Corp Law Flashcards
Be za besto (332 cards)
1
Q
What does Public law regulate?
A
The relationship between the state and people (natural and legal)
2
Q
What does Private law regulate?
A
The relationship between people (natural and legal)
3
Q
Name examples of things that Private law regulates
A
Contract, divorce, delict
4
Q
What does delict mean?
A
A willful wrong
5
Q
What does Criminal law regulate?
A
Crime and punishment
6
Q
What category of law does Criminal law fall under?
A
Public law
7
Q
What does Civil law regulate?
A
People’s rights and obligations towards each other and remedies available where obligations are breached
8
Q
Where does Common law come from?
A
Judicial decisions and custom
9
Q
Where does Statutory law come from?
A
Legislation - detailed written laws made by/through parliament in acts, regulations and statutory instruments
10
Q
What type of system is the Scottish legal system?
A
Hybrid (mixed) legal system
11
Q
What are the three parts of the Scottish tripartite system?
A
Executive (Government), Legislature (Parliaments) and Judiciary (the courts)
12
Q
In the Scottish tripartite system, what is the executive party and what do they do?
A
The government - they propose and apply laws
13
Q
In the Scottish tripartite system, what is the legislative party and what do they do?
A
The parliaments (British and Scottish) - they pass laws/legislation
14
Q
In the Scottish tripartite system, what is the judiciary party and what do they do
A
The courts - they interpret and apply laws
15
Q
What are the five sources of law?
A
Legislation, case law, institutional writers, custom, equity
16
Q
In the five sources of law, which takes priority above all others?
A
Legislation (statute)
17
Q
In the five sources of law, which has the lowest priority?
A
Equity (nobile officium)
18
Q
In the five sources of law, which takes 2nd highest priority?
A
Case law (judicial precedent)
19
Q
In the five sources of law, which takes 2nd lowest priority?
A
Custom
20
Q
In the five sources of law, which takes 3rd priority?
A
The institutional writers
21
Q
In the five sources of law, which position of priority does legislation take?
A
1st
22
Q
In the five sources of law, which position of priority does case law take?
A
2nd
23
Q
In the five sources of law, which position of priority do the institutional writers take?
A
3rd
24
Q
In the five sources of law, which position of priority does custom take?
A
4th
25
In the five sources of law, which position of priority does equity take?
5th
26
What is legislation?
Written laws made by or on authority of parliament
27
Which parliaments can pass legislation?
British, Scottish and Welsh parliaments
28
Within the source of law 'Legislation', which can't be challenged as beyond powers?
British parliament
29
Within the source of law 'Legislation', which can be challenged as beyond powers?
Scottish and Welsh parliaments
30
Within the source of law 'Legislation', which can pass laws regarding non-devolved matters?
British parliament
31
Within the source of law 'Legislation', which can pass laws only regarding devolved matters?
Scottish and Welsh parliaments
32
Do parliaments delegate to others the right to make laws in certain areas?
Yes
33
What are some examples of parties that parliaments may delegate the rights to make laws?
Government ministers/departments, councils
34
What can a parliament do if a party they delegated law-making rights to acts fraudulently?
They can challenge the party as having taken action beyond the powers delegated
35
In judicial precedent, how many conditions are there for a case to be considered a precedent case?
Three
36
What is the first condition for a case to be considered a precedent case?
It must be from a superior (binding) court
37
What is the second condition for a case to be considered a precedent case?
It must be on the same point of law
38
What is the third condition for a case to be considered a precedent case?
It must be the ratio decidendi (reason for the decision) part of the court's decision
Obiter dicta (other sayings) in the court's decision is not binding
39
What are some examples of institutional writers?
Stair, Bell, Erskine
40
In roughly which centuries did the institutional writers work?
17th - 18th centuries
41
In which circumstances are institutional writers referred to as a source of law?
1. no contrary legislation
2. no contrary case law
42
What is the first condition of custom being recognised as law?
It must be definite, certain and regularly practised
43
What is the second condition of custom being recognised as law?
It must be fair and reasonable
44
What is the third condition of custom being recognised as law?
It must be accepted and followed for a long period
45
What is the fourth condition of custom being recognised as law?
It cannot be contrary to legislation or judicial precedent
46
What is an example case for when equity was used?
Khaliq vs HMA
47
What is equity?
The residual law making power of the main courts
48
What are the two courts that can enact the equity source of law?
Court of Session and High Court of Justiciary
49
What is the first condition for equity as a source of law?
It must only make law where there is a gap in law
50
What is the second condition for equity as a source of law?
When it is essential a remedy must exist
51
What court is highest in the Scottish Civil Courts hierarchy?
Supreme Court
52
What is an appellant court?
A court that deals with appeals from other courts and tribunals
53
Which court is just beneath the Supreme Court in the hierarchy?
The Court of Session - Inner House
54
First instance of a simple procedure - which court do you go to?
Sheriff Court
55
First instance of an ordinary procedure - which court do you go to?
Sheriff Court
56
First instance of a summary procedure - which court do you go to?
Sheriff Court
57
First instance of personal injuries?
All-Scotland Sheriff Personal Injuries Court
58
The matter at hand can't go to the Sheriff Court or All-Scotland Personal Injuries Court, where must it go?
The Court of Session - Outer House
59
If the decision of the Court of Session - Outer House is to be appealed, which court must it go to?
The Court of Session - Inner House
60
If the decision of the Court of Session - Inner House is to be appealed, which court must it go to?
Supreme Court
61
What are the requirements for something to be considered a simple procedure?
Claims must be for payment of less than £5000 or
Delivery of moveable property or
To do something only if also an alternative claim for less than £5000
62
What are the requirements for something to be considered a summary cause procedure?
Claims for recovery of possession of heritable property
Claims for recovery of moveable property (where no alternative claim for a sum of money)
63
What are the requirements for something to be considered an ordinary cause procedure?
Claims for payment of £5000 or above
Most other types of action divorce, interdict, specific implement, etc)
64
In which case can the Sheriff Appeals Court's decision not be appealed?
If the case is for a simple procedure
65
Which court specialises in personal injuries claims?
The All-Scotland Sheriff Personal Injuries Court
66
In which case can the Sheriff Appeals Court's decision be appealed?
If the case is considered either a summary or an ordinary procedure
67
Which court's decisions are binding on all Scottish Civil Courts?
Supreme Court
68
What are the two procedures in Scottish Criminal Courts?
Solemn procedure and summary procedure
69
Between the two procedures in Scottish Criminal Courts, which is more serious?
Solemn procedure
70
In the solemn procedure, is there a jury of 15 people required?
Yes
71
In the summary procedure, is there a jury of 15 people required?
No
72
In the summary procedure, what does the jury decide?
Nothing - there is no jury in a summary procedure
73
In the solemn procedure, what does the jury decide?
The facts and guilt/innocence
74
In the summary procedure, what does the judge decide?
The facts, law, guilt/innocence and sentence
75
In the solemn procedure, what does the judge decide?
The law and sentence
76
When does a solemn procedure case proceed?
When there's an indictment (charge sheet) in the name of the Lord Advocate
77
When does a summary procedure case proceed?
When there's a complaint in the name of the Procurator Fiscal
78
Which are the courts of first instance for a criminal case?
Justice of Peace Court, Sheriff Court and High Court of Justiciary
79
Which are the appellate courts for a criminal case?
High Court of Justiciary and Sheriff Appeal Court
80
What are the requirements for the appeal of a conviction in the High Court of Justiciary?
3 or more judges
81
What are the requirements for the appeal of a sentence in the High Court of Justiciary?
2 judges
82
What are the requirements for the appeal of a conviction in the Sheriff Appeal Court?
3 judges
83
What are the requirements for the appeal of a sentence in the Sheriff Appeal Court?
2 judges
84
Which court is at the top of the Scottish Criminal Courts hierarchy?
High Court of Justiciary
85
Which court may the Justice of the Peace Court and Sheriff Court's appeals go to?
The Sheriff Appeal Court
86
Which kinds of cases go to the Justice of the Peace Court?
Summary procedure only, less serious cases
87
What is the Justice of the Peace Court's maximum administrable fine and sentence?
Fine - £2,500
Sentence - 60 days in prison
88
Which procedures go to the Sheriff Court?
Both summary and solemn procedures
89
What is the Sheriff Court's maximum administrable fine and sentence for a summary procedure?
Fine - £10,000
Sentence - 1 year in prison
90
What is the Sheriff Court's maximum administrable fine and sentence for a solemn procedure?
Fine - Unlimited
Sentence - 5 years
91
Which court handles solemn procedures only?
The High Court of Justiciary sitting as a court of first instance
92
What is the High Court of Justiciary's maximum administrable fine and sentence when sitting as a court of first instance?
Fine - Unlimited
Sentence - Life in prison
93
Which courts does the High Court of Justiciary sitting as an appeals court hear appeals from?
The Sheriff Appeal Court and the High Court of Justiciary sitting as a court of first instance
94
What is the definition of a contract?
An agreement on the same thing between two or more parties who have the capacity to make it, in the form demanded by the law, to perform, on both sides, acts which are not trifling, indeterminate, impossible or illegal
95
Do all contracts need to be in writing?
No
96
When do contracts need to be in writing?
When they are related to buying/mortgaging buildings or land
When it is a consumer credit agreement
97
What are the requirements for there to be a contract?
When each party has:
One or more obligations
One or more rights upon the other party
98
If only one party has obligations then can there be a contract?
No
99
What are express terms in a contract?
Terms agreed between the parties orally or in writing
100
What are implied terms in a contract?
Terms not expressly agreed but implied into the contract by law
101
What are incorporated terms in a contract?
Terms found in a separate document which are expressly or impliedly incorporated into the contract
102
Why is it essential that incorporated terms are validly incorporated?
Otherwise they will not apply
103
What are some cases that relate to contracts?
Mathieson Gee (Ayrshire) Ltd vs Quigley
Bears Sterns Bank v Forum Global Equity
104
If two or more parties agree about the same essential things, but not everything because certain things are non-essential, can there still be a contract?
Yes
105
What is a natural person?
A human
106
What is a legal person?
An entity such as companies, partnerships or local authorities
107
Which two kinds of people lack legal capacity?
The insane
Those under 16
108
What kinds of contracts would be unenforceable by a court and hence not form a contract?
Illegal obligations
Obligations which are impossible
Social arrangements (dates)
109
If the contract lacks formality and is about a consumer credit agreement, can there be a contract?
No
110
What are the two things needed for a contract to form?
Offer and acceptance
111
Is an invitation to treat an offer?
No, it is an indication of the party's willingness to negotiate
112
What are examples of invitations to treat?
Shops, advertisements and estimates
113
What are examples of offers?
Quotes or tender
114
Is silence enough to demonstrate acceptance?
Not normally
115
After the contract is formed, what is the only way it can be altered?
By mutual agreement
116
What is qualified acceptance?
One that contains additional terms, contradictory terms or one in which not all terms in the offer are accepted
117
What kind of 'acceptance' is actually a counter-offer?
Qualified acceptance
118
Is the original offer still available after a counter-offer?
No
119
What is the battle of the forms?
When two organisations keep counter-offering each other with their own form of contract
120
How does the battle of the forms end?
Someone accepts the offer, which means the last offered terms end up being the terms of the contract
121
What is an example case regarding the battle of the forms?
Butler Machine Tool Co Ltd vs Ex-Cell-O Corporation Ltd [1979] 1 All ER 965
122
When are telephone communications considered intimation?
Instantaneously unless unintelligible
123
When are fax and e-mail communications considered intimation?
Whenever they should have been picked up and read in the ordinary course of business
124
When does acceptance by post take effect?
At the time of posting, irrespective of when the letter is received
125
Can the offer ever be withdrawn after being made?
Yes, as long as it's before acceptance
126
If the offeree has not received revocation yet and has accepted, is the offer revoked?
No
127
If the offeree posts acceptance afterwards the offerer revokes the offer before receiving the acceptance in mail, is the contract made?
Yes, because the offer was already accepted at the time of posting
128
What is a void contract?
There has never been a contract
129
What is a voidable contract?
Contract exists but with a substantial defect, will exist until court sets it aside
130
Does a voidable contract enforce rights and obligations while it is not yet set aside?
Yes
131
In which three situations do you lose the right to set aside a voidable contract?
If you wait too long
If 3rd parties have acquired the rights
Parties to the original contract cannot be returned to their pre-contract position
132
Regarding voidable contracts, what is a relevant case you can mention?
Boyd and Forest v Glasgow and South West Railway Company
133
What are the three types of errors with contracts?
Unilateral, common error and mutual error
134
What is a unilateral error in contracts?
Only one party enters the contract under error
135
What is a common error in contracts?
All parties enter into contract under the same error
136
What is a mutual error in contracts?
All parties enter into contract under error but are at cross purposes
137
What is an example case you can use regarding errors in contracts?
Mathieson Gee v Quigley
138
What may be the consequences of unilateral errors on contracts?
Usually no impact, unless it is induced and essential (misrepresentation)
139
What may be the consequences of common errors on contracts?
Essential contract void
Substantial voidable
Or no effect
140
What may be the consequences of mutual errors on contracts?
Essential contract void
Substantial voidable
Or no effect
141
What is a misrepresentation in contracts?
Inducing an error into entering into the contract
142
What is the working definition of misrepresentation?
A false statement of fact (or opinion treated as fact) made by one party to the other at or prior to the contract being entered into and relied upon the other party in deciding to enter the contract
143
What are the three types of misrepresentation?
Innocent
Fraudulent
Negligent
144
What is the impact of an innocent misrepresentation on a contract?
Contract becomes voidable if factors preventing contract being voidable not present
145
What can be claimed against an innocent misrepresentation?
Nothing, there's no claim for damages
146
What is the impact of a fraudulent misrepresentation on a contract?
Contract void if removes essential or
Contract voidable if factors preventing contract being voidable not present
147
What can be claimed against a fraudulent misrepresentation?
Award of damages for loss suffered
148
What is the impact of a negligent misrepresentation on a contract?
Contract voidable if factors preventing contract being voidable not present
149
What can be claimed against a negligent misrepresentation?
Award of damages for loss suffered
150
What other factors may render a contract void or unenforceable?
Lack of capacity
Force and fear
Undue influence
Facility and circumvention
Obligations not legally enforceable
151
What is a breach of contract?
Where one of the parties to the contract, where it is legal and possible to perform their obligations, fails to perform their obligations
152
What are the two categories of remedies for a breach of contract?
Defensive (no court action needed)
Court action
153
What is a lien?
To retain breaching party's property until they fulfill their performance obligations
154
What is retention?
To retain performance of the contract until the other party fulfills their performance obligations
155
What is a recission?
Only if breach is material:
Non-breaching party rescinds the contract and may be able to claim damages
156
What are the three defensive (non-court action) remedies?
Lien
Retention
Recission
157
What are the four court action remedies?
Action of payment
Specific implement
Interdict
Damages
158
What is the action of payment remedy?
Court orders payment of a sum due in terms of contract
Sum of money plus interest and expenses
This decree can be enforced against the party in breach
159
What is the specific implement remedy?
Court orders the party in breach to do what they agreed to in the contract
If they don't do it, they will be held in contempt of court and face prison time and/or a fine
160
What is the interdict remedy?
Court orders breaching party not to do what they agreed in contract not to
If they continue doing it they'll be held in contempt of court and face prison time and/or a fine
161
What is the damages remedy?
Court orders compensation for losses suffered as a result of contract breach
To compensate party not in breach. Not to punish the breaching party
162
What must be proven for the court to order damages be compensated by the breaching party?
Non-breaching party suffered a loss
The loss was reasonably foreseeable when contract entered
The loss was caused by the breach of contract
Party suffering loss took reasonable steps to mitigate their loss
163
What is liquidating damages as a remedy?
To avoid difficulties caused by the law of damages, parties may have agreed in contract an amount of damages payable in the case of a breach
164
Only when will courts enforce liquidating damages?
If they feel it's a genuine attempt to pre-estimate loss, rather than a penalty on the breaching party
165
By which nine ways can a contract be terminated?
PC, find Cap
Performance
Compensation
Frustration
Illegality
Novation
Delegation
Confusion
Acceptilation
Prescription
166
What happens to rights and obligations of a contract when it's terminated?
They are extinguished
167
How does a contract end by performance?
All parties have done their obligations
168
How does a contract end by acceptilation?
One of the parties accepts less performance than they were entitled to in the obligation
169
How does a contract end by compensation?
Party A sets off a sum due to party B due to a larger sum being owed to them by Party B
In other words, one party pays the other party to end the contract
170
How does a contract end by novation?
Acceptance of a new obligation in extinction of a prior obligation
171
How does a contract end by delegation?
Acceptance of a new 'debtor' in contract in release of the existing debtor
172
How does a contract end by confusion?
One of the parties ends up on both sides of the contract
173
How does a contract end by illegality?
Obligation originally legal but has become illegal since entering contract
174
How does a contract end by frustration?
The purpose of contract now impossible due to reasons not in control of the parties
175
How does a contract end by prescription?
Where party with right to enforce performance of obligation doesn't take court action to enforce it in the statutory period of time and the right to enforce is lost
176
What are meetings of members also called?
General meetings
177
Which type of shares allow members to vote at meetings?
Voting shares
178
In which situation can the performance of directors be considered?
A meeting of members
179
What act(s) should members discuss during a general meeting?
Articles of Association
Companies Act 2006
180
Which type of companies do not have to hold general meetings unless required by members?
Private Limited Companies
181
Which type of companies need to hold general meetings?
Public Companies
182
When do public companies need to hold their annual general meeting by?
Within 6 months of the end of its accounting reference year
183
What 4 things are usually discussed during an AGM?
Approval of accounts
Receiving directors' and auditors' reports
Whether a dividend will be declared
Appointment of auditors and directors
184
What is the notice period for holding a GM?
14 days notice in writing to members
185
Who can call a GM whenever they think fit, provided they meet all other criteria?
Directors
Members if they hold 5% voting stock
186
Who can call on directors to hold a GM?
Members with 5% voting stock
187
What is the notice period for members with 5% voting stock to ask directors to hold a GM?
28 days
188
How are decisions made during a GM?
Voting
Either by poll or show of hands
189
How is a show of hands vote counted in a GM?
By the number of members/proxies present, not by the number of shares
190
How is a poll vote counted?
By the number of shares present, not by number of members/proxies
191
How many members are needed to request a poll vote?
5 members
192
Who, aside from 5 members, can request a poll vote?
Any member(s) whose combination of shares are equal to 10% or greater
193
Can the Articles of Association increase the requirements for requesting a poll vote?
No, it can only decrease them
194
Can the Articles of Association decrease the requirements for requesting a poll vote?
Yes, but it can't increase them
195
Who is a proxy?
A person who attends a meeting on behalf of a member and votes on their behalf
196
How do proxies make their decision?
Per the instructions of their owning shareholder
197
Which person is often appointed as a proxy?
The chairman
198
What are the two types of resolutions that can be passed in a general meeting?
Ordinary
Special
199
What is an ordinary resolution?
One in which only a majority needs to be passed
Example: appoint/remove director/auditor, approve dividend
200
What is a special resolution?
Majority of not less than 75%
Example: change name of company/articles/objects
201
Which companies can use a written resolution procedure?
Only private companies
202
What is a written resolution?
Any resolution, ordinary or special, can be passed in written form instead of member meetings
203
How are written resolutions voted on?
Sent and signed electronically
204
How are written resolutions passed?
When requisite majority vote in favour
205
What does The Companies Act 2006 generally govern?
Formation, running and possible dissolution of companies
206
When is a company formed under The Companies Act 2006?
Once the registration process with the Registrar of Companies is complete
and
A certificate of incorporation has been issued
207
If registered office is in Scotland, where is the Registrar of Companies?
Edinburgh
208
If registered office is in England/Wales where is the Registrar of Companies?
Cardiff
209
What determines the nationality of a company?
The registered office's location
210
How must a private company (limited by shares) be named?
Ending in limited or ltd
211
How must a public company be named?
Ending in public limited company or plc
212
Does the Companies Act 2006 place any restrictions on names beyond the ending being plc, or ltd etc?
Yes, names must exclude certain words and cannot be 'too like'
213
What three things are needed to form a company?
Memorandum of Association
Articles of Association
Application form IN01
214
What does the memorandum of association contain?
The object or objectives (business activities) of the company to engage in
215
What happens when the company enters into transactions outwith its objectives in the memorandum of association?
It means the transaction was ultra vires (beyond powers)
216
Who can be sued in the case of an ultra vires contract for any loss suffered?
The director who entered the ultra vires contract
Unless members ratified it
217
What is a way to get around the need for members' ratification for contracts?
By having 'general commercial company' in the objects clause
This allows all legal business activities
218
Where is the objects clause located in a company formed after 2006?
In the Articles of Association
219
Post Companies Act 2006, what is the memorandum of association for?
Merely a document that says those who sign it want to form a company
220
When is members ratification of an ultra vires contract required to avoid director's liability?
If a restrictive objects clause is in place
221
What're the minimum shareholders needed for a public company?
2 shareholders/members
222
What're the minimum shareholders needed for a private limited company?
1 shareholder/member
223
Which formation document is most like the company's constitution?
The Articles of Association
224
What three things do the articles of association define?
Directors' powers and responsibilities
Members rights
Meeting, voting, proxies
225
Which parties are articles of association a contract between?
The company and members
AND
Between members
226
When do companies not have to lodge their articles of association?
If private company limited by shares adopts Schedule 1* model articles
If public company adopts Schedule 3* model articles
227
Which document for company formation defines the name of the company?
Application Form (IN01)
228
Which document for company formation defines the registered office?
Application Form (IN01)
229
Which document for company formation defines the directors and company secretary (with their consent to act)?
Application Form (IN01)
230
Which document for company formation defines the share capital?
Application Form (IN01)
231
Which document for company formation defines the controlling interests?
Application Form (IN01)
232
What is located at the end of an application form (IN01)?
A signed certificate of compliance with legal requirements
233
Once documents are approved by the Registrar, what do they issue?
A certificate of incorporation
234
When does the company come into existence as a separate legal person?
When a certificate of incorporation is issued
235
After receiving a certificate of incorporation, can a private company begin trading?
Yes
236
After receiving a certificate of incorporation, can a public company begin trading?
No
Must first have Section 761* certificate confirming the allocation of minimum share capital (at least issued share capital of £50,000, 25% of which must be fully paid)
237
What are the two ongoing filing obligations for companies?
Lodging annual accounts with Registrar
Updating Registrar with changes in directors, share capital, etc
238
Which case is related to a company's separate personality?
Salomon v Salomon & Co Ltd [1897] A.C. 22 HL
239
Which case is related to the organisation, not members, owning the assets?
Macaura v Northern Assurance
240
For limited liability companies and partnerships, to what extent are the members liable?
To the amount they have agreed to invest
241
What is the veil of incorporation?
It means that the creditors can't look at the members themselves, because the company is its own personality and they must seek payment from instead
242
Which case is related to lifting the veil of incorporation?
Gilford Motor Co v Horne [1933] Ch.935
243
Which 4 situations allow the veil of incorporation to be lifted?
Company is being used to avoid legal obligation (Gilford Motor Co v Horne)
Company is being used for fraudulent purposes or insolvent trading
Company is a mere sham
During times of war to ascertain if behind the company are enemy aliens
244
Which organisations do separate personality, veil of incorporation and its possible lifting relate to?
Companies
Limited Liability Partnerships
245
Which type of organisation's members are liable for its debts without limit?
Partnership
246
What are the benefits of full separate personalities of a limited liability company/limited liability partnership when compared to a sole trader or partnership?
Members have limited liability to their agreed investment amount
The company isn't affected by death/retirement/insanity/bankruptcy of members
247
What are shares, fundamentally? Two points
A contract between company and shareholder
Incorporeal moveable property (series of rights)
248
In the event of a solvent liquidation, which amount is repaid to the shareholder?
The nominal value
249
What is the nominal value of a share?
The value stated on the share
250
Are companies allowed to offer shares at a premium?
Yes
251
Are companies allowed to offer shares at a discount?
No
252
What is the minimum share capital for a private company?
£0.01
253
Can a private company offer their shares to the public?
No
254
Are there often restrictions on private companies' transfer of their shares?
Yes
255
Is there a maximum share capital for private companies?
No
256
How many minimum shareholders must a public company have?
2 Shareholders
257
What is the minimum share capital needed for a public company to start trading?
£50,000
258
How much of the minimum share capital for a public company to start trading needs to be paid?
Only 25%
259
Can a public company offer their shares to the public?
Yes
260
Usually, are there restrictions placed on a public company's transfer of shares?
No
Unless listed on stock exchange or if shares quoted in other way
261
Do public companies have a maximum share capital?
No
262
What contractual rights do shares give the shareholders?
To vote at meetings
To share in the profits (dividend)
To have shares bought back by company
To have shares converted to debentures/loan capital
Return of face value of share in case of liquidation
Share in any excess capital after debts and share capital repaid (solvent liquidation)
263
What do ordinary shares usually represent?
One vote per share
In solvent liquidation, return of nominal value of share
Participation in any excess share capital
264
What do preference shares usually represent?
Right to a dividend at a fixed rate
Preference to payment of their dividend vs other types of shares
To preference to ordinary shares in case of solvent liquidation
265
What are redeemable shares, usually?
To vote at meetings of company
To a dividend - only payable out of profits
To return of nominal value in solvent liquidation
To have shares bought back by company only out of profits or proceeds of other shares
266
What rights do convertible stock usually mean?
To vote at meetings of a company
To dividends only payable out of profits
To have shares converted to debentures/loan capital
To return of nominal value in solvent liquidation
267
What are the two ways to acquire shares?
Original acquisition
Derivative acquisition
268
What is original acquisition in shares?
Shares issued by company and price paid to them, which then forms part of their share capital
269
What is derivative acquisition in shares?
Shares already issued by original acquisition and they are now selling/gifting/bequeathing them to next shareholder
Price paid to them not company
270
What is usually the company's contractual right regarding shares?
To be paid
271
Can shares be issued by the company partially paid?
Yes
Then payable depending on contract
272
If a PLC's shares are trading at £500 but their nominal value is £1, which value will be paid out to shareholders who bought them at £500 in a solvent liquidation?
Only the nominal value
So £1
273
Can shares decrease in value?
Yes, they can even decrease to nil
274
When can a minority shareholder seek redress against a majority shareholder?
Where proposed / actual act by way of negligence, default, breach of trust, breach of duty
275
Can a minority shareholder raise an action in the name of the company?
Yes
In limited circumstances minority shareholder can raise action in own name
276
When can a minority shareholder raise an action in the name of the company?
Only when approval has been obtained from court
277
Which act contains protections for minority shareholders?
Companies Act 2006
278
What does section 994 of CA 2006 relate to?
Allowing a member to petition court to declare if the company's affairs have been conducted in a prejudicial manner to the members generally or to particular members
279
If section 994 CA 2006 petition is successful, what are the possible remedies?
Regarding protections for minority shareholder
Company to carry out or not carry out certain actions
Members of company to buy out minority shareholders at fair price
Any other order as fit
280
What are the two types of directors?
Executive
Non-Executive
281
What is an executive director?
Responsible for day to day management of company
Have a contract
282
What is a non-executive director?
Directors who provide expertise, advice and supervision.
Non-executive directors are more common in large companies
283
What does the board of directors manage?
The overall policies
284
What does the board of directors leave to managers?
Day to day management
285
Can the board normally delegate powers to one or more directors?
Yes
286
Who runs the board of directors?
The chair, who is normally a separate individual from the Chief Executive Officer
287
How is the business of the board carried out?
By vote, simple majority
288
Does the chair of the board have a vote in all meetings of board and members?
Yes
289
What are the 6 duties of a director?
1. obey the constitution of the company and act for a proper purpose
2. promote success of company
3. exercise independent judgement
4. avoid conflicts of interest
5. not to accept benefits from third parties
6. declare any interest in proposed transactions of the company
also to exercise reasonable skill, care, due diligence
290
What are the 4 remedies for a director's breach of their duties?
a. damages for loss suffered by company
b. restoration of company's property
c. accounting of profits made by the director
d. recission of any contract entered into where director failed to disclose interest in it
For breach of lack of due diligence / negligence, remedy is damages
291
Pre Enterprise Act 2002, what were the two options for companies in financial difficulty?
1. Receivership
2. Liquidation
292
Which act did the Enterprise Act 2002 amend?
Insolvency Act 1986
293
What are the 3 statutory objectives of administration?
1. to rescue company as a going concern
2. to achieve better result for creditors overall than winding up
3. to realise property to make distribution to secured or preferred creditor(s), as long as can be done with regard to company's creditors as a whole
294
Who can administrator be appointed by through the court?
Court on request of company
Member
Director
Creditor
Floating charge holder
295
Who can administrator be appointed by without going through the court?
Qualified floating charge holder
296
Who must be notified of administrator appointment and within what time frame?
Registrar must be informed
Within 21 days
297
What 5 things happen in administration?
1. Director's powers suspended
2. Administrator takes charge of company with full powers
3. Administration of company must be published on all company documentation
4. Company granted moratorium from creditors
5. During moratorium, creditors cannot take action to enforce debts, appoint receiver and/or place company in liquidation
298
If requested, what must happen within 11 days of the request during administration?
Administrator obtains statement of company's affairs from company's accountant
It details company's assets and liabilities
299
What must the administrator do within 8 weeks of adminstration?
Must make statement of proposal on how the purposes of administration would be achieved
300
What must happen within 10 weeks of administration?
Administrator presents proposal to creditors and the creditors vote my simple majority whether they approve proposal
301
What 5 powers does the administrator have?
1. Sell company property
2. Raise or borrow money for company
3. Remove or appoint directors as appropriate
4. Bring/Defend legal action in company's name
5. Call meetings of creditors or members
302
What are the 3 reasons administration may terminate?
1. Purpose has been achieved
2. Purpose cannot be achieved and company enters liquidation
3. After 12 months since administrator's appointment, though period can be extended with consent of creditors or court
303
Which 3 categories does personal insolvency apply to?
Natural individuals such as sole traders/partners
Partnerships
Limited Partnerships
304
Which 2 categories does corporate insolvency apply to?
Companies (all types)
Limited liability partnerships
305
What may happen in a personal insolvency?
Will consider debtor having estate sequestrated and becoming bankrupt
306
What 3 things may happen in a corporate insolvency?
1. Receivership
2. Administration
3. Liquidation - voluntary or compulsory
307
Which are the main provisions for liquidation?
Insolvency Act 1986
The Insolvency (Scotland) (Receivership and Winding up) Rules 2018
308
Which is a provision specific to a Limited Liability Partnership undergoing liquidation?
Limited Liability Partnership Act 2000
309
What are the two types of liquidation?
Voluntary
Involuntary
310
What are the two options for voluntary liquidation?
Members voluntary liquidation
Creditors voluntary liquidation
311
In a members voluntary liquidation, what must happen no more than 5 weeks prior to members' meeting?
Directors provide declaration that company is solvent (including details of assets and liabilities), and able to pay all debts within 12 months
312
In a members voluntary liquidation, what are the 5 steps after directors provide declaration of solvency in correct time?
Members pass special resolution to wind up company
Appointment of liquidator
Company in liquidation from date of passing the resolution
Copy of declaration and resolution sent to Registrar and AiB
Published in Gazette
313
What are the steps in a creditors voluntary liquidation?
No declaration of solvency
Members pass special resolution to wind up
Copy of resolution sent to Registrar and AiB
Passing of resolution advertised in Gazette (15 days)
Meeting of creditors called (within 14 days)
At meeting, creditors appoint liquidator (registrar and AiB notified, published in Gazette)
314
What is compulsory liquidation?
When the court orders the company to enter liquidation
315
If paid up share capital is LESS than £120,000, which court does the compulsory liquidation petition go to?
Sheriff Court or Court of Session
316
If paid up share capital is MORE than £120,000, which court does the compulsory liquidation petition go to?
Court of Session
317
Which parties can petition the court for a compulsory liquidation?
Company itself
Directors
Members
Creditor(s)
318
What must a petition for compulsory liquidation demonstrate?
Grounds for winding up
319
What are the 4 possible grounds for winding up?
a. Company has passed special resolution to be wound up by court
b. If plc has not obtained certificate in terms of section 761 of Companies Act (issued £50,000 share cap) within 12 months
c. Company unable to pay its debts
d. It is just and equitable the company is wound up
320
If the grounds for winding up is company unable to pay its debts, what are three ways this can be proven?
1. Service of statutory demand of payment of £750 and remains unpaid or unsecured after 3 weeks
2. Charge for payment served and remains unpaid after expiry of induciae
3. Proved to satisfaction of court company unable to pay debts
321
If the grounds for winding up is that it would be just and equitable for it to do so, what are 4 examples reasons for this?
1. Company has lost its substratum
2. Illegality of company's activities
3. Deadlock in management of the company
4. Oppressive conduct by the majority of shareholders or directors
322
Which case can be used to support that it would be just and equitable to wind up because the company has lost its substratum?
Duneau v Klimt Invest SA & Ors [2022] EWHC 596
323
Which case can be used to support that it would be just and equitable to wind up because the company's activities are illegal?
Re Thomas Brindsmead and Sons Ltd [1897]
324
Which case can be used to support that it would be just and equitable to wind up because there's a deadlock in the management of the company?
Re Yenidje Tobacco Co Ltd [1935]
325
Which case can be used to support that it would be just and equitable to wind up because there's oppressive conduct by majority of shareholders or directors?
Lock v John Blackwood Ltd [1924]
326
What are the 4 steps in a compulsory liquidation if petition granted by court?
Interim liquidator appointed (company now in liquidation)
Notified to Registrar and AiB
Meeting of creditors held
Creditors appoint Liquidator (notified to Registrar, AiB and advertised in Gazette)
327
What're the effects of liquidation?
Liquidator in charge - directors' powers suspended
Business documents must show company is in liquidation
Company stops business except for what's needed to wind up company
All sales of property or transfers of shares are void unless court says otherwise
Legal proceedings may be taken against company only with consent of court
Floating charges attach
The company stays a legal person until wound up
328
What are the 11 functions of a liquidator?
Gather company assets
Settle contributories list
Adjudicate claims
Pay in specific order the creditors
Discharge company debts
Repay members
Redistribute surplus to members
Prepare full accounts
Call final meeting of creditors/members
Send final accounts to Registrar
Apply for dissolution
329
What are the two types of challengeable transactions in liquidation?
a. Gratuitous alienations
b. Unfair preferences
both from insolvency act 1986
330
What is the order of payment in liquidation?
1. Secured creditors
2. Liquidator's fees and expenses
3. Preferential creditors - employees arrears of wages up to £800 and holiday pay
4. Secondary preferential creditors (HMRC - PAYE, VAT, NIC)
5. Floating charge holders and unsecured creditors for prescribed part of sales secured by floating charge (50% first £10k, then 20% of £10k to £600k)
6. Unsecured creditors
7. Shareholders
331
When is liquidation terminated?
Liquidator paid those entitled
Prepares final accounts and held final meeting
Applies to Registrar for dissolution
If granted, both liquidation and the company at an end
332
receivership, and both personal insolvency parts left to add
