote This highlights reliance on inventory for liquidity.

Answer 1263

Whether the business is pursuing debtors vigorously ## Footnote Effective management of receivables can improve liquidity.

Answer 1264

Whether the business has made provision for bad/doubtful debts ## Footnote This can impact the reliability of current assets.

Answer 1265

Trade debtor days = Trade debtors x 365 / Sales ## Footnote Trade debtor days indicate how long a business must wait to receive payment from its debtors.

Answer 1266

Better cash flow and liquidity ## Footnote Fewer days mean the business is quicker in receiving payments, which is crucial for maintaining cash flow.

Answer 1267

Trade creditor days = Trade creditors x 365 / Cost of sales ## Footnote This ratio shows how long a business takes to pay its creditors.

Answer 1268

Greater liquidity for the business ## Footnote A higher number of days means the business holds onto cash longer before paying its creditors.

Answer 1269

Stock days = Stock x 365 / Total cost of sales ## Footnote This ratio provides insights into how effectively a business manages its inventory.

Answer 1270

Keep stock days low ## Footnote Fewer stock days maximize profits, reduce storage costs, and minimize perishability and obsolescence.

Answer 1271

Indicates efficiency in managing trade debtors ## Footnote It reflects how well the business collects payments from its customers.

Answer 1272

Indicates efficiency in managing trade creditors ## Footnote It shows how well the business manages its payments to suppliers.

Answer 1273

Stock days = Stock x 365 / Total cost of sales

Answer 1274

Funds invested by investors i.e. shareholders in a company. ## Footnote Capital is essential for a company's operations and growth.

Answer 1275

Those items that provide long-term value for business and can be sold. ## Footnote Assets are critical for evaluating a company's financial health.

Answer 1276

Long-term assets (for example, plant and machinery/premises). ## Footnote Fixed assets are used in the production of goods and services.

Answer 1277

Short-term assets (for example, cash/stock/trade debtors). ## Footnote Current assets are expected to be converted into cash within a year.

Answer 1278

Company’s debts (for example, a 5-year term loan). ## Footnote Liabilities are obligations that a company must settle in the future.

Answer 1279

Debts due to be paid in less than a year (for example, an overdraft, trade creditors). ## Footnote Current liabilities are crucial for assessing a company's short-term financial health.

Answer 1280

Turnover/income less expenses. ## Footnote Net profit indicates the profitability of a company after all expenses have been deducted.

Answer 1281

To establish a rescue culture by creating mechanisms to help companies in financial difficulty ## Footnote This act works alongside the Enterprise Act 2002 and The Corporate Insolvency and Governance Act 2020 (CIGA)

Answer 1282

The company's assets are collected by an insolvency practitioner and sold, with proceeds distributed to creditors ## Footnote Once assets are distributed, the company may be dissolved.

Answer 1283

A liquidator ## Footnote The liquidator undertakes the role of collecting and distributing the company's assets.

Answer 1284

A company is deemed insolvent if it cannot pay or discharge its debts and liabilities ## Footnote Two tests are used: the cash-flow test and the balance-sheet test.

Answer 1285

A company is considered insolvent if it cannot pay its debts as they fall due ## Footnote This test is outlined in Insolvency Act s 123(1)(e).

Answer 1286

It determines if a company's liabilities exceed its assets, including contingent and prospective liabilities ## Footnote This test is defined in Insolvency Act s 123(2).

Answer 1287

The proceeds of the sale of assets are distributed to creditors in a particular statutory order ## Footnote This order is typically defined by insolvency legislation.

Answer 1288

False ## Footnote A company must have its assets distributed before it can be dissolved.

Answer 1289

To have the money they are owed paid back at least in part.

Answer 1290

The cash-flow test.

Answer 1291

Proving insolvency.

Answer 1292

A formal demand for payment served by a creditor.

Answer 1293

More than £750.

Answer 1294

A judgment obtained against the company that remains unpaid, in full or in part.

Answer 1295

Evidence of numerous emails sent to the company chasing payment.

Answer 1296

Serve a formal statutory demand on the company’s registered office.

Answer 1297

s 123(1)(a).

Answer 1298

Compulsory and voluntary

Answer 1299

A third party, usually a creditor

Answer 1300

They must be owed over £750 and approach the court for a winding-up order

Answer 1301

Any creditor owed more than £750, the company itself, the company's directors, an administrator, or an official receiver

Answer 1302

A liquidation process initiated by the company itself

Answer 1303

Members’ voluntary liquidation (MVL) and creditors’ voluntary liquidation (CVL)

Answer 1304

It is commenced by a solvent company that has decided to stop trading

Answer 1305

It is often commenced by the company in response to creditor pressure

Answer 1306

A declaration of solvency is made in MVL

Answer 1307

A declaration by the majority of directors that the company can pay its debts in full within 12 months

Answer 1308

It relates to the declaration of solvency in members’ voluntary liquidation

Answer 1309

A Members’ Voluntary Liquidation is available for a solvent company.

Answer 1310

Make a declaration of solvency.

Answer 1311

They may be liable to a fine or imprisonment.

Answer 1312

Creditors’ Voluntary Liquidation (CVL).

Answer 1313

It must be passed within 5 weeks of the declaration of solvency.

Answer 1314

The shareholders.

Answer 1315

Pressure from creditors or professional advice indicating insolvency.

Answer 1316

The creditors.

Answer 1317

Liquidation proceedings are commenced.

Answer 1318

The Official Receiver or an authorised insolvency practitioner.

Answer 1319

Collects and realises the assets.

Answer 1320

Clawback assets from previous transactions.

Answer 1321

In the statutory order.

Answer 1322

Three months later by the registrar of companies.

Answer 1323

To preserve and recover the company’s assets and maximize funds for distribution ## Footnote Powers include collecting assets, investigating transactions, commencing litigation, disclaiming onerous property, and facilitating winding up.

Answer 1324

Collect in the assets and realise those assets (convert them into cash) ## Footnote This involves taking necessary actions to maximize available funds.

Answer 1325

The company’s past or antecedent transactions and/or conduct of the directors ## Footnote This investigation aims to claw back any monies for distribution.

Answer 1326

Commence litigation or defend proceedings if relevant and appropriate ## Footnote This is essential for protecting the company's interests.

Answer 1327

Disclaim onerous property or contracts ## Footnote This means rejecting liabilities that may harm the company's financial position.

Answer 1328

winding up ## Footnote This refers to the process of closing down the company's operations legally.

Answer 1329

1. Costs of collecting in and realisation of the company’s remaining assets 2. Preferential debts 3. Floating-charge holders 4. Unsecured creditors 5. Statutory interest on debts 6. Shareholders

Answer 1330

Fixed-charge holder

Answer 1331

They become an unsecured creditor for the balance or rank as a floating charge holder.

Answer 1332

Employee wages (up to £800 per employee for previous 4 months), holiday pay, pension payments, certain tax debts owing to HMRC.

Answer 1333

A fund preserved for unsecured creditors after preferential creditors are paid and before floating charge holders are paid.

Answer 1334

50% of the first £10,000 of money received from assets subject to a floating charge and 20% of the remaining money up to a maximum of £800,000.

Answer 1335

All debts within each category share the funds proportionate to what they are owed if there are not enough funds.

Answer 1336

Liquidator's costs and expenses of realising fixed charge assets.

Answer 1337

To provide companies in financial difficulty with breathing space to recover instead of facing liquidation.

Answer 1338

26 June 2020

Answer 1339

Enforcement action by certain types of creditors relating to pre-moratorium debts against the company.

Answer 1340

To give the company a chance to organise its affairs and recover financially.

Answer 1341

Force the company into insolvency.

Answer 1342

The directors.

Answer 1343

The practitioner, called a monitor, monitors the process and can end it if the company is not viable.

Answer 1344

File a notice at court to end the moratorium.

Answer 1345

Companies and LLPs, but not general or limited partnerships.

Answer 1346

That the entity is insolvent or close to it and that the moratorium will likely result in its rescue.

Answer 1347

Corporate Insolvency and Governance

Answer 1348

That it is insolvent or close to it and that the moratorium will likely result in its rescue.

Answer 1349

It must not have been subject to a moratorium, company voluntary arrangement, or administration in the last 12 months.

Answer 1350

Yes, but they must use the court route to do so.

Answer 1351

The company's directors.

Answer 1352

* Out-of-court route * Court route

Answer 1353

When the relevant prescribed documents are filed at court endorsed by the monitor.

Answer 1354

When a court order is made.

Answer 1355

20 business days.

Answer 1356

Another 20 business days.

Answer 1357

For a total period of up to 1 year from the date it initially came into effect.

Answer 1358

Until a date specified by the court, which is potentially extendable on further application.

Answer 1359

All creditors, except for financial creditors, are barred from pursuing any action to enforce their debts. ## Footnote This includes petitioning for a company’s winding up.

Answer 1360

Yes, sums that fall due to financial creditors, such as bank loans and mortgages, are still payable by the company during the moratorium period. ## Footnote These sums must be paid when they fall due, irrespective of the moratorium.

Answer 1361

No, suppliers cannot terminate their supply agreements with the company on the grounds that the company proposes to enter into a formal insolvency procedure. ## Footnote This holds even if the supply contract states that insolvency is a ground for termination.

Answer 1362

A court must presume that any director who chose to carry on business during this period is not responsible for the company’s financial position worsening. ## Footnote This provides directors with protection against liability for wrongful trading: Insolvency Act s 214.

Answer 1363

Certain pre-moratorium and moratorium debts take priority over other preferential, floating charge and unsecured debts. ## Footnote This is outlined in Insolvency Act s 7.14.

Answer 1364

A company cannot agree to grant fresh security without the monitor’s consent. ## Footnote This is one of the restrictions on a company’s activities during the moratorium.

Answer 1365

All pre-moratorium debts and debts incurred during the moratorium must be paid or discharged. ## Footnote Pre-moratorium debts are those for which the company does not have a payment holiday during the moratorium.

Answer 1366

The monitor must provide a statement that it is likely the moratorium will result in the rescue of the company as a going concern. ## Footnote This statement is crucial for the extension of the moratorium.

Answer 1367

To allow companies to restructure their liabilities to return to solvency. ## Footnote CIGA stands for the Corporate Insolvency and Governance Act.

Answer 1368

Companies that have or may encounter financial difficulties. ## Footnote Restructuring plans require court approval to become binding.

Answer 1369

Court approval called a sanction is required. ## Footnote This is an advantage over CVAs where secured creditors are only bound if they consent.

Answer 1370

Administration, CVA, and fixed-asset receivership. ## Footnote CVA stands for Company Voluntary Arrangement.

Answer 1371

True. ## Footnote Restructuring plans can also be used by administrators and liquidators.

Answer 1372

[court approval called a sanction].

Answer 1373

To rescue the company as a going concern ## Footnote This is the fundamental goal of the administration process.

Answer 1374

An independent insolvency practitioner called an administrator ## Footnote The administrator takes over management from the directors.

Answer 1375

Substantial powers to run, manage, reorganise or even sell the company ## Footnote These powers are granted under the Insolvency Act 1986 Sch 1.

Answer 1376

No, they can only do so with the administrator’s consent ## Footnote This limitation ensures the administrator has full control.

Answer 1377

It provides a statutory moratorium on actions by creditors ## Footnote This moratorium allows time for the company to reorganise.

Answer 1378

Enforcing security or instigating legal proceedings against the company ## Footnote This helps protect the company's assets during the restructuring process.

Answer 1379

Rescue the company as a going concern ## Footnote This is the primary focus of the administration process.

Answer 1380

Achieve a better result for the company’s creditors as a whole than if the company were wound up ## Footnote This objective is considered only if the first is not achievable.

Answer 1381

Realise the company’s assets to make a distribution to secured or preferential creditors ## Footnote This is only considered when the first two objectives are impractical.

Answer 1382

When it is not reasonably practicable to achieve the first objective or when it would provide a better outcome for the creditors ## Footnote This ensures that creditors' interests are prioritized.

Answer 1383

When neither of the first two objectives are reasonably practicable to achieve ## Footnote This ensures that the process is focused on viable outcomes.

Answer 1384

The company is or is likely to become unable to pay its debts and administration would achieve a better result for the company’s creditors than liquidation. ## Footnote This is in accordance with the Insolvency Act s 123.

Answer 1385

* Anyone who has appointed or may appoint an administrative receiver * Any qualifying floating-charge holder who may appoint an administrator * Anyone else entitled to have notice of the order pursuant to the Insolvency (England and Wales) Rules 2016

Answer 1386

No, neither the company nor its directors can use the out-of-court route.

Answer 1387

To provide quicker, cheaper, and less formal access to the administration process.

Answer 1388

5 clear business days’ notice of an intention to appoint an administrator to any qualifying floating-charge holder (QFCH).

Answer 1389

* Agree to the administration * Appoint its own administrator * Apply to the court for an alternative appointment

Answer 1390

A charge that specifies at least one of the following: * That paragraph 14 of Schedule B1 of the Insolvency Act applies to the charge * That the holder has the power to appoint an administrator under the charge * That the holder has the power to appoint an administrative receiver under the charge.

Answer 1391

A creditor who holds one or more charges or other security (including at least one QFC) over all or substantially all of the assets and undertaking of a company.

Answer 1392

* If there is a winding-up petition outstanding * If there is an outstanding application for an administration order * If there is an administrative receiver appointed * If the company is in liquidation.

Answer 1393

Serve the notice of intention on the court, any QFCH, and any lender entitled to appoint an administrative receiver unless there is no QFCH.

Answer 1394

Call a general meeting to seek the members’ approval of the notice of intention to appoint an administrator.

Answer 1395

* The company is unable to pay its debts * The company is not in liquidation * There has not been a previous administration within the last 12 months.

Answer 1396

When the notice of intention to appoint is filed at court.

Answer 1397

The administrator can rescue the company unhindered by demands from creditors ## Footnote This allows the administrator to focus on restructuring the company without immediate financial pressures.

Answer 1398

They need to be approved by the majority of the company’s creditors ## Footnote Approval from creditors is crucial for the administrator's plans to be implemented.

Answer 1399

Wide powers to manage the affairs, business and property of the company ## Footnote This includes making decisions that are in the best interest of the company's recovery.

Answer 1400

1 year after the date of the administration ## Footnote This period can be extended under certain circumstances.

Answer 1401

At least one of the following reasons: * Purpose cannot be achieved * Company should never have entered administration * Creditors require a court application * Purpose has been sufficiently achieved * Administrator converts to CVA * Court converts to liquidation in public interest * Administrator resigns ## Footnote These reasons provide a framework for assessing the viability of continuing administration.

Answer 1402

False ## Footnote The administrator has the authority to investigate past transactions to recover assets.

Answer 1403

CVA ## Footnote A CVA (Company Voluntary Arrangement) is a formal agreement between a company and its creditors.

Answer 1404

There are other unspecified ways ## Footnote The document notes that there are additional methods but does not elaborate on them.

Answer 1405

A CVA is a rescue procedure that allows a company to negotiate with creditors to enter into a binding arrangement to pay its debts. ## Footnote A CVA binds both the company and unsecured creditors and does not typically allow for a statutory moratorium.

Answer 1406

Creditors may agree to: * Wait longer to receive their debts * Accept only partial payment of the debt * A combination of the two ## Footnote This makes CVA a flexible option for companies in financial distress.

Answer 1407

The CVA can be initiated by the directors, a liquidator, or an administrator. ## Footnote This makes it accessible for various parties involved in the company's management.

Answer 1408

A CVA is suitable when a company is experiencing temporary cash-flow problems rather than being in a fundamentally weak financial position. ## Footnote This highlights the CVA's role as a flexible rescue mechanism.

Answer 1409

The nominee supervises the CVA and may report to the court on the viability of the arrangement. ## Footnote There is no requirement for court approval for the CVA.

Answer 1410

75% or more in value of unsecured creditors must agree, unless more than 50% in value of all unconnected creditors vote against it. ## Footnote Secured creditors are excluded from this voting requirement.

Answer 1411

All creditors (except secured or preferential who disagree) are bound by the decision, even if they did not vote. ## Footnote This ensures that the agreement is enforceable across the board.

Answer 1412

The supervisor checks that the approved proposal is being implemented and reports to the court. ## Footnote Unlike in administration, the directors remain in office and manage the company.

Answer 1413

The supervisor writes a final report for the creditors and shareholders, marking the end of the CVA. ## Footnote This report summarizes the implementation and closure of the arrangement.

Answer 1414

A creditor who has some form of security over the company’s assets

Answer 1415

Financial institutions/lenders

Answer 1416

Collateral or a charge over one or more or all of the company’s assets

Answer 1417

A mortgage

Answer 1418

The instrument creating the security that may grant the creditor the power to appoint a receiver

Answer 1419

The power to appoint a receiver without having to apply to the court

Answer 1420

The right to appoint an administrator

Answer 1421

The receiver takes control of the charged asset(s) and realises the asset(s) to satisfy the creditor’s debt

Answer 1422

The creditor who appointed them

Answer 1423

The interests of their client (the creditor) over the interests of the company or other creditors

Answer 1424

Winding up

Answer 1425

Challenge transactions entered into by an insolvent company and recover company property ## Footnote This increases the amount payable to creditors from the company's assets.

Answer 1426

When the company is in insolvent liquidation or administration ## Footnote Successful challenges restore the company to its pre-transaction position.

Answer 1427

* Transactions at an undervalue * Preferences * Floating charges

Answer 1428

The timing of the transaction and whether it falls within specified statutory periods prior to insolvency ## Footnote The connection to a person involved with the company can also affect the challenge.

Answer 1429

Directors, shadow directors, associates of directors, or associates of the company ## Footnote This definition is provided in Insolvency Act s 249.

Answer 1430

* Spouse * Civil partner * Business partner * Employee * Relative (brother, sister, aunt, uncle, niece, nephew) * Some trustees * A company controlled by the director

Answer 1431

If the same person controls both, or if one is controlled by a person and their associates control the other ## Footnote This is defined in Insolvency Act s 435.

Answer 1432

A gift or sale of a company asset for significantly less money than the actual value of the item ## Footnote Defined under Insolvency Act s 238(4)

Answer 1433

* It took place in the 2 years prior to the onset of insolvency * The company was insolvent at the time of the transaction or became insolvent as a result

Answer 1434

It will be presumed if the transaction was with a connected person, but can be rebutted ## Footnote If not with a connected person, insolvency must be proved by the administrator or liquidator.

Answer 1435

* Spouse or civil partner of the director * Child or stepchild of the director * Spouse or civil partner of that child or stepchild

Answer 1436

Transfer of a company factory to a spouse for £100,000 when it is worth £150,000

Answer 1437

A declaration from the court that the transaction is voidable to recover the undervalue

Answer 1438

Proving that the company entered into the transaction in good faith and for the purpose of carrying on its business

Answer 1439

An unfair or improper advantage given to a creditor or surety, placing them in a better position during insolvency than they would otherwise be

Answer 1440

If it took place within 6 months prior to insolvency with an unconnected person or within 2 years with a connected person, and the company was insolvent at the time or became insolvent as a result

Answer 1441

The legal ranking of creditors during the distribution of a company's assets in liquidation

Answer 1442

There is a presumption that the company was influenced by a desire to prefer that creditor, which can be rebutted

Answer 1443

[director’s close relative]

Answer 1444

6 months prior to the onset of insolvency

Answer 1445

2 years prior to the onset of insolvency

Answer 1446

That the transaction was motivated by a legitimate business reason rather than a desire to prefer a creditor

Answer 1447

Paying a creditor who is a golf partner of the directors instead of older creditors

Answer 1448

It outlines the conditions under which a preference can be voidable

Answer 1449

A desire to place that creditor in a better position than they would have been in during winding up

Answer 1450

[defense against preference claims]

Answer 1451

A floating charge is a security interest over a company's assets that allows the company to continue using the assets in the ordinary course of business until a default occurs.

Answer 1452

A floating charge can be avoided if it is invalid, such as when an unsecured creditor obtains it to secure an already existing obligation for no new consideration.

Answer 1453

A new floating charge is valid if new money or consideration is given to the company.

Answer 1454

A floating charge is invalid if the company upgrades a creditor’s security to a new broader floating charge without better loan terms or taking on more debt.

Answer 1455

The secured debt becomes unsecured.

Answer 1456

A floating charge can be avoided if the transaction was with an unconnected person and took place within 1 year of the onset of insolvency.

Answer 1457

The company must have been insolvent at the time the charge was given or must have become insolvent due to the transaction.

Answer 1458

fresh consideration

Answer 1459

The three reasons are: * The bank did not provide any fresh consideration to the company * The original loan amount has not been increased * The bank is not a connected person

Answer 1460

The floating charge may be declared invalid.

Answer 1461

2 years from the onset of insolvency ## Footnote No need to prove insolvency as it is presumed in this case.

Answer 1462

Floating charge over the company's assets

Answer 1463

A creditor

Answer 1464

The floating charge holder was a connected person

Answer 1465

That the company was insolvent at the time

Answer 1466

Fresh consideration

Answer 1467

No, it would not be avoided

Answer 1468

It avoids floating charges automatically

Answer 1469

Write to the floating charge holder

Answer 1470

Legal proceedings may need to be brought

Answer 1471

Carrying out the business of a company with the intent to defraud creditors for any fraudulent purpose ## Footnote Defined under Insolvency Act s 213 and s 246ZA

Answer 1472

The liquidator or administrator ## Footnote They can act if they find evidence of fraudulent intent by directors or others

Answer 1473

Ordering goods knowing that they cannot be paid for ## Footnote This demonstrates intent to defraud creditors

Answer 1474

Actual dishonesty ## Footnote This is a key requirement that makes claims difficult to bring

Answer 1475

A situation where the directors continue to trade despite knowing the company is insolvent, without needing to prove dishonesty ## Footnote It is generally easier to prove than fraudulent trading

Answer 1476

They may be personally liable to make contributions to the company’s assets ## Footnote The court has the authority to order such contributions

Answer 1477

Companies Act s 993 ## Footnote This act outlines the criminal implications of fraudulent trading

Answer 1478

A disqualification order under the Company Directors Disqualification Act 1996 ## Footnote This disqualifies them from acting as directors for a certain period

Answer 1479

False ## Footnote Wrongful trading does not require proof of dishonesty, making it easier to establish

Answer 1480

defraud creditors

Answer 1481

Occurs when a company has gone into administration and the director(s) continued to trade despite knowing there is no reasonable prospect of avoiding insolvency ## Footnote Wrongful trading is governed by the Insolvency Act s 214 and s 246ZB.

Answer 1482

* An insolvent liquidation must be in effect * The director(s) knew or ought to have concluded there was no reasonable prospect of avoiding insolvent liquidation

Answer 1483

The balance sheet test, where assets are insufficient for the payment of debts and liabilities ## Footnote This includes expenses of winding up or administration.

Answer 1484

They must act reasonably and responsibly, prioritizing creditors’ interests over their own ## Footnote Directors must show they took every reasonable step to minimize losses to creditors if insolvency is inevitable.

Answer 1485

* Seek advice from an insolvency practitioner * Implement protective measures before continuing to trade

Answer 1486

They can be held personally liable for the company’s debts from the date they knew or should have concluded the company was insolvent

Answer 1487

No, resigning does not prevent liability even if the director feels they have no choice but to resign

Answer 1488

A liquidator or administrator can bring a claim, including against shadow and de facto directors

Answer 1489

The director(s) may be ordered to personally contribute to the assets of the company

Answer 1490

There is a 6-year limitation period for the insolvency practitioner to bring proceedings

Answer 1491

Holders of a fixed charge ## Footnote They are entitled to payment to the extent of their security.

Answer 1492

The charge holder becomes an unsecured creditor for the shortfall, less the liquidator's fees and expenses ## Footnote For example, if an asset worth £200,000 is sold for £105,000, and the liquidator's expenses are £5,000, the fixed-charge holder will become an unsecured creditor for £100,000.

Answer 1493

They rank in order of creation of the charge, subject to any agreement to the contrary

Answer 1494

It generally automatically crystallises

Answer 1495

To set aside some of the money realised from floating charged assets for distribution to unsecured creditors

Answer 1496

[prescribed part or ring-fenced fund]

Answer 1497

To ensure that there are some funds available for unsecured creditors

Answer 1498

Special powers to challenge transactions entered into before insolvency. ## Footnote This allows the recovery of company property to increase payments to creditors.

Answer 1499

When the company is in insolvent liquidation or administration. ## Footnote This includes the period prior to the insolvency of the company.

Answer 1500

Restoration of the company to the position it would have been in had the transaction not occurred. ## Footnote These are referred to as clawback provisions.

Answer 1501

* Transactions at an undervalue * Preferences * Floating charges

Answer 1502

To determine if they fall within the specified statutory periods prior to insolvency. ## Footnote This is crucial for assessing whether transactions are challengeable.

Answer 1503

Whether the transaction took place with a person connected to the company. ## Footnote This can affect the challenge period and various presumptions.

Answer 1504

A director, shadow director, associates of directors, or associates of the company. ## Footnote Defined in Insolvency Act s 249.

Answer 1505

A spouse, civil partner, business partner, employee, relative, or certain trustees. ## Footnote Includes family members like brothers, sisters, aunts, uncles, nieces, and nephews as defined in s 435(8).

Answer 1506

If the same person has control of both or if one person controls one and their associates control the other. ## Footnote This is outlined in Insolvency Act s 435.

Answer 1507

A gift or sale of a company asset for significantly less money than the actual value of the item ## Footnote Example: selling stock or a vehicle for less than its value.

Answer 1508

* It took place in the 2 years prior to the onset of insolvency * The company was insolvent at the time of the transaction or became insolvent as a result

Answer 1509

Insolvency is presumed if the transaction was with a connected person, but can be rebutted ## Footnote If the transaction is not with a connected person, insolvency must be proved by the administrator or liquidator.

Answer 1510

* Spouse or civil partner * Child or stepchild of the director * Spouse or civil partner of the child or stepchild

Answer 1511

Transfer of business assets, such as a factory, to a spouse for payment significantly lower than market value ## Footnote Example: transferring a factory worth £150,000 to a spouse for £100,000.

Answer 1512

A declaration from the court that the transaction is voidable, allowing recovery of the undervalue amount

Answer 1513

Proving that the company entered into the transaction in good faith and for the purpose of carrying on its business, with reasonable grounds for believing it would benefit the company ## Footnote Reference: Insolvency Act s 238(5).

Answer 1514

An unfair or improper advantage that puts a creditor or guarantor in a better position in insolvency than they would otherwise be. ## Footnote This can elevate an unsecured creditor above their statutory order of priority.

Answer 1515

If it took place within 6 months prior to insolvency with an unconnected person or within 2 years with a connected person, and the company was insolvent at the time or became insolvent as a result. ## Footnote Influence by a desire to prefer that creditor is presumed in transactions with connected persons.

Answer 1516

6 months prior to the onset of insolvency. ## Footnote This applies in cases of insolvent administration or liquidation.

Answer 1517

2 years prior to the onset of insolvency. ## Footnote This includes transactions with individuals who have a close relationship with the company.

Answer 1518

The company was insolvent at the time of the transaction or became insolvent as a result, and the transaction was influenced by a desire to prefer that creditor. ## Footnote This is based on Insolvency Act s 239(5) and (6).

Answer 1519

Repayment of money loaned to the company by a director's close relative 18 months before liquidation when other creditors are unpaid. ## Footnote This demonstrates preferential treatment to a connected party.

Answer 1520

A company paying a creditor, with whom the directors play golf, instead of other creditors within 6 months of liquidation. ## Footnote This illustrates preferential treatment based on personal relationships.

Answer 1521

If they can show that repaying the creditor was necessary to keep the company afloat, not motivated by a desire to prefer. ## Footnote This indicates that the transaction was made for business necessity rather than preferential intent.

Answer 1522

They may be able to avoid a floating charge on the grounds it is invalid.

Answer 1523

If new money/consideration is given to the company.

Answer 1524

The new floating charge will be invalid.

Answer 1525

The debt is not avoided; it becomes unsecured.

Answer 1526

If the transaction was with an unconnected person and took place within 1 year of insolvency onset.

Answer 1527

The company must have been insolvent at the time of the charge or become insolvent due to the transaction.

Answer 1528

A bank converts a personal guarantee into a floating charge without fresh consideration.

Answer 1529

2 years from the onset of insolvency.

Answer 1530

There is no need to prove insolvency.

Answer 1531

£30,000 (£20,000 existing loan + £10,000 new loan).

Answer 1532

13 months prior to the winding up petition.

Answer 1533

It allows avoidance without proving insolvency.

Answer 1534

It avoids floating charges automatically without the need for legal proceedings.

Answer 1535

They write to the floating charge holder.

Answer 1536

Legal proceedings may need to be brought.

Answer 1537

unconnected person.

Answer 1538

Make an application to the court for a declaration that the directors were knowing parties in carrying on the business in a fraudulent manner ## Footnote This is based on Insolvency Act s 213 and s 246ZA.

Answer 1539

Ordering goods knowing that they cannot be paid for ## Footnote This illustrates the intent to defraud creditors.

Answer 1540

Actual dishonesty ## Footnote This makes claims for fraudulent trading difficult to bring.

Answer 1541

Wrongful trading ## Footnote Wrongful trading does not require proof of dishonesty.

Answer 1542

Individuals concerned may be personally liable to make contributions to the company’s assets ## Footnote This is a potential consequence for those found guilty of fraudulent trading.

Answer 1543

Companies Act s 993 ## Footnote This act provides provisions for criminal liability in cases of fraudulent trading.

Answer 1544

They may be subject to a disqualification order under the Company Directors Disqualification Act 1996 ## Footnote This can prevent them from serving as a director in the future.

Answer 1545

Wrongful trading occurs when a company has gone into administration and the director(s) continued to trade under certain conditions ## Footnote Specifically, when either an insolvent liquidation is imminent or the director(s) knew or ought to have concluded that there was no reasonable prospect of avoiding it.

Answer 1546

1. An insolvent liquidation is imminent 2. Director(s) knew or ought to have concluded that there was no reasonable prospect of avoiding insolvent liquidation ## Footnote This is defined under the Insolvency Act s 214 and s 246ZB.

Answer 1547

Insolvency for wrongful trading purposes is determined when a company's assets are insufficient to cover its debts and other liabilities ## Footnote This includes expenses of winding up or administration.

Answer 1548

Directors must show they acted reasonably and responsibly in concluding that the company would avoid insolvency ## Footnote They must prioritize creditors' interests and not act for their own benefit.

Answer 1549

They must take every reasonable step to minimize losses to creditors ## Footnote This may include continuing to trade only after implementing protective measures.

Answer 1550

Ensure their concerns are minuted in board meeting minutes as evidence ## Footnote This can help minimize their culpability in the event of a wrongful trading claim.

Answer 1551

Yes, directors can be held personally liable for the company’s debts from the date they knew or should have concluded insolvency ## Footnote Resigning as a director does not prevent liability.

Answer 1552

A liquidator or administrator can bring a claim against a director, including shadow and de facto directors ## Footnote This can result in an order for the director(s) to personally contribute to the company's assets.

Answer 1553

There is a 6-year limitation period for the insolvency practitioner to bring proceedings ## Footnote This period begins from the date of the wrongful trading.

Answer 1554

The court will assume that a director is not responsible for worsening the company’s financial position or its creditors if the company continued to trade between 1 March and 30 September 2020 and 26 November 2020 to 30 April 2021. ## Footnote CIGA stands for the Corporate Insolvency and Governance Act 2020.

Answer 1555

They may be subject to a disqualification order under the Company Directors Disqualification Act 1996.

Answer 1556

If the director has acted honestly and reasonably, according to Companies Act s 1157.

Answer 1557

No, relief is not available for wrongful trading.

Answer 1558

The court may order a director to repay, restore, or account for any money or property if they have misapplied or retained funds or property of the company.

Answer 1559

An insolvent company is unable to pay its debts, meaning it cannot pay in full all the liabilities it owes to its creditors.

Answer 1560

To realise the assets of the insolvent company and to distribute the realisations among the creditors.

Answer 1561

A statutory scheme for how an insolvency practitioner must apply asset realisations to meet creditor claims.

Answer 1562

Creditors are placed into different classes, and claims are satisfied in descending order of priority.

Answer 1563

1. Fixed charge holders and expenses of the insolvency process 2. Payments to preferential creditors 3. Floating-charge holders 4. Unsecured creditors.

Answer 1564

Creditors in the class(es) ranking below will receive nothing.

Answer 1565

[misfeasance].

Answer 1566

They are entitled to be paid ahead of the liquidators’ fees and the insolvency expenses to the extent of their security. ## Footnote Fixed charge holders have priority over liquidators' fees but may not receive full payment if there are insufficient funds after the liquidator's expenses.

Answer 1567

A liquidator will usually take their fees and expenses before paying any sums to the fixed charge holder. ## Footnote This ensures that the liquidator is compensated for their costs associated with the realization of the assets.

Answer 1568

The charge holder becomes an unsecured creditor for the shortfall after deducting the liquidator's expenses. ## Footnote In this case, if the liquidator's expenses are £5,000, the charge holder becomes an unsecured creditor for £100,000.

Answer 1569

They rank in order of creation of the charge subject to any agreement to the contrary. ## Footnote This means that the first charge created has priority over subsequent charges unless otherwise agreed.

Answer 1570

A floating charge will generally automatically crystallise. ## Footnote Crystallisation means that the floating charge becomes fixed on specific assets.

Answer 1571

It is an amount that must be ring-fenced for unsecured creditors from sums realised from floating charged assets. ## Footnote This ensures that some funds are available for distribution to unsecured creditors.

Answer 1572

False. ## Footnote A portion of the funds is set aside for unsecured creditors, known as the prescribed part.

Answer 1573

fixed charge holder. ## Footnote This highlights the priority of liquidator expenses in the payment hierarchy.

Answer 1574

Ordinary and secondary preferential debts ## Footnote This classification helps in understanding the hierarchy of debts in insolvency cases.

Answer 1575

* Contributions to occupational and state pension schemes * Wages and salaries of employees for work done in the 4 months before the insolvency date (up to a maximum of £800 per employee) * Unpaid holiday pay ## Footnote Ordinary preferential debts are prioritized during insolvency proceedings.

Answer 1576

* VAT * PAYE income tax in England and Wales * Construction Industry Scheme deductions * Employee National Insurance contributions * Student loan repayments ## Footnote Secondary preferential debts were established for insolvencies on or after 1 December 2020.

Answer 1577

They rank equally among themselves after ordinary preferential debts ## Footnote This ranking ensures that certain tax debts are prioritized in insolvency.

Answer 1578

A creditor with no security over any of the insolvent company's assets ## Footnote Unsecured creditors may include trade suppliers, utility companies, and employees not ranked as preferential creditors.

Answer 1579

They rank behind any liability or obligation that can be proved and preferential creditors ## Footnote Unsecured creditors are unlikely to be paid in full during liquidation.

Answer 1580

holiday pay ## Footnote This is one of the key components of ordinary preferential debts.

Answer 1581

False ## Footnote Secondary preferential debts are primarily certain tax debts owed to HMRC.

Answer 1582

£800 per employee ## Footnote This limit applies to wages earned in the 4 months before insolvency.

Answer 1583

Liquidator’s costs and expenses of realising any fixed charge assets ## Footnote See 7.14.5.1 for more details on fixed charge assets.

Answer 1584

Creditors to the extent of their security, with any shortfall being unsecured creditors ## Footnote Refer to point (9) for further explanation.

Answer 1585

Liquidation process

Answer 1586

Ordinary (a) and secondary (b) creditors ## Footnote (a) Employees’ arrears and (b) HM Revenue and Customs (HMRC) claims.

Answer 1587

Up to £800 for the previous 4 months' remuneration

Answer 1588

* 50% of the first £10,000 from property/assets subject to floating charge(s) * 20% of the remaining balance up to a limit of £800,000 for floating charges created on or after 6 April 2020 ## Footnote The previous limit of £600,000 applies for floating charges created before 6 April 2020.

Answer 1589

They go to creditors holding a floating charge of assets that crystallised on insolvency

Answer 1590

All other creditors with provable debts

Answer 1591

The amount ring-fenced for unsecured creditors as the prescribed part fund

Answer 1592

Remaining funds, distributed according to rights attached to a class of shares

Answer 1593

A liquidator realises assets for £100,000 which were subject to a floating charge created in 2021. The costs of realisation were £50,000, which goes to the liquidator. There are no preferential creditors. The calculation for the prescribed part/ring fenced fund in respect of the net realisation of £50,000 is as follows: 50% of the first £10,000 = £5,000 20% of the balance £40,000 (£50,000 – £10,000) = £8,000 Therefore, the prescribed part (which is set aside for unsecured creditors) is £13,000 (£5,000 + £8,000). The floating-charge holder receives the remaining balance of £37,000. Calculation: £50,000 – £13,000 = £37,000.

Answer 1594

To grant relief to a debtor who cannot pay their creditors and to fairly distribute the debtor’s assets to their unsecured creditors ## Footnote Bankruptcy aims to provide a structured process for debt relief and asset distribution.

Answer 1595

All the bankrupt’s assets are transferred to the Official Receiver or a trustee in bankruptcy who realises those assets and distributes the proceeds ## Footnote The trustee in bankruptcy (TIB) is responsible for managing the assets.

Answer 1596

1 year ## Footnote This is stipulated under the Insolvency Act s 279.

Answer 1597

The slate is wiped clean, allowing the bankrupt to start afresh, though it impacts their creditworthiness ## Footnote Discharge does not eliminate all debts, especially those not addressed in the bankruptcy.

Answer 1598

They must disclose their bankruptcy ## Footnote This is part of the restrictions during the bankruptcy period.

Answer 1599

No, they will be disqualified from acting as a director ## Footnote This restriction is enforced by the Company Directors Disqualification Act 1986 (CDD Act) s 11.

Answer 1600

Create, manage or promote a company ## Footnote This is also governed by the Company Directors Disqualification Act 1986 (CDD Act) s 11.

Answer 1601

It will automatically terminate unless varied in a partnership agreement ## Footnote This is according to the Partnership Act 1890 (Partnership Act) s 33.

Answer 1602

A court order placing continuing restrictions on irresponsible or dishonest bankrupts for up to 15 years after discharge ## Footnote BROs are issued if the bankrupt does not cooperate with the bankruptcy restrictions undertaking (BRU).

Answer 1603

An agreement to accept restrictions similar to those in a BRO ## Footnote It can be accepted as an alternative to a BRO.

Answer 1604

An order requiring a bankrupt with income to contribute towards their debts for up to 3 years ## Footnote IPOs are applied for by the trustee in bankruptcy.

Answer 1605

False ## Footnote They must disclose their bankruptcy to those they are trading with.

Answer 1606

Either the debtor or the debtor's creditors/supervisor

Answer 1607

Two tests based on whether an individual can pay their debts: * Debt is payable immediately and debtor has insufficient funds * Debt is payable at a future point with no reasonable prospect of payment

Answer 1608

Being unable to pay their debts

Answer 1609

Online to the adjudicator in the Insolvency Service via an online portal

Answer 1610

No, a court is not involved

Answer 1611

All necessary information and payment of the fee

Answer 1612

Requirements include: * Adjudicator has jurisdiction on application date * Debtor is unable to pay debts at determination date * No pending bankruptcy petition * No existing bankruptcy order for debts in the application

Answer 1613

Same as under the Insolvency Act

Answer 1614

bankruptcy

Answer 1615

One or more of the individual's creditors who are owed £5,000 or more or the supervisor or creditor of the individual's IVA ## Footnote Petitioning creditors are those who meet the threshold of £5,000 or more in debt.

Answer 1616

£5,000 ## Footnote This amount is established under the Insolvency Act s 267(4).

Answer 1617

* The debtor is domiciled in England and Wales * The debt is £5,000 or more * The debt is for a liquidated sum, payable immediately or at a specific date, and unsecured * The debtor is unable to pay or has no reasonable prospect of paying * There is no outstanding application to set aside a statutory demand ## Footnote These conditions are outlined in the Insolvency Act sections 265 and 267.

Answer 1618

The court will presume that the debtor cannot pay their debts ## Footnote This is referenced in section 267(2) of the Insolvency Act.

Answer 1619

The debtor owes £5,000 or more and either: * The debtor has not paid a statutory demand within 3 weeks * The creditor has a court judgment and has attempted enforcement without success ## Footnote This is based on Insolvency Act sections 267 and 268.

Answer 1620

The creditor presents a bankruptcy petition at court, paying the court fee and a large deposit ## Footnote This deposit is to cover the costs of the Trustee in Bankruptcy (TIB).

Answer 1621

* The creditor proves the debtor's inability to pay * The bankruptcy petition is served on the debtor * The court makes the bankruptcy order ## Footnote Service of the petition can occur at the debtor's home or work address.

Answer 1622

Until discharged or for a year ## Footnote This duration is specified in Insolvency Act section 278.

Answer 1623

3 weeks ## Footnote This is equivalent to 21 days.

Answer 1624

False ## Footnote There must be no outstanding application to set aside a statutory demand as per section 267(2).

Answer 1625

Official Receiver (OR) ## Footnote The OR is an officer of the court responsible for managing the bankruptcy process.

Answer 1626

To take control of the bankruptcy estate and advertise the order in the Gazette ## Footnote This includes realizing the assets and distributing proceeds to creditors.

Answer 1627

They are realized by the TIB after deducting bankruptcy costs and distributed to creditors ## Footnote Creditors typically receive less than what they are owed.

Answer 1628

All assets and property belonging to the bankrupt at the commencement of bankruptcy ## Footnote Exclusions may apply as defined in the Insolvency Act s 283.

Answer 1629

It automatically vests in the TIB once the bankruptcy order is made ## Footnote The TIB cannot sell the home without a court order under certain conditions.

Answer 1630

If the home is in joint names, a charge is registered under the Family Law Act, or children live there ## Footnote Sale may only be delayed for a maximum of 1 year in these cases.

Answer 1631

3 years ## Footnote After this period, ownership automatically reverts to the bankrupt.

Answer 1632

The business is closed, employees are dismissed, and assets are sold by the TIB ## Footnote This is unless the assets are excluded from the bankruptcy estate.

Answer 1633

Inform those they do business with about the bankruptcy order ## Footnote This is necessary unless they continue to trade under their own name.

Answer 1634

TIB ## Footnote TIB stands for Trustee in Bankruptcy.

Answer 1635

False ## Footnote Appointing a licensed insolvency practitioner incurs fees that may not be affordable for the bankrupt.

Answer 1636

• Items needed for work or tools of the trade • Everyday household items • Assets of a peculiarly personal nature • The bankrupt's income or salary unless there is an IPO in place ## Footnote An IPO is an Income Payment Order that may apply if there is excess income.

Answer 1637

A transaction where a bankrupt makes a gift, enters into a transaction for marriage or civil partnership, or receives consideration significantly less than provided by the bankrupt ## Footnote Relevant under Insolvency Act s 339.

Answer 1638

5 years ending with the day the bankruptcy order is made ## Footnote If made between 2–5 years before the bankruptcy order, proof of insolvency is needed.

Answer 1639

The insolvency of the bankrupt is presumed ## Footnote An associate includes a relative or a business partner as defined in Insolvency Act s 435.

Answer 1640

True ## Footnote This is applicable even if the item is necessary for daily living.

Answer 1641

The TIB can review preferences entered into prior to bankruptcy and apply to the court to have them set aside ## Footnote Relevant under Insolvency Act s 340.

Answer 1642

Insolvency Act s 339

Answer 1643

Proof that the bankrupt was insolvent at the time of the transaction

Answer 1644

• Clothing • Bedding • Furniture • Household equipment • Basic items needed at home

Answer 1645

Trustee in Bankruptcy

Answer 1646

There is no defense against it

Answer 1647

A payment that puts a creditor in a better position than they would otherwise have been on bankruptcy. ## Footnote Preferences are scrutinized in bankruptcy proceedings to ensure fairness to all creditors.

Answer 1648

2 years ## Footnote The relevant time is reduced to 2 years when the preference is made to an associate of the bankrupt individual.

Answer 1649

The bankrupt became insolvent as a result of the preference or was already insolvent when the preference took place. ## Footnote There is no presumption of insolvency even if the recipient was an associate.

Answer 1650

If the bankrupt can show there was no 'desire to prefer' when they made the payment. ## Footnote This may occur if the payment was made to appease a creditor or to continue business operations.

Answer 1651

Desire to prefer will be presumed. ## Footnote This means that the intent to favor the associate is automatically assumed in legal contexts.

Answer 1652

Sell their charged assets, take the value of their security, and pay any surplus funds to the TIB. ## Footnote If there is a shortfall, they become unsecured creditors for that amount.

Answer 1653

They will distribute the assets among the creditors. ## Footnote Creditors within each category will share any money available at that stage equally.

Answer 1654

Mortgage payments, court fines, maintenance payments, and student loans. ## Footnote These payments are prioritized and can occur despite the bankruptcy proceedings.

Answer 1655

1. Bankruptcy costs and expenses 2. Preferential debts 3. Ordinary unsecured debts 4. Interest on preferential and ordinary debts 5. Postponed creditors ## Footnote This order dictates how remaining assets are distributed among creditors after bankruptcy.

Answer 1656

Two tiers of preferential creditors, including: * Wages due in the last 4 months (max £800 per employee) * Holiday pay and pension contributions * Certain tax debts owed to HM Revenue and Customs. ## Footnote These debts are given special statutory priority in bankruptcy proceedings.

Answer 1657

It will be paid to the bankrupt, who can then apply to have the bankruptcy order annulled if all debts and fees have been paid in full. ## Footnote This provides a pathway for the bankrupt to restore their financial status once obligations are met.

Answer 1658

On the first anniversary of becoming bankrupt ## Footnote Insolvency Act s 279

Answer 1659

They normally have no further liability ## Footnote Insolvency Act s 281

Answer 1660

Borrow money and carry on a business ## Footnote They can also become a company director unless restricted.

Answer 1661

* Debts gained by fraud * Student loans * Court fines * Debts created after the bankruptcy order * Money owed in family law proceedings ## Footnote Includes spousal maintenance payments.

Answer 1662

3 years ## Footnote Individuals subject to an IPO may need to contribute to creditors after discharge.

Answer 1663

BRO (Bankruptcy Restriction Order) or BRU (Bankruptcy Restriction Undertaking) ## Footnote This can impose restrictions for up to 15 years.

Answer 1664

A low-cost alternative to bankruptcy for individuals with limited personal debts ## Footnote Insolvency Act s 251 A–X.

Answer 1665

They cannot take action to recover money without court permission.

Answer 1666

* Court fines * Obligations from family proceedings * Student loans * Secured debts

Answer 1667

Cannot borrow more than £500 without informing the lender.

Answer 1668

* Cannot act as a director of a company * Cannot create, manage, or promote a company without court permission * Must disclose the DRO when managing a business

Answer 1669

An IVA (Individual Voluntary Arrangement) is an alternative to a bankruptcy order.

Answer 1670

Debtors can keep control of their assets and avoid the effects of bankruptcy.

Answer 1671

Creditors may recover a higher proportion of the money owed and avoid the costs of petitioning for a bankruptcy order.

Answer 1672

An insolvency practitioner assists the debtor.

Answer 1673

The proposal identifies the proportion of the debt to be repaid and the time period for payments.

Answer 1674

5 years is not unusual.

Answer 1675

An interim order prevents proceedings from being brought against the debtor usually for 14 days.

Answer 1676

75% or more in value of creditors' debt is required for approval.

Answer 1677

Every unsecured creditor with notice of the meeting will be bound to the proposal.

Answer 1678

The nominee, who is the insolvency practitioner, becomes the supervisor.

Answer 1679

No, the rights of secured creditors cannot be affected without their consent.

Answer 1680

* The proposal is put to creditors * The nominee is appointed * The interim order is granted

Answer 1681

Creditors need 75% or more in value of debt, including at least 50% of unconnected creditors.

Answer 1682

The supervisor and/or any creditors may petition the court for a bankruptcy order.

Answer 1683

* Debtor will repay more of their debt than under bankruptcy * Avoid stigma of bankruptcy * Avoid consequences such as termination of business or disqualification as a director

Answer 1684

To provide an eligible debtor breathing space and legal protections from creditor action for a period of time

Answer 1685

* Standard respite order * Mental health crisis respite order

Answer 1686

Up to 60 days

Answer 1687

* Pausing most enforcement action * Pausing contact from creditors * Freezing most interest and charges on debts

Answer 1688

Individuals receiving mental health crisis treatment

Answer 1689

* Alternative points of contact other than the debtor * No restrictions on repeat applications

Answer 1690

For the duration of the applicant’s mental health crisis treatment plus 30 days

Answer 1691

* Owe a qualifying debt * Live or usually reside in England or Wales * Not have a DRO or an IVA nor be an undischarged bankrupt * Not had a standard respite order in the last 12 months

Answer 1692

Mental health crisis treatment

Answer 1693

* Secured debts * Student loans * Court fines * Child maintenance/orders made in family court proceedings * Debts incurred through fraud/fraudulent breach of trust * Most tax and benefit debt

Answer 1694

Mental Health Crisis Moratorium

Answer 1695

Income tax is charged on: * payments to employees * profits for sole traders and partners * shareholders, lenders and debenture holders * owners of rental properties ## Footnote These categories cover various sources of income that are taxable under income tax regulations.

Answer 1696

The tax year for income tax runs from 6 April to 5 April annually. ## Footnote This period is important for determining taxable income and assessing tax liabilities.

Answer 1697

Employees and company directors must pay income tax on remuneration. ## Footnote Remuneration includes salary, bonuses, and taxable benefits in kind.

Answer 1698

Self-employed individuals are subject to income tax on taxable trading profits from a trade or profession. ## Footnote This includes professions such as builders, dentists, or lawyers.

Answer 1699

Each partner is taxed on their share of the partnership income as determined by the partnership agreement. ## Footnote If there is no agreement, the share is considered to be equal among partners.

Answer 1700

A provision for a priority allocation of profits, known as 'salary' or 'interest on capital', may be made. ## Footnote After such allocations, the balance of profits is shared according to the agreed profit share.

Answer 1701

[sole traders and partners]

Answer 1702

False ## Footnote Tax is payable on profits regardless of the amount actually withdrawn from the business.

Answer 1703

Example Rod, Jane and Freddy are in partnership together. Their partnership agreement stipulates that Rod is entitled to a salary of £20,000 per annum and Jane receives £5,000 as interest on her capital account. Remaining profit is then split equally between the three partners. The partnership’s taxable profits for the current tax year are £205,000 so after taking into account Rod’s salary and Jane’s interest this leaves £180,000 as the remaining profit to be shared between them which equates to £60,000 each. So, Rod will be taxed on £80,000 (£60,000 + £20,000), Jane will be taxed on £65,000 (£60,000 + £5,000) and Freddy will be taxed on £60,000.

Answer 1704

No, a partnership itself is not liable to income tax. ## Footnote Each partner has individual liability for their own tax but not for the income tax of their co-partners.

Answer 1705

Certain income-related expenses incurred wholly and exclusively for the purpose of the business or trade. ## Footnote Examples include travel costs, office costs (such as stationery and phone bills), and the cost of raw materials.

Answer 1706

HMRC will permit a tax deduction for the business proportion of the expenditure if the expense can be identified as having separate business and non-business parts. ## Footnote If the expense is materially for a personal or non-business purpose, HMRC will disallow it entirely.

Answer 1707

A form of tax-approved depreciation for certain types of capital expenditure. ## Footnote Tax relief is given by treating capital allowances as an expense deducted when arriving at taxable trading profits.

Answer 1708

If construction began on or after 29 October 2018.

Answer 1709

A 100% first-year allowance is available for investment in environmentally friendly products. ## Footnote This allows the cost to be deducted from trading profits in the accounting period in which it is incurred.

Answer 1710

* Travel costs * Office costs (stationery, phone bills) * Cost of raw materials

Answer 1711

* Energy efficient heating and air conditioning equipment * Water-saving machinery * Electrical vehicle charging points * Zero-emission vehicles

Answer 1712

No, a partnership itself is not liable to income tax. ## Footnote Each partner has individual liability for their own tax but not for the income tax of their co-partners.

Answer 1713

Certain income-related expenses incurred wholly and exclusively for the purpose of the business or trade. ## Footnote Examples include travel costs, office costs (such as stationery and phone bills), and the cost of raw materials.

Answer 1714

HMRC will permit a tax deduction for the business proportion of the expenditure if the expense can be identified as having separate business and non-business parts. ## Footnote If the expense is materially for a personal or non-business purpose, HMRC will disallow it entirely.

Answer 1715

A form of tax-approved depreciation for certain types of capital expenditure. ## Footnote Tax relief is given by treating capital allowances as an expense deducted when arriving at taxable trading profits.

Answer 1716

If construction began on or after 29 October 2018.

Answer 1717

A 100% first-year allowance is available for investment in environmentally friendly products. ## Footnote This allows the cost to be deducted from trading profits in the accounting period in which it is incurred.

Answer 1718

* Travel costs * Office costs (stationery, phone bills) * Cost of raw materials

Answer 1719

* Energy efficient heating and air conditioning equipment * Water-saving machinery * Electrical vehicle charging points * Zero-emission vehicles

Answer 1720

Members of a company who own shares

Answer 1721

A distribution of the company’s post-tax profits

Answer 1722

Subject to income tax as dividend income

Answer 1723

Individuals who lend money to a business or a company

Answer 1724

Payment of interest on the loan balance

Answer 1725

Taxed as savings income

Answer 1726

Income from land and buildings, such as rental income

Answer 1727

Taxed separately from non-UK land and buildings

Answer 1728

* Savings income * Foreign income * Exempt income

Answer 1729

Interest paid on bank accounts and government or company bonds

Answer 1730

Generally pay UK income tax on their foreign income

Answer 1731

Income sources that are exempt from income tax

Answer 1732

* Social security benefits * Child benefit (subject to income level) * Tax credits * Interest on national savings certificates * Income from individual savings accounts (ISAs)

Answer 1733

Their income and pay their taxes ## Footnote Taxpayers whose tax is paid through PAYE may not need to self-assess.

Answer 1734

Taxpayers with trading or rental profits or who receive dividends on shares ## Footnote They must pay tax on the gross amount received.

Answer 1735

31 January after the end of the relevant tax year ## Footnote The tax year runs from 6 April to 5 April.

Answer 1736

31 October after the end of the tax year in question

Answer 1737

First payment: 31 January; Second payment: 31 July ## Footnote Applicable if tax bill is £1,000 or more or if less than 80% of tax is deducted at source.

Answer 1738

A penalty is payable

Answer 1739

They are taxed in different ways and at different rates

Answer 1740

Income from employment, self-employment, pension income, and rental income

Answer 1741

Interest paid on bank or building society accounts

Answer 1742

Dividend income

Answer 1743

[deducted at source]

Answer 1744

False ## Footnote Many taxpayers whose tax is paid through PAYE do not need to self-assess.

Answer 1745

Transfer part of their PA to their spouse or civil partner ## Footnote PA stands for Personal Allowance

Answer 1746

The couple must be married or in a civil partnership, the transferring spouse's income must be less than the PA, the recipient must be a basic rate taxpayer ## Footnote Basic rate taxpayer refers to individuals whose income falls within the basic income tax band

Answer 1747

It is reduced accordingly ## Footnote The transferred amount does not increase the recipient's PA

Answer 1748

They reduce their tax liability by an amount equivalent to 20% of the current allowance

Answer 1749

Arrive at Taxable Income

Answer 1750

It is split into three different types of income and appropriate tax rates are applied ## Footnote The order of applying tax rates is important for calculating tax liability

Answer 1751

basic rate taxpayer

Answer 1752

Taxed in three bands: basic rate band, higher rate band, and additional rate band ## Footnote The rate increases as the taxpayer’s income increases.

Answer 1753

A taxpayer whose Taxable Income does not exceed the basic rate band ## Footnote This classification is based on the amount of income relative to the tax bands.

Answer 1754

A taxpayer whose income is within but does not exceed the higher rate band ## Footnote This classification is based on the amount of income relative to the tax bands.

Answer 1755

A taxpayer with income in the additional rate band ## Footnote This classification is based on the amount of income relative to the tax bands.

Answer 1756

Ordinarily taxed based on the tax band in which it falls: basic rate, higher rate, or additional rate ## Footnote Taxation depends on the amount of savings income and the taxpayer's overall taxable income.

Answer 1757

An allowance that may be available to taxpayers to reduce the amount of savings income subject to tax ## Footnote The amount of the allowance depends on the highest tax band into which any of the taxpayer’s taxable income falls.

Answer 1758

Taxed at 0% (nil rate band) ## Footnote While it is classed as taxable income, it is not subject to tax.

Answer 1759

basic rate taxpayer

Answer 1760

higher rate taxpayer

Answer 1761

additional rate taxpayer

Answer 1762

Dividends are always taxed as the top or last slice of a taxpayer's income. ## Footnote This means they are taxed after considering non-savings income and savings income.

Answer 1763

It is important to determine whether the taxpayer is a basic rate, higher rate, or additional rate taxpayer. ## Footnote This classification helps in identifying the applicable tax rate on dividend income.

Answer 1764

non-savings income and savings income has been considered.

Answer 1765

* Basic rate taxpayer * Higher rate taxpayer * Additional rate taxpayer ## Footnote These classifications determine the tax rate applicable to dividend income.

Answer 1766

Step 1 – Calculate Total Income i.e. all sources of income including non-savings, savings and dividend income Step 2 – Calculate Net Income (Total Income – any allowable deductions for interest payable on qualifying loans and pension contributions) Step 3 – Calculate Taxable Income (Net Income – Personal Allowance (PA) if applicable) Step 4 – Split Taxable Income into non-savings, savings and dividend income Step 5 – Consider any reliefs available such as a personal savings allowance and any dividend allowance Step 6 - Apply the relevant tax rates to the different types of income in the order of non- savings, savings and dividend income Step 7 – Add the amounts calculated for each type of income together to work out the total tax liability Step 8 – Deduct any tax paid at source to work out how much tax is due

Answer 1767

To encourage taxpayers to invest in EIS companies by providing income tax and capital gains tax advantages ## Footnote The EIS aims to stimulate investment in small, high-risk businesses in the UK.

Answer 1768

30% ## Footnote This deduction applies to new shares in qualifying EIS companies.

Answer 1769

The same tax year or the previous tax year ## Footnote The deduction can be split between these two years.

Answer 1770

£1 million ## Footnote This translates to a maximum tax relief of £300,000 (£1m x 30%) per year.

Answer 1771

Must not own more than 30% of the ordinary shares nor be an employee of the EIS company ## Footnote This ensures that the taxpayer is not connected to the EIS company.

Answer 1772

£2 million ## Footnote This allows for a maximum tax relief of £600,000 per year.

Answer 1773

False ## Footnote EIS relief cannot be used to cause a tax repayment.

Answer 1774

£10,000 ## Footnote The individual cannot deduct more than their actual tax liability.

Answer 1775

It can be offset by EIS relief ## Footnote This provides additional flexibility in utilizing the tax advantages.

Answer 1776

Pay As You Earn ## Footnote PAYE is a system where employers deduct tax from employees' pay before it is given to them.

Answer 1777

Tax is deducted from pay by employers and paid to HMRC. ## Footnote This ensures that employees' tax obligations are managed directly by their employers.

Answer 1778

Amount of tax-free allowance and tax rate applicable to the employee's income. ## Footnote Tax codes consist of letters and numbers and are sent by HMRC to employers.

Answer 1779

Because deduction of tax via PAYE is not always accurate. ## Footnote Employees may need to reconcile their tax liability with what has been deducted.

Answer 1780

A mechanism used to address double taxation of profits in the first year of business. ## Footnote It was complex and difficult to administer alongside opening and closing year rules.

Answer 1781

6 April 2024 ## Footnote This change aims to simplify tax reporting for self-employed individuals.

Answer 1782

No action is needed. ## Footnote Their accounting year aligns with the tax year in this case.

Answer 1783

Declare profits earned solely within the tax year and possibly apportion tax from two different accounting years. ## Footnote This requires careful calculation to ensure accurate reporting.

Answer 1784

Using days, with 366 days in a leap year. ## Footnote Alternative methods such as months or weeks can also be used.

Answer 1785

An estimated provisional profit figure. ## Footnote This figure can be amended later when actual profits are known.

Answer 1786

Tax relief through offsetting the loss against income and sometimes capital gains ## Footnote This claim is not automatic and must be applied for by the taxpayer.

Answer 1787

Current year loss relief and prior year loss relief ## Footnote Losses can be set against Net Income from the current or prior year.

Answer 1788

Any of the taxpayer’s Net Income from the current year or the prior year ## Footnote Total Income less any deductible payments as outlined in section 7.16.3.4, but before the PA is applied.

Answer 1789

They will waste their PA ## Footnote PA refers to Personal Allowance.

Answer 1790

Net Income from the current year or from the prior year

Answer 1791

False ## Footnote Taxpayers must apply for the relief.

Answer 1792

Dilip makes a trading loss of £40,000 but also received rental income of £27,000 in the current tax year. If he decides to claim tax relief for the loss in the current tax year, he must offset all of the £27,000 income against the loss, even though a portion of that income would ordinarily be covered by his PA. He could carry back the remaining loss of £13,000 (£40,000 - £27,000) to offset against income in the previous tax year. Alternatively, he could have opted to carry back the full loss to the previous tax year in priority to the current tax year.

Answer 1793

Utilise all the loss available for relief or relieve all their available income ## Footnote No partial claims are permitted.

Answer 1794

Yes, they may use the balance as an allowable loss to reduce their capital gains ## Footnote This helps save capital gains tax.

Answer 1795

False ## Footnote A taxpayer must either fully utilise their loss or relieve their income completely.

Answer 1796

income ## Footnote This is a critical requirement in loss relief claims.

Answer 1797

It may be used as an allowable loss to reduce capital gains ## Footnote This provision helps in tax savings.

Answer 1798

In the current tax year, Vaneesha makes a trading loss of £30,000 She also has property income of £25,000 and realises capital gains of £18,000. If she elects to offset her trading loss against her property income, there will be £5,000 of loss remaining. Vaneesha can offset this amount against her capital gains, reducing those to £13,000. Vaneesha may also be entitled to an annual exemption (see below) in respect of her capital gains, thereby reducing her tax bill still further.

Answer 1799

£30,000 ## Footnote Trading losses can be offset against other income sources.

Answer 1800

£25,000 ## Footnote Property income can be used to offset trading losses.

Answer 1801

£18,000 ## Footnote Capital gains can be offset by any remaining trading losses.

Answer 1802

£5,000 ## Footnote This remaining loss can be used to offset capital gains.

Answer 1803

£13,000 ## Footnote The capital gains are reduced after the offset of remaining losses.

Answer 1804

True ## Footnote Remaining losses after offsetting property income can be applied to capital gains.

Answer 1805

Annual exemption ## Footnote The annual exemption applies to capital gains and can lower the taxable amount.

Answer 1806

Sarah incorporates her sole trade business and receives shares in return for the trade and assets. At the date of cessation of her trade, she has unrelieved trading losses of £32,000. They are her losses – they cannot be transferred to the company. However, if each tax year Sarah receives, say, £14,000 from the company in the form of salary and/or dividends, this income can be reduced by the carried forward losses, at least until the loss is fully utilised.

Answer 1807

Using the tax legislation as it stands in order to pay less tax ## Footnote Tax planning is not unlawful and is usually done after a genuine situation arises.

Answer 1808

Tax avoidance is using lawful means to reduce tax liability; tax evasion is paying less (or no) tax through illegal methods ## Footnote Tax avoidance may involve contrived means, while tax evasion is criminal.

Answer 1809

Targeted Anti-Avoidance Rules ## Footnote These are specific provisions in tax legislation that outline unacceptable transactions.

Answer 1810

All transactions within income tax, capital gains tax, corporation tax, inheritance tax, and some other taxes ## Footnote The GAAR seeks to deter abusive tax schemes.

Answer 1811

To allow HMRC to set aside tax arrangements only if they cannot reasonably be regarded as a reasonable course of action ## Footnote This is a high threshold for HMRC to clear.

Answer 1812

The opinion of an independent advisory panel ## Footnote This opinion assesses the reasonableness of the tax arrangement.

Answer 1813

Make a just and reasonable tax adjustment ## Footnote This may involve taxing the income in a legitimate way.

Answer 1814

Penalized under general tax laws for filing an inaccurate return ## Footnote Enablers of abusive arrangements may be liable for penalties equal to the benefit received.

Answer 1815

False ## Footnote The GAAR does not provide specific penalties; penalties are under general tax laws.

Answer 1816

A person who enables the abusive tax arrangement in the course of their business ## Footnote They may face penalties for facilitating such arrangements.

Answer 1817

At least 3 years ## Footnote This provision prevents immediate sale of shares to claim the EIS tax deduction.

Answer 1818

The tax deduction will be clawed back ## Footnote Clawback does not apply if the taxpayer dies or gifts the shares to their spouse or civil partner.

Answer 1819

Becoming an employee in the EIS company or obtaining over 30% of the ordinary share capital ## Footnote This ensures compliance with EIS conditions.

Answer 1820

Prevent parents from shifting income to children to exploit lower tax rates ## Footnote This is particularly relevant for income generated in excess of £100 for minor unmarried children.

Answer 1821

Taxed as the income of the parent ## Footnote This rule applies only to minor unmarried children.

Answer 1822

Minor grandchildren, minor nieces and nephews, or minor friends ## Footnote These recipients are not subject to the same taxation restrictions as minor unmarried children.

Answer 1823

To set a proportion of the income tax for Welsh taxpayers ## Footnote This power was granted from 6 April 2019.

Answer 1824

UK income tax rate is reduced by a percentage, and the Welsh rate is added ## Footnote The specific rates can be found in the Tax Checker.

Answer 1825

To set different rates for each income tax band ## Footnote Rates are set by a resolution passed before the start of each tax year.

Answer 1826

* income from employment * profits from self-employment * income from rentals * income from pensions * taxable social security benefits ## Footnote Savings and dividend income remain subject to UK income tax rates.

Answer 1827

Welsh taxpayers who are individuals that are resident in the UK for income tax purposes and: * have a close connection with Wales * do not have a close connection with England, Scotland, or Northern Ireland and spend more days in Wales than in any other part of the UK * are an MP for a Welsh constituency or a Welsh politician ## Footnote This applies for the relevant tax year.

Answer 1828

Whether an individual has one or more places of residence in the UK in the relevant tax year ## Footnote A close connection is established if an individual lives in a residence situated in Wales for part of the year.

Answer 1829

A residence is considered a main residence if: * it is where most time is spent * it is where most possessions are located * family lives there if married or in a civil partnership * it is the registered address for bank accounts, GP, or car insurance * membership of clubs and societies is there ## Footnote This applies even if you live away from this place due to work circumstances.

Answer 1830

False ## Footnote They remain subject to UK income tax rates.

Answer 1831

non-savings and non-dividend ## Footnote This includes income from various sources such as employment and pensions.

Answer 1832

An individual must spend more days in Wales than in any other part of the UK to establish a close connection. ## Footnote This is critical for determining Welsh taxpayer status.

Answer 1833

A person will be a Welsh taxpayer if they spend more days in Wales in the relevant tax year than any other part of the UK ## Footnote Other parts of the UK are treated separately for these purposes.

Answer 1834

An individual is treated as spending a day in a particular part of the UK if they are in that part at the end of the day unless just travelling through that part ## Footnote This is crucial for determining taxpayer status.

Answer 1835

Taxable income is taxed in the following order: non-savings and non-dividend income, followed by savings income, and finally dividend income ## Footnote This order reflects the same principles as UK income tax calculations.

Answer 1836

Welsh income tax rates apply to the non-savings and non-dividend element of an individual’s income ## Footnote UK income tax rates are then applied to savings and dividend income.

Answer 1837

Yes, the income tax allowances that apply to UK taxpayers also apply to Welsh taxpayers ## Footnote Reliefs for UK taxpayers similarly apply to Welsh taxpayers.

Answer 1838

HMRC administers and collects Welsh income tax ## Footnote This includes determining taxpayer status based on individual addresses.

Answer 1839

Their income tax is deducted through the Pay As You Earn (PAYE) system after HMRC determines their Welsh taxpayer status ## Footnote HMRC provides a PAYE tax code that begins with the letter “C”.

Answer 1840

They must submit a self-assessment tax return to HMRC and indicate their Welsh taxpayer status by ticking the relevant box ## Footnote This is essential for proper tax reporting.

Answer 1841

Welsh Parliament provides an income tax tool for Welsh taxpayers to calculate their income tax payments and another tool to see how the Welsh element of their income tax is spent ## Footnote These tools facilitate transparency and understanding of tax contributions.

Answer 1842

No, Welsh income tax rates do not affect NIC, which are set by the UK government and paid in the normal way ## Footnote This distinction is important for understanding total tax obligations.

Answer 1843

Taxable profits, which comprise trading profits, non-trading profits, property income, and capital gains ## Footnote Corporation tax specifically taxes the profits gained from the trading activities of a company.

Answer 1844

* Trading profits * Non-trading profits * Property income * Capital gains ## Footnote Taxable profits are the basis for calculating corporation tax liabilities.

Answer 1845

Yes, as qualifying charitable deductions ## Footnote Charitable donations can reduce the taxable profits of a corporation.

Answer 1846

Trading income less cost of sales, trading losses, and capital allowances ## Footnote This calculation applies similarly to companies, sole traders, and partnerships.

Answer 1847

Sale proceeds less allowable expenditure, indexation allowance, capital losses, and any unused capital losses ## Footnote Taxable chargeable gains are also subject to corporation tax.

Answer 1848

No, dividends are a distribution of profits after tax and not an allowable trading expense ## Footnote A company's trading income does not include dividends received.

Answer 1849

Trading income or profits, rental income, and interest received ## Footnote Dividend income is generally exempt unless specific anti-avoidance provisions apply.

Answer 1850

Cost of sales, trading losses, and capital allowances ## Footnote This formula helps to determine the trading profits for tax purposes.

Answer 1851

False ## Footnote Dividend income is generally exempt unless certain anti-avoidance provisions apply.

Answer 1852

Expenditure must be: * Wholly and exclusively incurred for the purpose of business * Not prohibited by statute * Of an income nature with an element of regularity ## Footnote Examples include raw materials for production, rent payments, or wages paid to employees.

Answer 1853

Capital allowances provide relief for capital expenditure on certain items against business income to encourage investment ## Footnote This is aimed at helping businesses become profitable in the long term.

Answer 1854

Only companies can claim capital allowances; sole traders and partnerships cannot. ## Footnote This includes both super deduction and special rate first year allowances.

Answer 1855

The super deduction allowed relief at 130% of the qualifying cost for new plant and machinery that ordinarily qualified for the 18% main pool rate. ## Footnote This was aimed at encouraging investment post-COVID-19.

Answer 1856

The SR allowance applied to new plant and machinery qualifying for the 6% special rate pool, providing 50% relief in the first year. ## Footnote The balance is then written down at the usual 6% rate in future years.

Answer 1857

New plant and machinery that qualify for the 18% main pool rate. ## Footnote This is compared to the usual 18% writing down allowance.

Answer 1858

New plant and machinery that qualify for the 6% special rate pool, including integral features in buildings and long-life assets. ## Footnote The first-year relief is 50% of the qualifying cost.

Answer 1859

The AIA allows companies to select the most tax-efficient allowances available for environmentally friendly products. ## Footnote This is a form of tax relief for capital expenditure.

Answer 1860

Capital allowances are treated as an expense to be deducted when calculating taxable trading profits for the accounting period. ## Footnote This acts as a form of tax-approved depreciation.

Answer 1861

Capital allowances are available for buildings if construction began on or after 29 October 2018. ## Footnote This includes other structures used by a business.

Answer 1862

A tax deduction for investment in environmentally friendly products, allowing the cost to be deducted from trading profits in the accounting period it is incurred.

Answer 1863

* Energy efficient heating and air conditioning equipment * Water-saving machinery * Electrical vehicle charging points * Zero-emission vehicles

Answer 1864

First-year allowances are for environmentally friendly products, while full expensing allows 100% of the cost of new plant and machinery to be claimed as an expense.

Answer 1865

No, full expensing is only available for new machinery.

Answer 1866

No, first-year allowances cannot be claimed in addition to any AIA on the same expenditure.

Answer 1867

A 100% tax deduction for expenditure on plant and machinery (excluding cars).

Answer 1868

It cannot be carried forward to future periods; a new allowance is given for each accounting period.

Answer 1869

Allowances that enable businesses to reduce trading profit by claiming a deduction for the cost of plant and machinery not covered by first-year allowance or AIA.

Answer 1870

On a continuous basis, reducing the cost of the asset carried forward to the next accounting period.

Answer 1871

18% per year on a reducing balance basis.

Answer 1872

6% per year (the special rate pool).

Answer 1873

Setting it against total profits in the current accounting period (if there are any other profits) ## Footnote This allows businesses to reduce their taxable income for the current year.

Answer 1874

Carrying it back and setting it against total profits in the preceding 12 months ## Footnote This option can only be exercised after a current period offset.

Answer 1875

Carrying it forward to set it against total profits of a later accounting period ## Footnote This allows businesses to utilize losses in future profitable years.

Answer 1876

Ascertain the sale proceeds from the sale of the asset and deduct any costs associated with the sale to give the net sale proceeds figure.

Answer 1877

The original acquisition cost of the asset when it was first purchased, including any costs associated with the acquisition.

Answer 1878

A mechanism to account for inflationary increases in asset value, available for companies but frozen up to 31 December 2017.

Answer 1879

Capital/chargeable gains

Answer 1880

They cannot be carried back.

Answer 1881

Trading losses

Answer 1882

Calculate taxable income profits and taxable chargeable gains ## Footnote These are added together to obtain taxable total profits.

Answer 1883

9 months and 1 day after the end of the accounting period ## Footnote Corporation tax returns are due 12 months after the same period.

Answer 1884

It is subject to interest and penalties.

Answer 1885

In quarterly instalments ## Footnote This is for companies with larger profits.

Answer 1886

To tax any value given to shareholders not paid for through full consideration as a dividend.

Answer 1887

No, dividends are not tax-deductible as an expense.

Answer 1888

Distributable profits, which are profits after tax.

Answer 1889

Dividends paid in non-cash assets instead of cash ## Footnote Examples include property or machinery transferred to a shareholder.

Answer 1890

They are chargeable to income tax at the shareholder’s tax rate.

Answer 1891

No, dividends are not subject to national insurance contributions.

Answer 1892

They pay themselves a small salary and extract the majority in the form of dividends.

Answer 1893

To mitigate the impact of tax liability, as dividend tax rates are lower.

Answer 1894

Salary and bonuses paid to directors and employees, and employers’ national insurance contributions ## Footnote These payments are treated as business expenses.

Answer 1895

1. Company pension contributions 2. Rent paid for use of a building owned by a shareholder/director 3. Interest payments on a loan from a shareholder/director ## Footnote These methods provide alternative ways to extract profits beyond salary and bonuses.

Answer 1896

A company controlled by five or fewer participators or any number of participators who are also directors ## Footnote Participators include shareholders or persons with the right to acquire shares.

Answer 1897

Ownership of more than 50% of the shares or more than half of the voting power ## Footnote Control can also include the right to acquire over 50% of the shares.

Answer 1898

1. Specific provisions inside the tax legislation 2. General Anti-Abuse Rule (GAAR) ## Footnote These methods aim to curb tax avoidance practices.

Answer 1899

The rules surrounding loans to participators of a close company ## Footnote This provision ensures tax compliance for certain financial transactions.

Answer 1900

To ensure recipients of interest-free loans pay tax on the benefit received ## Footnote This rule addresses tax implications for participators receiving loans.

Answer 1901

If there is no interest charged on the loan or interest is charged below the official rate of interest ## Footnote The official rate of interest is set by HMRC.

Answer 1902

True ## Footnote Special rules apply to ensure tax is paid on certain loan benefits.

Answer 1903

Henry borrows £80,000 from his own company, of which he is the sole director and shareholder. He pays no interest on the loan. If the official rate of interest for the tax year were 2.00% (see Tax Checker for the current figure), Henry will be taxed on the benefit of the cheap loan, which is £80,000 x 2.00% = £1,600.

Answer 1904

An amount equal to the higher rate for dividends of the loan, 9 months and 1 day after the end of the accounting period in which the loan is made. ## Footnote See Tax Checker for the current rate of the higher rate for dividends.

Answer 1905

The company will eventually receive a refund of the notional tax from HMRC. ## Footnote This happens because the participator will receive no further taxable benefit.

Answer 1906

The amount written off is taxed as an income receipt akin to a dividend payment of the participator. ## Footnote The participator will then have to pay the relevant tax on the amounts received.

Answer 1907

No tax is payable if: * The loan is made in the ordinary course of a money lending business * The loan is £15,000 or less and the borrower works for the company full time and owns 5% or less of the company’s ordinary shares.

Answer 1908

9 months and 1 day after the end of the accounting period in which the loan is repaid or waived. ## Footnote The notional tax is set at the higher rate for dividend income.

Answer 1909

No, the notional tax is not deductible as an expense for the company.

Answer 1910

Adjustments made when goods or services are provided between group companies to ensure transactions are made at arm's length. ## Footnote This enforces an adjustment if a potential tax advantage has been made.

Answer 1911

Anti-avoidance legislation enforces an adjustment to remove the tax advantage. ## Footnote The outcome of the transaction will reflect what would have occurred on an arm's-length basis.

Answer 1912

They prevent a company from carrying forward its trading losses after a change in ownership if the new owner acquired the company to use those losses.

Answer 1913

The profit-making company could change the nature of the business and use the losses against future profits, which is prevented by anti-avoidance rules.

Answer 1914

A major change in the nature or conduct of the trade or business.

Answer 1915

Capital Gains Tax ## Footnote CGT is a tax on the profit or gain from the sale of chargeable assets.

Answer 1916

The chargeable gain ## Footnote It is the profit made when a chargeable person/entity disposes of an asset that has increased in value.

Answer 1917

Selling price - Purchase price ## Footnote For example, if a property was purchased for £100,000 and sold for £250,000, the gain is £150,000.

Answer 1918

Market value ## Footnote This applies to transactions with connected persons as well.

Answer 1919

Incidental costs of disposal, acquisition costs, enhancement expenditure ## Footnote This includes legal fees, valuation fees, advertising costs, and any expenses that enhance the asset's value.

Answer 1920

Building costs for extending a property ## Footnote Such costs must be reflected in the asset's state at the time of disposal.

Answer 1921

31 January following the year in which the gain was made ## Footnote This differs from income tax payment schedules.

Answer 1922

Within 60 days of completion ## Footnote This applies to any CGT due on such disposals.

Answer 1923

A relief on gains made by individuals on sale or gift of certain business assets ## Footnote This includes trading businesses and shares in trading companies under specific conditions.

Answer 1924

1. Trading business active for at least 2 years 2. Shares in a trading company with at least 5% ownership 3. Assets owned and used by the trading business for 2 years ## Footnote A disposal of an asset in isolation will not qualify unless within these provisions.

Answer 1925

False ## Footnote Payments on account are not required for CGT, unlike income tax.

Answer 1926

chargeable asset

Answer 1927

Details of disposals ## Footnote This includes any gains made during the tax year.

Answer 1928

Enables an individual to give away certain types of business assets without paying CGT through a joint election by the donor and donee.

Answer 1929

The gain is deferred until the donee disposes of the asset.

Answer 1930

The donee's acquisition cost is reduced by the donor’s gain.

Answer 1931

* Assets used for trade or profession by the transferor or their personal company * Shares in an unquoted trading company * Shares in the transferor’s personal company * Assets qualifying for agricultural property relief for inheritance tax

Answer 1932

Allows a sole trader or partner to defer CGT on the disposal of qualifying business assets if proceeds are reinvested in other qualifying assets.

Answer 1933

The business must be trading, and reinvestment must occur within 1 year before or 3 years after the sale of the asset.

Answer 1934

Partial relief is available.

Answer 1935

A deferral mechanism that applies when an individual transfers their business or partnership interest to a company.

Answer 1936

The CGT liability is deferred until a later disposal of the shares received as consideration.

Answer 1937

Exempts all or part of a gain arising on a property used as an individual's home.

Answer 1938

Exempt gain = Gain × (Period of occupation of property/Period of ownership)

Answer 1939

When the taxpayer has lived in the property as their home for the entire time they owned it.

Answer 1940

* Last 9 months of ownership * Absence due to employment abroad (unlimited) * Absence due to work elsewhere (max 4 years) * Any absence for any reason up to 3 years

Answer 1941

To encourage investment in small companies

Answer 1942

Capital Gains Tax (CGT)

Answer 1943

Up to 1 year prior to the gain or in the 3 years after it is made

Answer 1944

It becomes chargeable

Answer 1945

Capital Gains Tax (CGT)

Answer 1946

Qualifying unquoted trading company

Answer 1947

Gloria purchased and then occupied a property as her main residence for 5 years until she moved out to live with her boyfriend. Gloria lived with her boyfriend for the next 4 years. She then returned to the property and resumed residence for another 11 years, when she sold her house for a gain of £300,000. Gloria’s chargeable gain is £15,000 as £285,000 of the gain is exempt. Gloria owned the residence for 20 years. She occupied it for 16 years and lived elsewhere with her boyfriend for 4 years. However, because she lived in the house both before and after she lived with her boyfriend, she can take advantage of the 3-year deemed occupation rule. Thus, she will be treated as having not lived in the house for only 1 year. Her exemption is £300,000 x (19 ÷ 20) = £285,000.

Answer 1948

Using the same facts as the example above, but 4 years before the eventual sale Gloria’s employer sent her to work abroad for a couple of years but when she came back to the UK, she never returned to or lived in the house. Since Gloria did not move back into the residence, she cannot take full advantage of the deemed occupation rule despite working abroad. However, she will be credited with having lived in the house for the 5 years between purchase and moving in with her boyfriend and the 7 years she was resident before she left to work abroad. She will also be deemed resident for 3 of the years when she lived with her boyfriend and for the final 9 months (3/4 year) before the sale as she had previously occupied the property. Thus, her exemption is £300,000 x (15.75 ÷ 20) = £236,250.

Answer 1949

The AEA is set against any capital gains made in the relevant tax year, making those within the AEA exempt from CGT. ## Footnote The AEA functions similarly to the personal allowance for income tax in England and Wales.

Answer 1950

To arrive at the taxable chargeable gain, deduct the AEA from the chargeable gain remaining after all reliefs (excluding BADR). ## Footnote BADR stands for Business Asset Disposal Relief.

Answer 1951

The rate of CGT depends on the level of an individual’s taxable income and the nature of the asset being disposed of. ## Footnote Specific rates can be found in the Tax Checker.

Answer 1952

The CGT rate is set out in the Tax Checker. ## Footnote This rate is higher compared to those paying at the basic rate.

Answer 1953

The CGT rate will be as set out in the Tax Checker. ## Footnote The unused basic rate band can affect the CGT calculation.

Answer 1954

The rates will increase to those set out in the Tax Checker for both UK and overseas residential property gains. ## Footnote This applies to gains on residential property only.

Answer 1955

The AEA should be allocated in the most beneficial way to minimize tax payable, prioritizing residential property gains. ## Footnote This is important because residential property gains are taxed at a higher rate.

Answer 1956

Trustees and personal representatives pay CGT at the rates set out in the Tax Checker, depending on the nature of the asset sold. ## Footnote The specifics can vary based on asset type.

Answer 1957

personal allowance

Answer 1958

Capital gains ## Footnote Capital losses reduce capital gains and are not normally set against the taxpayer’s income.

Answer 1959

No ## Footnote Capital losses are typically not set against income.

Answer 1960

The same tax year ## Footnote This process is automatic.

Answer 1961

£9,000 ## Footnote The gain and loss must be netted off to determine the net gains.

Answer 1962

The AEA ## Footnote AEA stands for Annual Exempt Amount.

Answer 1963

Sally sold some quoted shares, giving rise to a gain of £20,000. She also sold a plot of land in the same tax year giving rise to a loss of £50,000. The loss exceeds the gains for the year, so Sally’s gain will be completely negated, and she will not owe any CGT. Sally’s AEA will be lost

Answer 1964

Using the example above involving Sally, she can carry forward the unused loss (£50,000 - £20,000 = £30,000). However, Sally cannot also use the AEA to reduce the £20,000 gain still further and her AEA will be lost for that tax yea

Answer 1965

Gains in the most beneficial manner if there are gains charged to tax at different rates ## Footnote This allocation helps minimize tax liability by utilizing losses effectively.

Answer 1966

Specific provisions inside the tax legislation and the GAAR ## Footnote GAAR stands for General Anti-Abuse Rule.

Answer 1967

Rules surrounding losses ## Footnote These rules are designed to ensure losses are not exploited for tax benefits.

Answer 1968

Offsetting a CGT loss against any CGT gain if the loss was due to arrangements for tax advantage ## Footnote TAAR stands for Targeted Anti-Avoidance Rule.

Answer 1969

Paying less or no tax, enjoying a relief or deferral from paying tax, or an increased tax repayment ## Footnote These advantages can be leveraged through specific arrangements.

Answer 1970

arrangements that were made with their main purpose being to secure a tax advantage ## Footnote This rule is vital to prevent tax avoidance strategies.

Answer 1971

Andrew owns shares in his brother’s trading company, PMI (UK) Ltd. The company has been loss-making for a while, so the shares are standing at a loss of £25,000. Andrew made a £25,000 gain on a painting earlier in the tax year, so he decides to sell the shares in PMI (UK) Ltd to offset the gain. However, he still wants to own the shares and support his brother, so he arranges that his wife, Amanda, purchase the same number and class of shares on the same day for the same price. This way, once she gifts the shares to him (on a no-gain no-loss basis) he will have exactly the same asset as he had previously but has been able to offset his loss on the shares against his gain on the painting, meaning he had no CGT to pay. In this example, there have been “arrangements” as Andrew arranged for Amanda to purchase the shares and then to gift them to Andrew. The main purpose of these arrangements was to “secure a tax advantage”, as the economic reality of the situation meant that Andrew’s position did not change. Andrew arranged for a circular transaction which ended up in him owning the same asset that he “sold”. All that changed was his ability to generate a capital loss on the shares which he would not have been able to have done without the arrangements. This loss would therefore satisfy the conditions of the TAAR, and the loss would not be able to be offset against Andrew’s gain on the painting.

Answer 1972

Any supply of goods or services made in the UK unless exempt ## Footnote VAT is charged if the supply is made by a taxable person while carrying on business.

Answer 1973

A person who makes or intends to make taxable supplies and is required to be registered under the Value Added Tax Act 1994 ## Footnote A taxable person can be an individual, company, partnership, or LLP.

Answer 1974

Transfers of consumer goods, supply of power or heat, grant of an interest in land, or gift of goods ## Footnote A supply of services is anything not classified as a supply of goods.

Answer 1975

* Supply of residential land * Insurance * Financial services * Education * Health services * Postal services ## Footnote These exemptions prevent VAT from being charged on specific essential services.

Answer 1976

VAT charged on the value of the business and services supplied to customers ## Footnote Businesses collect output tax from customers.

Answer 1977

VAT paid by a business on goods and services it has purchased ## Footnote Businesses can deduct input tax from the output tax they collect.

Answer 1978

Required registration when taxable supplies exceed the VAT registration threshold in the previous 12 months or are expected to exceed the threshold in the next 30 days ## Footnote This is a rolling test conducted at the end of each month.

Answer 1979

A business can choose to register for VAT to recover input tax paid on purchases ## Footnote However, they must charge VAT to customers, which can be a cost if the customer cannot recover it.

Answer 1980

* Taxable turnover falls below the de-registration threshold for 12 months * Stops trading or supplying VAT subject goods/services ## Footnote Registration must be cancelled within 30 days in the latter case.

Answer 1981

Set out in the Tax Checker ## Footnote The standard rate applies to most supplies unless specified otherwise.

Answer 1982

* Food (excluding catering) * Books and newspapers * Water and sewerage services * Transport * Residential construction ## Footnote Zero-rated supplies are taxed at 0%.

Answer 1983

* Domestic fuel * Installation of energy-saving materials * Child car seats ## Footnote These items have a lower VAT rate compared to standard supplies.

Answer 1984

False ## Footnote Non-business activities, such as private sales and vehicle MOT tests, are outside the scope of VAT.

Answer 1985

Normally exempt supply for VAT

Answer 1986

Opt to charge VAT even if the supply is normally exempt

Answer 1987

Applies to all future supplies relating to that land or building

Answer 1988

Standard rate VAT

Answer 1989

Restricted in recovering input tax

Answer 1990

Taxable transaction

Answer 1991

Standard rate VAT

Answer 1992

Renting it out would be an exempt supply

Answer 1993

Input tax suffered on the purchase price

Answer 1994

Heating costs, cleaning, and repairs

Answer 1995

Relates to individual land or buildings

Answer 1996

Some tenants may make exempt supplies

Answer 1997

HMRC will revoke the option if not put into practice

Answer 1998

Owner of the land or building

Answer 1999

Standard rate VAT

Answer 2000

Compliance and administrative requirements ## Footnote These requirements can be burdensome for businesses.

Answer 2001

1 month and 7 days after the end of each accounting period ## Footnote This typically refers to the VAT quarter.

Answer 2002

Four different VAT periods in a year ## Footnote Example periods include March, June, September, and December.

Answer 2003

The same as the VAT return submission deadline ## Footnote This ensures timely compliance.

Answer 2004

The accounting period within which a supply of goods or services falls ## Footnote It is crucial for VAT accounting.

Answer 2005

When goods are removed or made available to the recipient ## Footnote This indicates when VAT becomes due.

Answer 2006

When the services are performed ## Footnote This is key for determining VAT liability.

Answer 2007

By issuing a VAT invoice or receiving payment before delivery ## Footnote This can change the accounting period for VAT.

Answer 2008

The invoice date becomes the new tax point ## Footnote This provides flexibility in VAT accounting.

Answer 2009

No, a business cannot reclaim VAT on such supplies ## Footnote This includes personal use items like computers.

Answer 2010

Input VAT on car purchases cannot usually be reclaimed ## Footnote This is due to the potential for personal use.

Answer 2011

No, VAT on business entertaining cannot be reclaimed ## Footnote This is a common restriction in VAT regulations.

Answer 2012

Reclaim input tax from HMRC ## Footnote They often make monthly claims to aid cash flow.

Answer 2013

They cannot reclaim VAT as they cannot register ## Footnote This limits their ability to recover input tax.

Answer 2014

A person making a combination of zero-rated and exempt supplies ## Footnote Only a proportion of their input tax is recoverable.

Answer 2015

A tax invoice containing specified information such as the VAT number, the tax point, the value of the supply, and the rate of VAT charged ## Footnote Tax invoices are crucial for supporting claims for input tax deductions in VAT returns.

Answer 2016

Tax invoices to back up any claim ## Footnote Tax invoices must be issued to all customers, regardless of their VAT status.

Answer 2017

Each quarter ## Footnote Payment of any VAT due is made by direct debit to HMRC.

Answer 2018

VAT charged on all supplies (output tax) less VAT paid on purchases (input tax) ## Footnote If input tax exceeds output tax, HMRC will issue a rebate or may require monthly returns.

Answer 2019

Standard rate, reduced rate, or zero rate ## Footnote VAT is charged on the value of a supply.

Answer 2020

All taxable goods and services received or supplied ## Footnote This includes any exempt supplies made.

Answer 2021

* Annual accounts * Bank statements * Invoices for purchases and sales * Daily records of takings * Relevant correspondence ## Footnote A VAT account summarizing input and output VAT for each tax period must also be maintained.

Answer 2022

They must be up to date and detailed enough to calculate VAT to pay or reclaim from HMRC ## Footnote There is no prescribed format for records, but they must allow HMRC to easily check figures.

Answer 2023

Liability to criminal and civil penalties, plus interest on late payments ## Footnote Penalties can include charges for failure to register, late submissions, and under-declarations.

Answer 2024

A penalty charge as a percentage of the VAT due from the time they should have registered ## Footnote The percentage increases the longer the delay.

Answer 2025

A percentage surcharge on the VAT due ## Footnote The surcharge can increase up to a maximum of 15% for consistent defaults.

Answer 2026

A penalty charged as a percentage of the tax that should have been paid ## Footnote This applies in cases of significant or repeated lack of care.

Answer 2027

Penalties up to the amount of VAT evaded, unlimited fines, and imprisonment for up to 7 years ## Footnote Tax evasion is treated very seriously under VAT legislation.

Answer 2028

A tax invoice containing specified information such as the VAT number, the tax point, the value of the supply, and the rate of VAT charged ## Footnote Tax invoices are crucial for supporting claims for input tax deductions in VAT returns.

Answer 2029

Tax invoices to back up any claim ## Footnote Tax invoices must be issued to all customers, regardless of their VAT status.

Answer 2030

Each quarter ## Footnote Payment of any VAT due is made by direct debit to HMRC.

Answer 2031

VAT charged on all supplies (output tax) less VAT paid on purchases (input tax) ## Footnote If input tax exceeds output tax, HMRC will issue a rebate or may require monthly returns.

Answer 2032

Standard rate, reduced rate, or zero rate ## Footnote VAT is charged on the value of a supply.

Answer 2033

All taxable goods and services received or supplied ## Footnote This includes any exempt supplies made.

Answer 2034

* Annual accounts * Bank statements * Invoices for purchases and sales * Daily records of takings * Relevant correspondence ## Footnote A VAT account summarizing input and output VAT for each tax period must also be maintained.

Answer 2035

They must be up to date and detailed enough to calculate VAT to pay or reclaim from HMRC ## Footnote There is no prescribed format for records, but they must allow HMRC to easily check figures.

Answer 2036

Liability to criminal and civil penalties, plus interest on late payments ## Footnote Penalties can include charges for failure to register, late submissions, and under-declarations.

Answer 2037

A penalty charge as a percentage of the VAT due from the time they should have registered ## Footnote The percentage increases the longer the delay.

Answer 2038

A percentage surcharge on the VAT due ## Footnote The surcharge can increase up to a maximum of 15% for consistent defaults.

Answer 2039

A penalty charged as a percentage of the tax that should have been paid ## Footnote This applies in cases of significant or repeated lack of care.

Answer 2040

Penalties up to the amount of VAT evaded, unlimited fines, and imprisonment for up to 7 years ## Footnote Tax evasion is treated very seriously under VAT legislation.

Answer 2041

100% ## Footnote A sole-trade business qualifies for 100% BPR.

Answer 2042

Shares in a quoted trading company and land or buildings owned by an individual ## Footnote 50% relief applies if the donor has voting control of the company.

Answer 2043

Trading businesses only ## Footnote Businesses that hold investments or deal in property are not eligible.

Answer 2044

2 years ## Footnote The donor must have owned the property for at least 2 years before the transfer.

Answer 2045

The donor will not receive BPR on the transfer ## Footnote Exceptions exist for certain situations like quick succession.

Answer 2046

Yes ## Footnote Shares in overseas trading companies qualify for BPR.

Answer 2047

An asset not used for business purposes or required for future business use ## Footnote Examples include shares held for investment or personal use.

Answer 2048

For gifts into trusts (chargeable lifetime transfers) ## Footnote Potentially exempt transfers do not have immediate chargeability.

Answer 2049

The survivor is credited with the ownership period of the deceased partner ## Footnote This means the property is deemed acquired at the date of the deceased's acquisition.

Answer 2050

shares or securities held for investment purposes ## Footnote Other examples include large cash deposits not required for business use.

Answer 2051

False ## Footnote Such a business is considered to be dealing in land and is excluded from BPR.

Answer 2052

The donee must either have: * retained the property until the death of the donor * sold the original property and replaced it with other business property ## Footnote BPR stands for Business Property Relief.

Answer 2053

The donee must have reinvested the whole of the net proceeds of sale in the replacement property. ## Footnote There is no partial relief for a partial reinvestment.

Answer 2054

No, the replacement business property need not be the same as the original business property. ## Footnote This allows flexibility in the type of property that can be acquired.

Answer 2055

A withdrawal of BPR will only affect the tax payable on the donor's death. ## Footnote It does not affect the original calculation of the lifetime tax on a chargeable lifetime transfer.

Answer 2056

False ## Footnote The provision is all or nothing; partial reinvestment does not qualify for relief.

Answer 2057

6 April 2024 to 5 April 2025 ## Footnote This tax year follows the previous one, which ran from 6 April 2023 to 5 April 2024.

Answer 2058

£1m ## Footnote This amount is the same as for the previous tax year 2023/2024.

Answer 2059

£12,570 ## Footnote The PA is currently frozen until April 2026.

Answer 2060

Reduced by £1 for every £2 taxable income exceeds £100,000 ## Footnote The PA ceases to apply when taxable income exceeds £125,140.

Answer 2061

£125,140 ## Footnote This is calculated as PA x2.

Answer 2062

Relevant for capital allowances for corporation tax purposes ## Footnote AIA also applies to sole traders and partners.

Answer 2063

£1,260 (at 20% = up to £252 reduction in tax) ## Footnote This is the same as the previous tax year 2023/2024.

Answer 2064

Taxable income up to £37,700 ## Footnote This is consistent with the previous tax year 2023/2024.

Answer 2065

Taxable income from £37,701 to £125,140 ## Footnote This is the same as the previous tax year 2023/2024.

Answer 2066

Taxable income over £125,140 ## Footnote This is unchanged from the previous tax year 2023/2024.

Answer 2067

Changed from £150,000 to £125,140 ## Footnote This applies to the 2024/2025 tax year.

Answer 2068

20%: taxable income up to £37,700 ## Footnote This rate applies to individuals with taxable income within the specified limit.

Answer 2069

40%: taxable income from £37,701 to £125,140 ## Footnote This rate applies to individuals whose taxable income falls within this range.

Answer 2070

45%: taxable income over £125,140 ## Footnote This rate is applicable to high earners exceeding the threshold.

Answer 2071

Changed from £150,000 to £125,140 ## Footnote This change affects the taxation of higher income earners.

Answer 2072

Applicable where taxable non-savings income is less than £5,000 ## Footnote This rate provides a tax benefit for low-income earners with savings income.

Answer 2073

Taxed at 20% and the difference to £5,000 is taxed at 0% ## Footnote This structure allows for a tax-free threshold on savings for low earners.

Answer 2074

£5,000 ## Footnote This is the threshold amount that allows for the application of the 0% savings starting rate.

Answer 2075

It reduces the starting rate for savings by £1 ## Footnote This means that higher non-savings income can diminish the benefits of the savings starting rate.

Answer 2076

£1,000 ## Footnote The PSA is the amount of interest that can be earned tax-free.

Answer 2077

£500 ## Footnote The PSA varies based on the taxpayer's income.

Answer 2078

No PSA ## Footnote Additional rate taxpayers do not benefit from a personal savings allowance.

Answer 2079

It determines the amount of the PSA. ## Footnote The PSA is dependent on the taxable income of the taxpayer.

Answer 2080

Yes ## Footnote The bands and rates have not changed from the previous year.

Answer 2081

£500 ## Footnote This is a reduction from the previous tax year's allowance of £1,000.

Answer 2082

£1,000 ## Footnote This amount was available regardless of the taxpayer's tax band.

Answer 2083

False ## Footnote The dividend allowance is available on dividend income regardless of tax band.

Answer 2084

1 April 2024 to 31 March 2025

Answer 2085

Profits over £250,000

Answer 2086

25% with an element of marginal relief

Answer 2087

No, it has remained the same

Answer 2088

An effective rate with marginal relief

Answer 2089

Based on rates for 6 April 2024 to 5 April 2025. A company has taxable chargeable gains of £15,000. A company has taxable income profits of £25,000. The company’s total taxable profit (TTP) is £15,000 + £25,000 = £40,000. As the TTP is £50,000 or less, the rate of corporation tax to be applied to the TTP will be the small profits rate of 19%. The corporation tax to be paid by the company is £40,000 (TTP) x 19% = £7,600. Example 2 Based on rates for 6 April 2024 to 5 April 2025. A company has taxable chargeable gains of £80,000. A company has taxable income profits of £220,000. The company’s TTP is £80,000 + £220,000 = £300,000. As the TTP is over £250,000, the rate of corporation tax to be applied to the TTP will be the main rate of 25%. The corporation tax to be paid by the company is £300,000 (TTP) x 25% = £75,000.x

Answer 2090

9 months and 1 day after the end of a company’s accounting period

Answer 2091

In quarterly instalments

Answer 2092

Based on rates for 6 April 2024 to 5 April 2025. Hamster Ltd (a close company) lent Jessica, a participator, £118,000 on 1 May 2024. The company’s financial year-end is 30 June and it does not pay tax in instalments. Hamster Ltd will have to pay corporation tax to HM Revenue and Customs on the loan to Jessica: £118,000 x 33.75% (the higher rate for dividends) = £39,825. This will be due on 1 April 2025 (9 months and 1 day from the end of the financial year end for Hamster Ltd). If the loan is then waived by Hamster Ltd, Hamster Ltd will recover the tax it has paid of £39,825 back from HM Revenue and Customs and Jessica will be taxed on the amount of the loan of £118,000 as dividend income at the relevant rate as part of her income tax calculation. The rate she will pay will depend upon the type of tax rate payer she is and will be subject to any dividend allowance which may be available to her.

Answer 2093

£3,000 ## Footnote This is a decrease from the previous tax year 2023/2024, which was £6,000.

Answer 2094

£6,000 ## Footnote This amount is applicable for gains not exceeding the annual exemption.

Answer 2095

10% ## Footnote This applies to individuals in England and Wales.

Answer 2096

20% ## Footnote This applies to individuals in England and Wales.

Answer 2097

The amount of basic rate band remaining after an individual’s income has been taxed ## Footnote This affects the calculation of CGT rates.

Answer 2098

18% and 24% ## Footnote These rates apply to gains on both UK and overseas residential property.

Answer 2099

18% and 28% ## Footnote These rates applied to gains on both UK and overseas residential property.

Answer 2100

False ## Footnote The rates for residential property have changed.

Answer 2101

10% on qualifying chargeable gains ## Footnote This rate remains unchanged from the previous tax year 2023/2024.

Answer 2102

No, it is the same ## Footnote Both years have a CGT rate of 10% on qualifying chargeable gains.

Answer 2103

£3,000 ## Footnote This is a decrease from the previous tax year 2023/2024, which was £6,000.

Answer 2104

£6,000 ## Footnote This amount is applicable for gains not exceeding the annual exemption.

Answer 2105

10% ## Footnote This applies to individuals in England and Wales.

Answer 2106

20% ## Footnote This applies to individuals in England and Wales.

Answer 2107

The amount of basic rate band remaining after an individual’s income has been taxed ## Footnote This affects the calculation of CGT rates.

Answer 2108

18% and 24% ## Footnote These rates apply to gains on both UK and overseas residential property.

Answer 2109

18% and 28% ## Footnote These rates applied to gains on both UK and overseas residential property.

Answer 2110

False ## Footnote The rates for residential property have changed.

Answer 2111

Based on rates for 6 April 2024 to 5 April 2025. Barry (a higher rate income taxpayer) makes the following capital disposals in the current tax year: * quoted shares – gain of £30,000 * UK residential property – gain of £87,300, and * painting – loss of £15,000. The capital loss of £15,000 on the painting should be offset against the residential property gain (to save CGT at the highest rate). The same applies for the AEA of £3,000 (AEA for 2024/2025). This leaves a property gain of £69,300 (calculated: £87,300 - £15,000 - £3,000 as reduced by both the loss on the painting and the AEA) and a gain on the shares of £30,000. Residential property £69,300 at 24% (as a higher rate income taxpayer there will be no unused basic rate band) = £16,632. Shares £30,000 at 20% = £6,000. Total CGT liability = £22,632 (£16,632 + £6,000), which will be payable by 31 January following the end of the current tax year

Answer 2112

£90,000 ## Footnote Previous tax year 2023/2024 was £85,000.

Answer 2113

£88,000 ## Footnote Previous tax year 2023/2024 was £83,000.

Answer 2114

20% ## Footnote This is the same as for the previous tax year 2023/2024.

Answer 2115

5% ## Footnote This is the same as for the previous tax year 2023/2024.

Answer 2116

0% ## Footnote This is the same as for the previous tax year 2023/2024.

Answer 2117

Example of a VAT calculation If goods are sold for £100, the VAT at 20% will be £20. The total sale price is £120. You will often be given a VAT-inclusive figure for a supply or a purchase. To calculate the VAT element for a standard rate supply or purchase, the VAT fraction is 1/6. for example, if the price is £120, the VAT is £20 and the net of VAT cost is £100. For reduced-rate transactions, the VAT element of a VAT-inclusive figure is 1/21. If the price is £105, the VAT is £5 and the net of VAT cost is £100.

Business Law Flashcards

(2232 cards)