Business Organisations Flashcards
(124 cards)
1
Q
business form determines
A
the allocation of liability for business debts and other forms of liability should individuals be harmed by the business or should the business be involved in a crime
2
Q
classification of business organisations
A
- sole trader (legal entity)
- Partnership
- company
3
Q
Sole trader
A
- legal personality is that of the individual
- has to meet the loses (liability is not limited)
- Private assets are at risk
- Can emily people
- Legal charge over property
- liable for the success and failure of the firm thus all the profits and losses
- private assets can be taken to satisfy debts
4
Q
definition of partnership
PARTNERSHIP ACT 1890 S1
A
“the relationship which subsets between persons carrying on a business in common with a view of profit”
- must be at least 2 people
- carrying on a business in common
- not incorporated (PA s2 (2)) (not a corporation
- collectively ‘a firm’ (PA s4) –> can sue and be sued as a firm, but doesnt alter the position in regards the individual liability of the other partners
- regular partnerships are not separate legal entities (from partners) and such cannot employ people or own property (but LLPs can)
5
Q
rules governing partnerships
A
- formation: absence of formalities (relatively easy and inexpensive)
- usually a written partnership -not a requirement for ordinary partnerships
- joint and several liability for wrongs (PA s12) –> if one person commits a tort, crime or equitable wrong then the partnership will be liable
- joint liability in contract (PA s9)
- the right to sue others (civil liability (contribution) Act 1978 s3
6
Q
partner’s duties:
A
- duty of disclosure (PA s28)
- duty to account (PA s29)
- duty not to enter into competition (PA s30)
7
Q
partner’s rights (unless excluded through the partnership agreement)
A
- right to share equally in the capital and profits of the firm (this is PRIMA FACIE) evidence of being a partner
- right to be indemnified by the firm for any liabilities of losses made in the normal course of business
- right to take a role in management
- entitlement to inspect partnership account
- right to veto entry of new partner or to change the partnership’s business
8
Q
Limited Liability Partnership Act 2000
A
- made it possible for two or more persons to trade as a LLP
- have the advantages of limited liability, succession and flexible organisation
- similarities with normal partnership
- LLPs do not have to adopt the company with a board of directors
- must be registered so there are some formalities like the registration of an LLP (£40) and the loss of privacy that accompanies this
- have to have written contracts of partnership
- members of partnership pay income tax and national insurance
- corporation tax is also approx 20%
9
Q
corporations
A
has its own legal personality separate from that of its members.
companies can be created by charter, by statute or by registering under the companies Acts
10
Q
types of corporations
A
- chartered (bbc –> royal chartered)
- statutory (utilities, needed right to purchase land compulsory)
- registered under companies legislation (companies Act of 2006
- those registered before the 2006 legislation are treated as if the registered under it
11
Q
principal types of registered company
A
-limited by shares (private or public)
-limited by guarantee (private)
-unlimited (private)
-community interest companies
other registrations for social enterprises and are provided under part 2 of the companies (audit, investigations and community enterprise) Act 2004
12
Q
meaning of company
A
- 2006 Act s1 defines company as a company formed and registered under the 2006 act.
- there is no general definition
- one person companies are permitted
- one person companies are in any event a de fact reality (SALOMON V SALOMON &CO)
13
Q
limited companies
A
-company is fully liable for it’s own debt
-members of an LLC have restricted liability for the company’s debts (still responsible for the debts)
-it’s the liability of the members that is limited not the liability of the company
K
14
Q
companies limited by guarantee
A
- if the company is wound up, members contribute the amount guaranteed when they became members
- that is, the amount each member agreed to contribute in the even of liquidation, usually a nominal sum
- often used for charitable to educational purposes
- public companies cannot be limited by guarantee
15
Q
companies limited by shares
A
- if wound up, members liability is limited to the amount (if any) unpaid on shares held (bank might ask for security)
- may be public or private company
16
Q
unlimited company
A
- members fully liable for the debts of the company
- no requirement for disclosure of accounts
- rarely used in practice (not really any advs)
17
Q
Public and private companies
A
- Public companies can offer shares for sale to the public and shares can be listed on a stock market such as the London Stock Exchange.
- Private companies must not offer shares to members of the public (s.755 Companies Act 2006).
18
Q
Company formation
A
This process is called incorporation.
Companies Act 2006 ss 7-16.
Note that the 2006 Act made changes to the constitutional arrangements for companies – their memorandum of association and articles of association
19
Q
a) Documents required for registration
A
• Memorandum of association
• An application for registration including the proposed company’s name and registered address, whether it is to have limited liability (and if so, whether by shares or guarantee) and whether it is to be public or private.
==>must also contain specified details of share capital and initial shareholdings (or of guarantors and guaranteed contributions if it is a company limited by guarantee) and a statement of proposed officers.
• Articles of association
• Declaration of compliance with the Companies Act 2006
• Registration fee (£40)
20
Q
• Memorandum of association
A
– this is the agreement made by those who want to set up the company showing that they agree to be members of the company by subscribing to at least one share each.
21
Q
• Articles of association
A
– rules for internal governance: powers, duties, meetings etc- must be submitted unless model articles set out in the legislation are being used
22
Q
A new requirement was introduced in 2016: People with significant control
A
• From April 2016 companies are required to keep a register of People with significant control (PSCs)
23
Q
b) Registrar of Companies
A
- Issues Certificate of Incorporation
- This is conclusive evidence that the formalities of registration have been complied with Jubilee Cotton Mills Ltd v Lewis [1924] AC 958 (AC = Appeal Cases)
24
Q
advantages of company
A
• Limited liability of members
• Raising finance is generally easier
• Perpetual succession
• Transferable shares
• No maximum limit on the number of members
-directors can also sell shares
-status: company looks more credible in the eyes of customers, clients and suppliers
25
disadvantages of companies
* Administrative cost of setting up and running a company
* Subject to external and internal regulation
* Majority shareholder ability to exert control
* No automatic right for members to participate in the management of the company
* Public access to company information
There are also tax advantages and disadvantages to take into account. Companies have greater access to tax benefits.
if you set up a company have to make the accounts public
26
Companies and partnerships
* Member of company is not an agent of the company but partner is an agent of the partnership
* Ownership and management are split in companies (members and directors) but not in a partnership
* In a company, dividends can come only from profits but this is not the case in a partnership
* Taxation regimes are different
27
Corporate governance and the
| ‘unacceptable face of capitalism’
•Key area of policy intervention and potential change
The financial crisis and a number of scandals involving large corporations have meant that corporate governance has become a political issue
•This is a current story, one to watch throughout the year
•On 29th August 2017 the Government published proposed changes in the area of corporate governance
28
The Government’s package of corporate governance reforms
- executive pay- (pay ratio = show/ report what highest and lowest payed worker gets)
- strengthening the employee, customer and wider stakeholder voice –all companies (private or public) to get directors to explain something about corporate
* Corporate governance in large privately held businesses
* Some action on enforcement
* Boardroom diversity =gov. didn't follow this legislation
29
Corporate personality
--> corporate entity
The company has a legal personality separate from that of its members. That is, it is a separate legal entity:
Salomon v Salomon & Co Ltd
30
The effects of corporate legal personality
* The company can sue and be sued in its own name
* It can make contracts on its own behalf
* It owns its property – the property is not owned by the members
* There is perpetual succession
* The liability of the company is unlimited
* The liability of the members is limited to the value of their shareholding
* Companies have to supply various documents to the Companies Registry. These are open to public inspection and the Registrar announces them in the London Gazette.
* Appropriation of company assets by members is theft even if the members and directors responsible are the only members and hold all the shares
31
Criminal liability
-Companies can be held liable for criminal acts including corporate manslaughter at common law and under statute. (HOMOCIDE ACT 2007)
-Senior managers may be personally liable as well as the company.
-These will be managers with a strategic responsibility for the company who might be said to be the ‘mind’ of the company.
In such situations it is possible to address abuses by the controllers of companies by virtue of their relationship to the company (without lifting the corporate veil )
32
Lifting the veil of incorporation
- The leading case on this issue is the 2013 Supreme Court case: Prest v Petrodel Resources Ltd.
- The corporate veil will be lifted in very limited circumstances where a person deliberately evades an existing legal obligation, restriction or liability using a company under her or his control.
Examples include situations where a company:
• Is engaged in fraudulent or wrongful trading when insolvent (Insolvency Act 1986);
• Is a mere facade concealing the true facts (e.g. Jones v Lipman); or
• Is one of a group of companies - in very narrow circumstances the law may treat the group as a single company e.g. to prevent tax evasion (Income and Corporation Taxes Act 1988).
33
Personnel
* Members: shareholders / guarantors
* Directors: management
* Company secretary: administration
34
Who are the members?
* those who subscribe to the company’s Memorandum of Association;
* anyone agreeing to be a member and whose name is listed in the company’s register of members.
In a company limited by shares the members will be the shareholders.
In a company limited by guarantee the members will be those signing the Memorandum of Association or otherwise admitted to membership by the directors.
35
Register of members
A register of members must be kept by the company, usually at its registered office.
Members may inspect the register free of charge: others have access for an administrative fee.
36
Company name requirements
* A public limited company’s name must end in public limited company or plc.
* A private limited company’s name must end in limited or Ltd.
* The name must not be identical to that of another company.
* It must not give offence or be criminal.
* Various words are prohibited including those suggesting links with government or Royalty.
37
Company name objections
Section 69(1) allows a person to object to a company’s name if:
• it is the same as that associated with the objector and he/she has goodwill in the name; or
• it is sufficiently similar to an existing name to suggest a connection between the company and the objector.
-Objections are dealt with by a Company Names Adjudicator
This statutory process does not replace the common law action in tort for passing off where a name is likely to divert customers away or cause confusion between the two businesses. Damages can be claimed by means of an action for passing off..
38
resolutions
- resolutions at meetings and written resolutions
- ordinary resolutions
- special resolutions
- notices to members
39
Resolutions at meetings and written resolutions
Resolutions are company decisions.
They can be made at meetings, or in the case of private limited companies, in writing without a meeting.
Most resolutions of private companies are expected to be passed in writing rather than by attendance at meetings.
40
Ordinary resolutions
These can be passed by a simple majority (over 50 per cent) of those present at the meeting or in private limited companies by members who hold a majority of the voting rights.
Matters decided by ordinary resolution might include the appointment of auditors and the removal of directors.
41
Special resolutions
The majority must be 75 per cent or more of those voting at a meeting or 75 per cent or more of those with voting rights if passed by a written resolution.
A special resolution might deal with changes to the articles or the name of the company.
It might reduce the amount of capital or commence the voluntary winding up of the company.
42
Notices to members
Members must receive notice of meetings and the resolutions to be put.
Typically notice is fourteen days but the length of notice is dependent on subject matter and type of meeting.
For example, notice of removal of a director under s168 is 28 days.
43
Annual General Meeting
* Public companies and traded companies must have an annual general meeting (AGM)
* Private companies in general do not need to have one
* Members must be given notice of the meeting and its business
* Typically the meeting will include directors’ reports, auditors’ report, the accounts, dividends, election of directors and the appointment of auditors.
44
Board meetings
Directors acting collectively are known as the board of directors, meetings of the board of directors are known as board meetings.
* A company's articles of association usually contain provisions on board meetings covering e.g. how meetings should be called and chaired.
* Quorum: this is the minimum number for the meeting to be properly constituted. Generally two unless it is a one-member company.
* A person should chair the meeting.
* Voting can be by show of hands of those present and by proxy or on the basis of voting power.
* Minutes should be taken.
45
Confirmation statement
A confirmation statement (formerly known as an ANNUAL RETURN) has to be submitted to the Registrar (s853A) and an annual financial statement (s415).
The latter will include a profit and loss account, balance sheet, directors’ report and auditors’ report.
The reporting requirements differ depending on the nature AND size of the company:
• a small companies regime applies to small companies,
• there are different requirements for quoted companies.
• there are also distinctions between private and public companies.
46
Recent reporting developments
- The Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013 (SI 2013/1970) introduced a requirement for the directors of a company to produce a ‘strategic report’ (there are exemptions for small businesses).
- The purpose of the strategic report is to inform members of the company and help them assess how the directors have performed their duty to promote the success of the company.
- The strategic report must contain a fair review of the company’s business, and a description of the principal risks and uncertainties facing the company.
47
For quoted companies the report must also contain:
• the main trends and factors likely to affect the future development, performance and position of the company’s business, and
• information about:
-environmental matters (including the impact of the company’s business on the environment),
-the company’s employees, and
-social, community and human rights issues,
48
Constitutional documents
- The Companies Act 2006 made significant changes to the requirements for the registration of companies and to the nature of a company’s constitution.
- The Small Business, Enterprise and Employment Act 2015 required the secretary of state to bring in a new streamlined company registration procedure by the end of May 2017.
49
The position prior to the Companies Act 2006
- a) Memorandum of Association
| b) Articles of Association
50
a) Memorandum of Association
This used to be the company’s constitution and it governed its dealings with outsiders.
The 'Objects' clause:
* This contained the company purpose: the company’s permitted activities. It was sufficient to state that the object was to carry on business as a general commercial company.
* If a company acted outside of its purpose it went beyond its powers (ultra vires – see below). Members could restrain an intended act if it was ultra vires.
51
b) Articles of Association
These covered internal governance: powers, duties, meetings etc.
A short form could be adopted – Table A – under the Companies (Tables A to F) Regulations 1985.
52
a) Memorandum
The Memorandum now plays a more limited role. It mainly provides evidence of the intention of those who subscribed to it to form a company, become members and (in a company limited by shares) take at least one share each (s8).
53
b) Articles
- The principal constitutional document is the Articles (ss 17-18). Companies must have Articles and if they do not, or their Articles are not sufficiently comprehensive, a default model will apply (s20(1)).
- Where governance material is in the Memorandum it is treated as if it is in the Articles (s28). Unalterable clauses in old Memorandums are treated as part of the Articles and will usually be subject to change by special resolution (s21(1)).
- The objects of the company will be unrestricted except where limited by the Articles: s31(1).
54
c) Contract of membership
The constitution of a company creates a contract between every member and the company and between every member and every other member by virtue of s33(1).
55
The doctrine of ultra vires
Ultra vires is a Latin phrase meaning “beyond the powers”
Meaning and significance
• beyond the powers of the company
• the doctrine holds that contracts made ultra vires (beyond the powers of a company) are void
• statute has moderated the effect of this doctrine
• the concept has in any case become less important because of wide object clauses
56
Meaning of director
* Not defined in law
* Includes anyone occupying the position of director
* Whatever the position is called
* An officer appointed under the company’s constitution
* May also be an employee under a ‘service’ contract
57
executive director
is one who typically works for the company full-time and is therefore likely to be an employee as well as a director
58
non- executive director
tend to be part-time and are directors but not usually employees
receive fees not salary
59
a 'shadow director'
is a person in accordance with whose directions or instructions in the directors normally act, but not a professional adviser (s251).
The Small Business, Enterprise and Employment Act 2015 has extended the statutory duties of directors to shadow directors (s89).
-if a lawyer giving advice --> doesn't make you a director
60
Appointment of directors
* At least two for public companies, one for private companies
* At least one director must be a natural legal person (soon to change)
* Otherwise corporate directors possible (ie a company as a director) although change is proposed
* New rule that all directors must be natural legal persons due to come into force soon
* Usually shareholders but not necessarily
* Initial appointments on registration of the company
* Subsequently, simple majority vote at general meeting
* Board of Directors can fill casual vacancies until next AGM
* May be re-appointed
* May retire by rotation
--> usually happens @outset ==> PLC are 2 directors and company =1
61
New requirement for all company directors to be natural persons
- The Small Business, Enterprise and Employment Act 2015 contains a provision that allows for the prohibition of the use of corporate directors (directors that are corporations rather than natural legal persons) with some exceptions.
- This is one of a number measures contained within the 2015 Act that were designed to bring greater transparency to business.
62
Register of directors
Every company must keep a register of its directors and must provide the following information about directors who are individuals: name; address for correspondence; country of residence; nationality; occupation (if any) and date of birth (s162(1)).
The address given can be the company’s registered address (s163(5)).
-registrar can be inspected free of charge by the company's members and for a small fee by anyone else
63
Removal of directors
* Expiry of period of office
* Resignation - i.e every 7 years directors resigns and the can be re-elected
* Removal under s 168 by ordinary resolution with special notice- 28 days notice for meeting -director who is going to be removed can argue against the removal
* Disqualification
64
Disqualification of directors
-People who are undischarged bankrupts are disqualified (forgery, wrongful trading etc) from holding directorships unless they have permission from the court which made the bankruptcy order.
-
65
Key tasks of the board of directors
* Establishing vision, mission and values
* Setting the strategy and structure
* Delegation to management
* Exercising responsibility to shareholders and others
66
Specific roles
- chairman of the company
- managing director
- other executive directors
67
Chairman of the company
* Chairs the Board of Directors and may have a casting vote
* Presides at general meetings -decides how meeting unravels
* Executive or non-executive? - sometimes employees sometimes not
68
Managing director
CEO/COO
• Articles may provide for appointment of MD
• Powers delegated to MD by the Board
• Functions not set out in law – will be in service agreement.
- basically runs daily business
- duty set out in service agreement (contract)
- if someone makes people think they're a MD, they take the role of it (s250)
69
Other executive directors
• The Articles may provide for other executive directors
70
Liabilities of directors
- Any provision purporting to exempt a director from liability for any negligence, default, breach of duty or breach of trust in relation to the company is void (s232(1)).
- However, the members can ratify the conduct after it has occurred (s239).
- The members can, in fact, authorise breaches in advance, subject to common law rules (s180).
- Moreover, directors will not be liable when they have acted in accordance with the Articles.
71
Payment of directors
- don't get paid
- no statutory requirement fr them to get payed
-s420 of the Companies Act 2006 requires the directors of companies whose shares can be bought and sold on the stock exchange (quoted companies) to prepare a directors' remuneration report for each financial year of the company.
72
Future reforms on executive pay in listed companies
```
The Government’s recent Green Paper on corporate governance contains options for future reform in this area. Stakeholders are invited to provide their views in the areas of:
• shareholder voting and other rights
• shareholder engagement on pay
• the role of a remuneration committee
• pay disclosure
• long-term pay incentives
```
73
director's general duties
* To act within powers
* To promote the success of the company
* To exercise independent judgement
* To exercise reasonable care, skill and diligence
* To avoid conflicts of interest
* Not to accept benefits from third parties
* To declare interest in proposed transaction or arrangement
74
Fiduciary duties
-apply to all directors
75
Directors’ duties in equity
* To avoid conflicts of interest
* Not to make profit unless permitted by the company
* To act in good faith in the interests of the company
76
Profits and benefits from office
• Duty to account for personal profit
o Industrial Development Consultants v Cooley
• No duty to account for profits of running a competing business unless Articles or service contract so provides.
o Bell v Lever Bros Ltd
• Duty not to use confidential information for own purposes.
77
Abuse of powers
• Directors’ powers must be used for the sole benefit of the company
o Hogg v Cramphorn
78
Remedies for breach of fiduciary duties
```
These would include the following.
• Damages
• Restitution of property
• Avoiding a contract
• An account of profits
• An injunction
```
79
Directors’ duties at common law
* Skill
* Diligence
* Liability for others
80
fraudulent trading
-they have carried on business with the intention of defrauding the creditors or any creditor (deliberate dishonesty is required)
S213 INSOLVENCY ACT 1986
81
To whom does a director owe a duty?
* To the Company (the members in general – not individuals)
* Owed by each director individually
* Interests to be taken into account:
* Shareholders in general
* Employees
* Creditors, especially when the company is insolvent
82
who has control of the company?
Members of a company delegate the task of management to directors, but members have the power to make some decisions by passing resolutions
* An ordinary resolution requires a simple majority (over 50%)
* A special resolution requires a majority of not less than 75%
Members with over 50% or over 75% of the shares therefore have greater control than minority shareholders.
83
Minority protection at common law
Majority rule
* Shareholders collectively make decisions for the company
* If the company is harmed, legal action lies with the company rather than individual members (because of its separate legal identity) – so the board of directors would decide whether or not to sue.
• Foss v Harbottle (1843)
84
Foss v Harbottle
The courts should not generally interfere with the majority shareholders’ running of the company
Principles underlying this –
* Legitimacy of majority rule
* Individual shareholder lacks the legal standing to take action on behalf of the company because the company is a separate legal person
* The proper complainant is the company itself
85
Fraud
This is a false representation – by statement or conduct – made in order to obtain material advantage. If it causes loss, the person suffering loss can claim damages in tort. The tort is deceit. Fraud is separately defined for criminal purposes.
86
Ultra vires
A member of a company has the right to prevent the company from entering into a transaction that is ultra vires (beyond the powers of the company).
87
Examples of fraud
>Expropriation of the company’s property
Signing a contract in personal names so that the goods belonged to the individuals and not the company
```
>Reduction in capital designed to harm a class of shareholders
Capital reduced to benefit one group and harm another by affecting their shareholding
```
>An act designed to benefit the majority at the expense of the company
The company sells land to its majority shareholder below its real value
88
Members’ actions at common law
* Personal
* Derivative
* Representative
89
Personal actions
based on the member suffering a wrong in their capacity as a member. Each member has a contract with the company, if their rights are infringed
90
Derivative actions
>these are concerned with wrongs suffered by the company rather than the member.
>Where the company cannot act to right the wrong – because the majority shareholder is the wrongdoer – the courts will allow an action on behalf of the company by other members
>they can bring a claim to sue the company
> but also v rare
91
Representative actions
These are where an individual shareholder has suffered a loss and the company has suffered a loss and a shareholder brings an action on behalf of all the shareholders who have suffered a loss.
92
Derivative claims may only be brought in relation to two matters.
1. An act or omission – actual or proposed – which involves negligence, default, breach of duty or breach of trust by a director of the company. Thus, a claim can be based on an alleged breach of any of the directors’ general duties
2. Claims can be brought in pursuance of court orders relating to ‘unfair prejudice’ actions under s994 (see below).
93
Unfair Prejudice
Where the affairs of the company are conducted in a way that it unfairly adversely affects the interests of the members.
94
Relief from unfair prejudice
Specific
The court may-
• Regulate the company’s affairs for the future
• Restrain the company from doing or continuing to do prejudicial acts (See Re H R Harmer Ltd (1958))
• Authorise a claim to be made by the company
• Require the company not to make any changes to the articles without leave of the court
• Order the purchase of the minority shares at a fair price either by the other members or by the company itself
General
The court may make any other order as it sees fit (as in Re a Company (1986)).
95
Criminal law
This is concerned with offences against society at large, that is, crimes.
The aims in some legal systems include making reparations to the victim.
Generally require actus reus (guilty act) plus mens rea (guilty mind) except for crimes of strict liability
96
Civil law
This relates to the relationships between private parties such as supplier and consumer. In these areas the 'injured' (wronged) party sues the party that is in the wrong and usually seeks damages (financial compensation).
97
Business liability for criminal wrongs
* Sole trader – the individual
* Partnership – Joint and several liability for wrongs (torts, crimes and equitable wrongs) (PA s12) – if one partner commits a tort, crime or equitable wrong in the course of the business the partnership will be liable.
* Company – the company (separate legal personality) and / or the individuals concerned.
98
(Lord Reid in Tesco Supermarkets v Nattrass).
A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these."
99
Criminal liability for fraud
* For minor offences (summary conviction) a person who is convicted of fraud is liable to imprisonment for a term not exceeding 12 months or to a fine.
* For the most serious offences (triable on indictment) a person who is convicted of fraud is liable to imprisonment for a term not exceeding 10 years or to a fine (or to both).
100
Identifying a fraud
The Fraud Act 2006 sets out a general offence of fraud that can be committed in three ways:
• Fraud by false representation (s2)
• Fraud by failing to disclose information (s3)
• Fraud by abuse of position (s4)
101
Fraud by false representation
This offence entails dishonestly making a false representation with the intention to make a gain for oneself or another, or to cause loss to another or to expose another to a risk of loss.
102
Prosecution must prove (fraud by false representation)
* a representation was made;
* that it was false;
* that it was made dishonestly;
* that the person who made the false representation knew that it was or might be untrue or misleading;
* and that it was made with intent to make a gain for himself or another, or to cause loss to another or expose another to risk of loss.
103
Fraud by failing to disclose information
Prosecution must prove
That the defendant:
• failed to disclose information to another person;
• that he did so when he was under a legal duty to disclose that information;
• and that he did so dishonestly intending, by that failure, to make a gain or cause a loss.
104
Ghosh test
both objective and subjective
1. according to standards of ordinary people was what was done dishonest
- -> if not dishonest the prosecution fails. if it is then..
2. did the defendant realise what he was doing was dishonest
105
Fraud by abuse of position
This offence occurs where an individual occupies a position in which s/he is expected to safeguard, or not to act against, the financial interests of another person.
106
Fraud by abuse of position
The prosecution must prove:
That the defendant:
• at the material time occupied a position in which he was expected to safeguard, or not to act against, the financial interests of another;
• that he abused that position;
• that he did so dishonestly;
• that when he did so he intended by that abuse to make a gain or cause loss.
107
Other key fraud offences
* Possession etc. of articles for use in frauds (s6).
* Making or supplying articles for use in frauds(s7)
* Making or supplying articles for use in frauds (s8)
* Participating in fraudulent business carried on by sole trader etc.(s9)
* For companies the equivalent provision relating to fraudulent trading is found in s458 of the Companies Act 1985
* Obtaining services dishonestly (s11)
108
False accounting
This is found in s.17 of the Theft Act 1968.
It’s where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another:
• destroys, defaces, conceals or falsifies any account or any record or document made or required for any accounting purpose; or
• in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is or may be misleading, false or deceptive in a material particular.
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Money laundering
The key provision dealing with money laundering is the Proceeds of Crime Act 2002 (POCA 2002).
Money laundering offences are punishable by sentences of up to 14 years imprisonment.
Offences include:
• Concealing or disguising criminal property.
• Entering into or becoming concerned in an arrangement which one knows or suspects facilitates (by whatever means) the acquisition, retention, use or control of criminal property by or on behalf of another person.
• Acquisition, use and possession of criminal property.
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Provisions to combat terrorism
The Terrorism Act 2000 mirrors the provisions dealing with money laundering and creates offences relating to terrorist property. The Counter Terrorism Act 2008 also contains provisions designed to address the funding of terrorism.
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Product liability: potential legal actions
Civil law
* Breach of contract
* Negligence
* Breach of statutory duty
* Consumer Protection Act 1987 Part I
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Product liability: potential legal actions
Criminal law
* General Product Safety Regulations 2005
| * Consumer Protection Act 1987 Part II
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GPS Regulations
* General safety requirement
* Product must be safe
* Duty to notify enforcement authorities if unsafe
* Distributors' duty of care
* Producers’ to provide customers with relevant information
* Safety notices, including recall
* Appeals against notices
* Due diligence defence
* General protection whereas CPA regulations are sector-specific
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Breach of statutory duty
‘Breach of statutory duty’ is a tort (civil wrong).
Where statute has imposed an obligation on a person and that person has breached the obligation, a person who has suffered an injury or damage can sometimes bring an action for breach of statutory duty.
To succeed the claimant must show that:
• The statute was intended to give private rights of action to claimants such as him / her
• S/he suffered an injury or damage of a kind against which the statute was designed to give protection
• The breach of the statutory obligation caused the injury / damage
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The Consumer Protection from Unfair Trading Regulations 2008
• The CPUT Regulations 2008 create criminal offences in the area of unfair business-to consumer practices.
>brought forward by EU
>2008 version doesnt apply to business to business
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• What does professional diligence mean?
o Professional diligence is defined in reg 2(1)
o “the standard of special skill and care which a trader may reasonably be expected to exercise towards consumers which is commensurate with either:
a) honest market practice in the trader's field of activity or;
b) the general principle of good faith in the trader's field of activity”
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breach of professional diligence occurs where:
o a commercial practice contravenes the requirements of professional diligence and;
o materially distorts or is likely to materially distort the economic behaviour of an average consumer with regard to the product.
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materially distort economic behaviour
o to impair the average consumer’s ability to make an informed decision thereby causing him/her to take a transactional decision that he would not have taken otherwise
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Misleading actions
Under reg 5 a commercial practice is a 'misleading action' if either:
o It contains false information and is therefore untruthful
o Its overall presentation in any way deceives or is likely to deceive the average consumer in relation to any of those matters, even if the information is factually correct
o And it causes or is likely to cause the average consumer to take a transactional decision he would not have taken otherwise
e.g • This product is organic (when it isn’t)
• Contains no sugar (when it does)
• Manufactured in 1850 (when it’s a modern reproduction)
• Designed by Armani (when it’s a fake)
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Misleading omissions
(CPUT)
Regulation 6(1)
```
Information:
• omitted
• hidden
• unclear etc
• where commercial intent unclear
```
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• What is material information?
o Material information is defined in reg 6(3) as information the average consumer needs if they are to make an informed decision and any information required under EU law.
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Aggressive practices
* harassment
* coercion
* undue influence
e.g. pressure selling
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The Schedule 1 list
* ‘Inertia selling’ (see above) (demanding immediate or deferred payment for or the return or safekeeping of products supplied by the trader, but not solicited by the consumer)
* Claiming to be a signatory to a code of conduct when the trader is not
* Falsely stating that the product will only be available for a very limited time in order to elicit an immediate decision
* Creating the impression that a product can be legally sold when it cannot
* Making persistent and unwanted solicitations by telephone, fax, email or other remote media except in circumstances and to the extent justified to enforce a contractual obligation
* Explicitly informing a consumer that if he does not buy the product or service, the trader’s job or livelihood will be in jeopardy
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Defences
It is a defence under CPUT reg 17(1) for the accused to show that they took all reasonable precautions and exercised all due diligence to avoid committing the offence and that the offence was due to one of the following
* A mistake
* Reliance on information supplied to them by another person
* The act or default of another person: this other person may then be guilty of an offence even if they are not a trader (reg 16)
* An accident
* Some other cause beyond their control.
