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SQE2 > business law - unfinished > Flashcards

business law - unfinished Flashcards

1
Q

what is on the IN01?

A
  • name
  • address
  • director and subscriber info
  • statement of capital
  • persons of significant control
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2
Q

what is a person with significant control?

A

someone with more than 25% of shares / voting rights

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3
Q

when is stamp duty payable on shares?

A

when the transfer is over £1000

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4
Q

what is an overdraft facility

A

an agreement with the bank allowing a business to overdraw on its account up to an agreed amount. compound interest.

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5
Q

what is a term loan

A

where a business borrows a fixed amount for a specified term which must be repaid at the end plus interest at regular intervals

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6
Q

what is a revolving credit facility

A

where the bank agrees to make a maximum amount of money available throughout an agreed period. good for companies with irregular income patterns.

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7
Q

what is a bullet payment

A

payment in one go at the end of a term

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8
Q

what is amortisation

A

equal instalments over a term

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9
Q

what is a balloon payment

A

unequal instalments with the final being the largest

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10
Q

when must charges be registered

A

within 21 days of creation, otherwise it is void

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11
Q

what is subordination

A

where creditors enter an agreement to change the priority of their charges

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12
Q

what is a negative pledge

A

where a company agrees not to create any charges with priority over the relevant floating charge

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13
Q

when must a taxable person be registered for VAT purposes

A

when the valuable of their taxable supplies exceeded £85,000 in 12 months

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14
Q

what are the 3 types of liquidation

A
  1. compulsory liquidation
  2. creditors voluntary liquidation
  3. members voluntary liquidation
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15
Q

what is the creditor hierarchy?

A
  1. fixed charges
  2. winding up expenses
  3. preferential debts
  4. floating charges
  5. shareholder
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16
Q

who are preferential creditors

A
  1. wages / employees
  2. HMRC in respect of PAYE and VAT
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17
Q

what are the aims of administration?

A
  1. to rescue company as a going concern
  2. to put creditors in a better position than winding up would have
  3. realise property to pay as many secured and preferential creditors as possible
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18
Q

what duty is an administrator under?

A

to perform duties in the best interests of the creditors as a whole

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19
Q

how is administration commenced?

A

by court order following application and hearing, or by company filing at court.

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20
Q

when can a court make an administration order?

A

if it is satisfied the company is likely to become unable to pay debts and the order will achieve one of the aims

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21
Q

what is the procedure for out-of-court administration?

A

serve notice of intention on the court, floating charge holders and a lender entitled to appoint a receiver, then file a statutory declaration that a company is unable to pay debts

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22
Q

how can a QFCH secure priority in ending a company?

A

appoint a receiver who will then have a primary duty to them

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23
Q

how does administration work?

A

the admin will put forward proposals to the creditors who can suggest amendments
- proposals are approved by a majority of present creditors in value vote in favour, as long as they don’t comprise more than 50% in value of the unconnected creditors

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24
Q

what happens to directors in administration

A

their powers cease but they remain in office

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25
Q

when does administration end

A

usually 1 year after taking effect

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26
Q

what is a CVA

A

a written agreement between the company and all creditors

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27
Q

what proportions must approve a CVA

A

75% or more in value of creditors, 50% or more of unconnected creditors (secured creditors cannot vote)

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28
Q

when can a floating charge holder appoint a receiver

A

when their charge is over the whole of the assets and no other charge holder take priority

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29
Q

when is an individual insolvent?

A

when a debt is payable now but the debtor does not have enough money to pay, or a future debt has no reasonable prospect of being paid

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30
Q

how can a creditor prove personal insolvency

A
  1. statutory demand of £5,000 or more and wait 3 weeks
  2. statutory demand in respect of fututre debt over £5,000 and see if individual shows reasonable prospect of being able to pay, or applies to court to set aside
  3. obtain a court judgment for a debt of £5,000 or more and attempt enforcement unsuccessfully
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31
Q

what is bankruptcy

A

process whereby debtor’s assets pass to the trustee who will pay off as many debts as possible, usually discharged after a year

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32
Q

what is the procedure for bankruptcy

A

a. creditor owed over £5,000 brings petition. creditors may aggregate their debts owed
b. OR debtor may apply for their own bankruptcy online and an adjudicator will decide whether to make an order within 28 days

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33
Q

what is a bankrupt individual permitted to keep

A

assets needed for day-to-day living, but receiver may sell these for cheaper alternatives

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34
Q

what happens to an individual’s home in bankruptcy

A

the interest passes to the trustee unless someone else has an interest in which case the trustee needs a court order. after 1 year the creditors interest outweighs anyone elses. 3 years after order, it transfers back to the bankrupt

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35
Q

business restrictions for bankrupt person

A

a. cannot obtain credit of more than £500 without disclosing
b. cannot be director
c. cannot be management, promotion or formation of company without court order
d. cannot trade under different name without disclosing
e. any partnership ends

36
Q

what is an IVA

A

alternative to bankruptcy
a. proposals passed if 75% or more in value and 50% or more non associates agree

37
Q

debt respite claim

A

a. mental health crisis gives 30 days on top of treatment
b. normal breathing space gives 60 days

38
Q

how many limited partners in limited partnershp

A

at least 1

39
Q

when must a newly incorporated company register with CH

A

within 3 months

40
Q

when must change of articles be filed at CH

A

within 15 days with the relevant resolution

41
Q

limits on accounting ref periods

A

can’t extend beyond 18 months or change within 5 months of end of last change

42
Q

what is MA14

A

a director can’t vote or count in quorum if they are interested in the transaction

43
Q

minimum notice for general meeting

A

14 days

44
Q

when is shareholder prevented from quorum

A

a. vote to buyback shares
b. ratifying their own breach

45
Q

who can demand poll vote

A

a. chair
2. directors
c. 2 persons with right to vote
d. one person with 10% of voting right

46
Q

when may meeting be held on short notice

A

where 90% of voting rights AND majority of shareholders consent

47
Q

who may call written res

A

5% or more of voting rights, directors must comply in 21 days

48
Q

how long is written res circulated for

A

28 days

49
Q

when must allotment of shares be registered

A

2 months

50
Q

unfair prejudice

A

a. company affairs conducted in manner which is unfairly prejudicial to some or all interests; OR
b. actual or proposed act or omission would be so prejudiced

51
Q

derivative claim

A

instigated by shareholder for wrong done to company by director, arising from negligence, default or breach

52
Q

how can director be appointed per MA17

A

by the board or by ordinary resolution

53
Q

notification requirement for appointment and removal of directors

A

14 days

54
Q

how to remove director

A
  • special notice of 28 days
  • director may make oral rep
55
Q

when does director not need to declare interest in proposed transaction

A

a. unaware
b. cannot give rise to conflict
c. directors are already aware

56
Q

wrongful trading

A

a. insolvent liquidation occurs
b. before winding up director [ought to have] known that there was no reasonable prospect of avoiding it
c. they were a director

57
Q

defence to wrongful trading

A

took every available step to minimise potential loss to creditors

58
Q

fraudulent trading

A

in process of winding up, business has been carried on with intent to defraud creditors

59
Q

misfeasance

A

breach of directors duty or fiduciary duty

60
Q

Substnaital property transactions

A

a. director or connected person
b. buys from or sells to company
c. a non cash asset
d. of substantial value
i. over £100,000 OR
ii. over £5,000 and 10% of net asset
value

61
Q

exceptions to approvals of loans to directors

A

a. company business up to £50,000
b. defending proceedings in relation to company or regulatory proceedings
c. minor and business transactons up to £10,000

62
Q

unanimous decisions in partnerships

A

a. change of nature
b. new partner
c. change of terms

63
Q

when does a partnership dissolve

A

a. partner retires
b. fixed term expires
c. death/bankruptcy of partner
d. where continuing becomes unlawful

64
Q

novation agreement

A

releases partner from existing liability

65
Q

how to release exiting partner from future liability

A

a. notify all those who you have done business with
b. notice in london gazette

66
Q

requirement to allot with 1 class of shares

A

board resolution

67
Q

requirement to allot with several classes of shares

A

ordinary resolution which confers authoirty for 5 years

68
Q

how much priority do pre-emption rights give

A

14 days

69
Q

when may share buyback occur

A

a. shares fully paid
b. paid for out of profits
c. authorised by ordinary res
note - may be bought with capital if authorised by special res

70
Q

how to approve dividend

A

ordinary res

71
Q

how to calc trading profits

A

chargeable receipts LESS deductible expenditure LESS capital allowances

72
Q

writing down allowance

A

18%

73
Q

start up loss relief (non incorp)

A

loss suffered in first 4 years of new business set against 3 year prior

74
Q

carry across relief (non incorp)

A

a. set against current year
b. set against preceding year
c. set against current then preceding
d. set against preceding then current

75
Q

capital gains set off

A

set losses against capital gains (non incorp)

76
Q

carry forward (non incorp)

A

loss carried forward until exhausted

77
Q

terminal carryback (non incorp)

A

loss from final 12 months set against final tax year or 3 years preceding

78
Q

incoporation carry forward

A

if incorp in return for shares of 80%, losses can be set against income from company

79
Q

proving corporate insolvency

A
  1. creditor serve statutory demand for £750 or more and unpaid after 21 days
    2.creditor has obtained judgment and has remained unpaid after enforcement
  2. provably failed cash flow or balance sheet test
80
Q

compulsory liquidation

A

initiated by creditor, fails if company can demonstrate genuine dispute

81
Q

CVL

A

initiated by company to avoid claims

82
Q

process of liquidation

A
  • directors lose power & terminated
  • liquidator sells assets
83
Q

avoidance of floating charge

A

void where granted in relevant time without fresh consideration
- connected person 2 years, non-connected 12 months (insolvent at time or as result)

84
Q

preferences

A

where person put in better position n event of insolvency
relevant time:
COMPANY & PERSoNAL = connected 2 years, unconnected 6 months
desire to prefer presumed for connected

85
Q

transactions at undervalue

A

where company receives lower consideration
relevant time:
individual = 5 years
company = 2 years
insolvency presumed with connected person

86
Q

extortionate credit transaction

A

made in 3 years prior

SQE2 (10 decks)

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