Mock Flashcards

Question

Model articles , 9.

Answer 1

Calling a directors’ meeting 9 ( 1 ) Any director may call a directors’ meeting by giving notice of the meeting to the directors or by authorising the company secretary (if any) to give such notice. (2) Notice of any directors’ meeting must indicate— (a) its proposed date and time; (b) where it is to take place; and (c) if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. (3) Notice of a directors’ meeting must be given to each director, but need not be in writing. (4) Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it.

Answer 2

Quorum for directors’ meetings 11 (1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two. (3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision— (a) to appoint further directors, or (b) to call a general meeting so as to enable the shareholders to appoint further directors

Answer 3

Casting vote 13 (1) If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote. But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decision-making process for quorum or voting purposes

Answer 4

Conflicts of interest 14 ( 1 ) If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes. (2) But if paragraph (3) applies, a director who is interested in an actual or proposed transaction or arrangement with the company is to be counted as participating in the decision-making process for quorum and voting purposes. (3) This paragraph applies when— (a) the company by ordinary resolution disapplies the provision of the articles which would otherwise prevent a director from being counted as participating in the deci¬sion-making process; (b) the director’s interest cannot reasonably be regarded as likely to give rise to a conflict of interest; or (c) the director’s conflict of interest arises from a permitted cause. (4) For the purposes of this article, the following are permitted causes— (a) a guarantee given, or to be given, by or to a director in respect of an obligation incurred by or on behalf of the company or any of its subsidiaries; (b) subscription, or an agreement to subscribe, for shares or other securities of the com¬pany or any of its subsidiaries, or to underwrite, sub-underwrite, or guarantee sub¬scription for any such shares or securities; and (c) arrangements pursuant to which benefits are made available to employees and direc¬tors or former employees and directors of the company or any of its subsidiaries which do not provide special benefits for directors or former directors. (5) For the purposes of this article, references to proposed decisions and decision-making processes include any directors’ meeting or part of a directors’ meeting. (6) Subject to paragraph (7), if a question arises at a meeting of directors or of a committee of directors as to the right of a director to participate in the meeting (or part of the meeting) for voting or quorum purposes, the question may, before the conclusion of the meeting, be referred to the chairman whose ruling in relation to any director other than the chairman is to be final and conclusive. (7) If any question as to the right to participate in the meeting (or part of the meeting) should arise in respect of the chairman, the question is to be decided by a decision of the directors at that meeting, for which purpose the chairman is not to be counted as participating in the meeting (or that part of the meeting) for voting or quorum purposes.

Answer 5

Records of decisions to be kept 15 The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors.

Answer 6

Methods of appointing directors 17 (1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director— (a) by ordinary resolution, or (b) by a decision of the directors. (2) In any case where, as a result of death, the company has no shareholders and no directors, the personal representatives of the last shareholder to have died have the right, by notice in writing, to appoint a person to be a director. (3) For the purposes of paragraph (2), where 2 or more shareholders die in circumstances rendering it uncertain who was the last to die, a younger shareholder is deemed to have survived an older shareholder.

Answer 7

Directors’ remuneration 19 (1) Directors may undertake any services for the company that the directors decide. (2) Directors are entitled to such remuneration as the directors determine— (a) for their services to the company as directors, and (b) for any other service which they undertake for the company. (3) Subject to the articles, a director’s remuneration may— (a) take any form, and (b) include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that director. (4) Unless the directors decide otherwise, directors’ remuneration accrues from day to day. (5) Unless the directors decide otherwise, directors are not accountable to the company for any remuneration which they receive as directors or other officers or employees of the company’s subsidiaries or of any other body corporate in which the company is interested.

Answer 8

All shares to be fully paid up 21 (1 ) No share is to be issued for less than the aggregate of its nominal value and any premium to be paid to the company in consideration for its issue. This does not apply to shares taken on the formation of the company by the subscribers to the company’s memorandum

Answer 9

Share transfers 26 (1) Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of the transferor. (2) No fee may be charged for registering any instrument of transfer or other document relating to or affecting the title to any share. (3) The company may retain any instrument of transfer which is registered. (4) The transferor remains the holder of a share until the transferee’s name is entered in the register of members as holder of it. (5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.

Answer 10

21Amendment of articles (1) A company may amend its articles by special resolution. (2) In the case of a company that is a charity, this is subject to— (a) in England and Wales, [F1sections 197 and 198 of the Charities Act 2011]; (b) in Northern Ireland, [F2section 96 of the Charities Act (Northern Ireland) 2008] . (3) In the case of a company that is registered in the Scottish Charity Register, this is subject to— (a) section 112 of the Companies Act 1989 (c. 40), and (b) section 16 of the Charities and Trustee Investment (Scotland) Act 2005 (asp 10).

Answer 11

26Registrar to be sent copy of amended articles (1) Where a company amends its articles it must send to the registrar a copy of the articles as amended not later than 15 days after the amendment takes effect. (2) This section does not require a company to set out in its articles any provisions of model articles that— (a) are applied by the articles, or (b) apply by virtue of section 20 (default application of model articles). (3) If a company fails to comply with this section an offence is committed by— (a) the company, and (b) every officer of the company who is in default. (4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Answer 12

77Change of name (1) A company may change its name— (a) by special resolution (see section 78), or (b) by other means provided for by the company's articles (see section 79). (2) The name of a company may also be changed— (a) by resolution of the directors acting under section 64 (change of name to comply with direction of Secretary of State under that section); (b) on the determination of a new name by a company names adjudicator under section 73 (powers of adjudicator on upholding objection to company name); (c) on the determination of a new name by the court under section 74 (appeal against decision of company names adjudicator); (d) under section 1033 (company's name on restoration to the register).

Answer 13

281Resolutions (1)A resolution of the members (or of a class of members) of a private company must be passed— (a)as a written resolution in accordance with Chapter 2, or (b)at a meeting of the members (to which the provisions of Chapter 3 apply). (2)A resolution of the members (or of a class of members) of a public company must be passed at a meeting of the members (to which the provisions of Chapter 3 and, where relevant, Chapter 4 apply). (3)Where a provision of the Companies Acts— (a)requires a resolution of a company, or of the members (or a class of members) of a company, and (b)does not specify what kind of resolution is required, what is required is an ordinary resolution unless the company's articles require a higher majority (or unanimity). (4)Nothing in this Part affects any enactment or rule of law as to— (a)things done otherwise than by passing a resolution, (b)circumstances in which a resolution is or is not treated as having been passed, or (c)cases in which a person is precluded from alleging that a resolution has not been duly passed.

Answer 14

282Ordinary resolutions (1) An ordinary resolution of the members (or of a class of members) of a company means a resolution that is passed by a simple majority. (2) A written resolution is passed by a simple majority if it is passed by members representing a simple majority of the total voting rights of eligible members (see Chapter 2). (3) A resolution passed at a meeting on a show of hands is passed by a simple majority if it is passed by [F1a simple majority of the votes cast by those entitled to vote] (4) A resolution passed on a poll taken at a meeting is passed by a simple majority if it is passed by members representing a simple majority of the total voting rights of members who (being entitled to do so) vote [F2in person, by proxy or in advance (see section 322A)] on the resolution. (5) Anything that may be done by ordinary resolution may also be done by special resolution

Answer 15

(1) A special resolution of the members (or of a class of members) of a company means a resolution passed by a majority of not less than 75%. (2) A written resolution is passed by a majority of not less than 75% if it is passed by members representing not less than 75% of the total voting rights of eligible members (see Chapter 2). (3) Where a resolution of a private company is passed as a written resolution— (a) the resolution is not a special resolution unless it stated that it was proposed as a special resolution, and (b) if the resolution so stated, it may only be passed as a special resolution. (4) A resolution passed at a meeting on a show of hands is passed by a majority of not less than 75% if it is passed by [F1not less than 75% of the votes cast by those entitled to vote.] (5) A resolution passed on a poll taken at a meeting is passed by a majority of not less than 75% if it is passed by members representing not less than 75% of the total voting rights of the members who (being entitled to do so) vote [F2in person, by proxy or in advance (see section 322A)] on the resolution. (6) Where a resolution is passed at a meeting— (a) the resolution is not a special resolution unless the notice of the meeting included the text of the resolution and specified the intention to propose the resolution as a special resolution, and (b) if the notice of the meeting so specified, the resolution may only be passed as a special resolution.

Answer 16

284Votes: general rules (1)On a vote on a written resolution— (a)in the case of a company having a share capital, every member has one vote in respect of each share or each £10 of stock held by him, and (b)in any other case, every member has one vote. [F1(2)On a vote on a resolution on a show of hands at a meeting, each member present in person has one vote.] (3)On a vote on a resolution on a poll taken at a meeting— (a)in the case of a company having a share capital, every member has one vote in respect of each share or each £10 of stock held by him, and (b)in any other case, every member has one vote. (4)The provisions of this section have effect subject to any provision of the company's articles. [F2(5)Nothing in this section is to be read as restricting the effect of— • section 152 (exercise of rights by nominees), • section 285 (voting by proxy), • section 322 (exercise of voting rights on poll), • section 322A (voting on a poll: votes cast in advance), or • section 323 (representation of corporations at meetings).]

Answer 17

288Written resolutions of private companies (1)In the Companies Acts a “written resolution” means a resolution of a private company proposed and passed in accordance with this Chapter. (2)The following may not be passed as a written resolution— (a)a resolution under section 168 removing a director before the expiration of his period of office; (b)a resolution under section 510 removing an auditor before the expiration of his term of office. (3)A resolution may be proposed as a written resolution— (a)by the directors of a private company (see section 291), or (b)by the members of a private company (see sections 292 to 295). (4)References in enactments passed or made before this Chapter comes into force to— (a)a resolution of a company in general meeting, or (b)a resolution of a meeting of a class of members of the company, have effect as if they included references to a written resolution of the members, or of a class of members, of a private company (as appropriate). (5)A written resolution of a private company has effect as if passed (as the case may be)— (a)by the company in general meeting, or (b)by a meeting of a class of members of the company, and references in enactments passed or made before this section comes into force to a meeting at which a resolution is passed or to members voting in favour of a resolution shall be construed accordingly.

Answer 18

289Eligible members (1) In relation to a resolution proposed as a written resolution of a private company, the eligible members are the members who would have been entitled to vote on the resolution on the circulation date of the resolution (see section 290). (2) If the persons entitled to vote on a written resolution change during the course of the day that is the circulation date of the resolution, the eligible members are the persons entitled to vote on the resolution at the time that the first copy of the resolution is sent or submitted to a member for his agreement.

Answer 19

290 290Circulation date References in this Part to the circulation date of a written resolution are to the date on which copies of it are sent or submitted to members in accordance with this Chapter (or if copies are sent or submitted to members on different days, to the first of those days).

Answer 20

291, 291Circulation of written resolutions proposed by directors (1)This section applies to a resolution proposed as a written resolution by the directors of the company. (2)The company must send or submit a copy of the resolution to every eligible member. (3)The company must do so— (a)by sending copies at the same time (so far as reasonably practicable) to all eligible members in hard copy form, in electronic form or by means of a website, or (b)if it is possible to do so without undue delay, by submitting the same copy to each eligible member in turn (or different copies to each of a number of eligible members in turn), or by sending copies to some members in accordance with paragraph (a) and submitting a copy or copies to other members in accordance with paragraph (b). (4)The copy of the resolution must be accompanied by a statement informing the member— (a)how to signify agreement to the resolution (see section 296), and (b)as to the date by which the resolution must be passed if it is not to lapse (see section 297). (5)In the event of default in complying with this section, an offence is committed by every officer of the company who is in default. (6)A person guilty of an offence under this section is liable— (a)on conviction on indictment, to a fine; (b)on summary conviction, to a fine not exceeding the statutory maximum. (7)The validity of the resolution, if passed, is not affected by a failure to comply with this section.

Answer 21

297Period for agreeing to written resolution (1) A proposed written resolution lapses if it is not passed before the end of— (a) the period specified for this purpose in the company's articles, or (b) if none is specified, the period of 28 days beginning with the circulation date. (2) The agreement of a member to a written resolution is ineffective if signified after the expiry of that period.

Answer 22

301, 301Resolutions at general meetings A resolution of the members of a company is validly passed at a general meeting if— (a)notice of the meeting and of the resolution is given, and (b)the meeting is held and conducted, in accordance with the provisions of this Chapter (and, where relevant, Chapter 4) and the company's articles.

Answer 23

CA 2006 S 302

Answer 24

307Notice required of general meeting [F1(A1)This section applies to— (a)a general meeting of a company that is not a traded company; and (b)a general meeting of a traded company that is an opted-in company (as defined by section 971(1)), where— (i)the meeting is held to decide whether to take any action that might result in the frustration of a takeover bid for the company; or (ii)the meeting is held by virtue of section 969 (power of offeror to require general meeting to be held). (A2)For corresponding provision(s) in relation to general meetings of traded companies (other than meetings within subsection (A1)(b)), see section 307A.] (1)A general meeting of a private company (other than an adjourned meeting) must be called by notice of at least 14 days. (2)A general meeting of a public company (other than an adjourned meeting) must be called by notice of— (a)in the case of an annual general meeting, at least 21 days, and (b)in any other case, at least 14 days. (3)The company's articles may require a longer period of notice than that specified in subsection (1) or (2). (4)A general meeting may be called by shorter notice than that otherwise required if shorter notice is agreed by the members. (5)The shorter notice must be agreed to by a majority in number of the members having a right to attend and vote at the meeting, being a majority who— (a)together hold not less than the requisite percentage in nominal value of the shares giving a right to attend and vote at the meeting (excluding any shares in the company held as treasury shares), or (b)in the case of a company not having a share capital, together represent not less than the requisite percentage of the total voting rights at that meeting of all the members. (6)The requisite percentage is— (a)in the case of a private company, 90% or such higher percentage (not exceeding 95%) as may be specified in the company's articles; (b)in the case of a public company, 95%. (7)Subsections (5) and (6) do not apply to an annual general meeting of a public company (see instead section 337(2)).

Answer 25

308Manner in which notice to be given Notice of a general meeting of a company must be given— (a)in hard copy form, (b)in electronic form, or (c)by means of a website (see section 309), or partly by one such means and partly by another

Answer 26

310, 310Persons entitled to receive notice of meetings (1)Notice of a general meeting of a company must be sent to— (a)every member of the company, and (b)every director. (2)In subsection (1), the reference to members includes any person who is entitled to a share in consequence of the death or bankruptcy of a member, if the company has been notified of their entitlement. (3)In subsection (2), the reference to the bankruptcy of a member includes— (a)the sequestration of the estate of a member; (b)a member's estate being the subject of a protected trust deed (within the meaning of the Bankruptcy (Scotland) Act [F12016]). (4)This section has effect subject to— (a)any enactment, and (b)any provision of the company's articles.

Answer 27

318 318Quorum at meetings (1)In the case of a company limited by shares or guarantee and having only one member, one qualifying person present at a meeting is a quorum. (2)In any other case, subject to the provisions of the company's articles, two qualifying persons present at a meeting are a quorum, unless— (a)each is a qualifying person only because he is authorised under section 323 to act as the representative of a corporation in relation to the meeting, and they are representatives of the same corporation; or (b)each is a qualifying person only because he is appointed as proxy of a member in relation to the meeting, and they are proxies of the same member. (3)For the purposes of this section a “qualifying person” means— (a)an individual who is a member of the company, (b)a person authorised under section 323 (representation of corporations at meetings) to act as the representative of a corporation in relation to the meeting, or (c)a person appointed as proxy of a member in relation to the meeting.

Answer 28

319Chairman of meeting (1) A member may be elected to be the chairman of a general meeting by a resolution of the company passed at the meeting. (2) Subsection (1) is subject to any provision of the company's articles that states who may or may not be chairman.

Answer 29

320Declaration by chairman on a show of hands (1)On a vote on a resolution at a meeting on a show of hands, a declaration by the chairman that the resolution— (a)has or has not been passed, or (b)passed with a particular majority, is conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. (2)An entry in respect of such a declaration in minutes of the meeting recorded in accordance with section 355 is also conclusive evidence of that fact without such proof. (3)This section does not have effect if a poll is demanded in respect of the resolution (and the demand is not subsequently withdrawn).

Answer 30

321Right to demand a poll (1) A provision of a company's articles is void in so far as it would have the effect of excluding the right to demand a poll at a general meeting on any question other than— (a) the election of the chairman of the meeting, or (b) the adjournment of the meeting. (2) A provision of a company's articles is void in so far as it would have the effect of making ineffective a demand for a poll on any such question which is made— (a) by not less than 5 members having the right to vote on the resolution; or (b) by a member or members representing not less than 10% of the total voting rights of all the members having the right to vote on the resolution (excluding any voting rights attached to any shares in the company held as treasury shares); or (c) by a member or members holding shares in the company conferring a right to vote on the resolution, being shares on which an aggregate sum has been paid up equal to not less than 10% of the total sum paid up on all the shares conferring that right (excluding shares in the company conferring a right to vote on the resolution which are held as treasury shares).

Answer 31

322Voting on a poll On a poll taken at a general meeting of a company, a member entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way

Answer 32

323 323Representation of corporations at meetings (1)If a corporation (whether or not a company within the meaning of this Act) is a member of a company, it may by resolution of its directors or other governing body authorise a person or persons to act as its representative or representatives at any meeting of the company. [F1(2)A person authorised by a corporation is entitled to exercise (on behalf of the corporation) the same powers as the corporation could exercise if it were an individual member of the company. Where a corporation authorises more than one person, this subsection is subject to subsections (3) and (4). (3)On a vote on a resolution on a show of hands at a meeting of the company, each authorised person has the same voting rights as the corporation would be entitled to. (4)Where subsection (3) does not apply and more than one authorised person purport to exercise a power under subsection (2) in respect of the same shares— (a)if they purport to exercise the power in the same way as each other, the power is treated as exercised in that way; (b)if they do not purport to exercise the power in the same way as each other, the power is treated as not exercised.]

Answer 33

324Rights to appoint proxies (1) A member of a company is entitled to appoint another person as his proxy to exercise all or any of his rights to attend and to speak and vote at a meeting of the company. (2) In the case of a company having a share capital, a member may appoint more than one proxy in relation to a meeting, provided that each proxy is appointed to exercise the rights attached to a different share or shares held by him, or (as the case may be) to a different £10, or multiple of £10, of stock held by him.

Answer 34

325, 325Notice of meeting to contain statement of rights (1)In every notice calling a meeting of a company there must appear, with reasonable prominence, a statement informing the member of— (a)his rights under section 324, and (b)any more extensive rights conferred by the company's articles to appoint more than one proxy. (2)Failure to comply with this section does not affect the validity of the meeting or of anything done at the meeting. (3)If this section is not complied with as respects any meeting, an offence is committed by every officer of the company who is in default. (4)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.

Answer 35

355Records of resolutions and meetings etc (1) Every company must keep records comprising— (a) copies of all resolutions of members passed otherwise than at general meetings, (b) minutes of all proceedings of general meetings, and (c) details provided to the company in accordance with section 357 (decisions of sole member). (2) The records must be kept for at least ten years from the date of the resolution, meeting or decision (as appropriate). (3) If a company fails to comply with this section, an offence is committed by every officer of the company who is in default. (4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Answer 36

358Inspection of records of resolutions and meetings (1) The records referred to in section 355 (records of resolutions etc) relating to the previous ten years must be kept available for inspection— (a) at the company's registered office, or (b) at a place specified in regulations under section 1136.

Answer 37

360Computation of periods of notice etc: clear day rule (1)This section applies for the purposes of the following provisions of this Part— • section 307(1) and (2) (notice required of general meeting), • [F1section 307A(1), (4), (5) and (7)(b) (notice required of general meeting of traded company), ] • section 312(1) and (3) (resolution requiring special notice), • section 314(4)(d) (request to circulate members' statement), • section 316(2)(b) (expenses of circulating statement to be deposited or tendered before meeting), • [F2section 337(3) (contents of notice of AGM of traded company),] • section 338(4)(d)(i) (request to circulate member's resolution at AGM of public company),F3. . . • [F4section 338A(5) (request to include matter in the business to be dealt with at AGM of traded company),] • section 340(2)(b)(i) (expenses of circulating statement to be deposited or tendered before meeting)[F5, and • section 340B(2)(b) (traded companies: duty to circulate members' matters for AGM).] (2)Any reference in those provisions to a period of notice, or to a period before a meeting by which a request must be received or sum deposited or tendered, is to a period of the specified length excluding— (a)the day of the meeting, and (b)the day on which the notice is given, the request received or the sum deposited or tendered.

Answer 38

502Auditor's rights in relation to resolutions and meetings (1) In relation to a written resolution proposed to be agreed to by a private company, the company's auditor is entitled to receive all such communications relating to the resolution as, by virtue of any provision of Chapter 2 of Part 13 of this Act, are required to be supplied to a member of the company. (2) A company's auditor is entitled— (a) to receive all notices of, and other communications relating to, any general meeting which a member of the company is entitled to receive, (b) to attend any general meeting of the company, and (c) to be heard at any general meeting which he attends on any part of the business of the meeting which concerns him as auditor. (3) Where the auditor is a firm, the right to attend or be heard at a meeting is exercisable by an individual authorised by the firm in writing to act as its representative at the meeting.

Answer 39

1147Deemed delivery of documents and information (1)This section applies in relation to documents and information sent or supplied by a company. (2)Where— (a)the document or information is sent by post (whether in hard copy or electronic form) to an address in the United Kingdom, and (b)the company is able to show that it was properly addressed, prepaid and posted, it is deemed to have been received by the intended recipient 48 hours after it was posted. (3)Where— (a)the document or information is sent or supplied by electronic means, and (b)the company is able to show that it was properly addressed, it is deemed to have been received by the intended recipient 48 hours after it was sent. (4)Where the document or information is sent or supplied by means of a website, it is deemed to have been received by the intended recipient— (a)when the material was first made available on the website, or (b)if later, when the recipient received (or is deemed to have received) notice of the fact that the material was available on the website. (5)In calculating a period of hours for the purposes of this section, no account shall be taken of any part of a day that is not a working day. (6)This section has effect subject to— (a)in its application to documents or information sent or supplied by a company to its members, any contrary provision of the company's articles; (b)in its application to documents or information sent or supplied by a company to its debentures holders, any contrary provision in the instrument constituting the debentures; (c)in its application to documents or information sent or supplied by a company to a person otherwise than in his capacity as a member or debenture holder, any contrary provision in an agreement between the company and that person.

Answer 40

1168Hard copy and electronic form and related expressions (1)The following provisions apply for the purposes of the Companies Acts. (2)A document or information is sent or supplied in hard copy form if it is sent or supplied in a paper copy or similar form capable of being read. References to hard copy have a corresponding meaning. (3)A document or information is sent or supplied in electronic form if it is sent or supplied— (a)by electronic means (for example, by e-mail or fax), or (b)by any other means while in an electronic form (for example, sending a disk by post). References to electronic copy have a corresponding meaning. (4)A document or information is sent or supplied by electronic means if it is— (a)sent initially and received at its destination by means of electronic equipment for the processing (which expression includes digital compression) or storage of data, and (b)entirely transmitted, conveyed and received by wire, by radio, by optical means or by other electromagnetic means. References to electronic means have a corresponding meaning. (5)A document or information authorised or required to be sent or supplied in electronic form must be sent or supplied in a form, and by a means, that the sender or supplier reasonably considers will enable the recipient— (a)to read it, and (b)to retain a copy of it. (6)For the purposes of this section, a document or information can be read only if— (a)it can be read with the naked eye, or (b)to the extent that it consists of images (for example photographs, pictures, maps, plans or drawings), it can be seen with the naked eye. (7)The provisions of this section apply whether the provision of the Companies Acts in question uses the words “sent” or “supplied” or uses other words (such as “deliver”, “provide”, “produce” or, in the case of a notice, “give”) to refer to the sending or supplying of a document or information.

Answer 41

3Limited and unlimited companies (1)A company is a “limited company” if the liability of its members is limited by its constitution. It may be limited by shares or limited by guarantee

Answer 42

17A company's constitution Unless the context otherwise requires, references in the Companies Acts to a company's constitution include— (a)the company's articles, and (b)any resolutions and agreements to which Chapter 3 applies (see section 29).

Answer 43

87Change of address of registered office (1)A company may change the address of its registered office by giving notice to the registrar. (2)The change takes effect upon the notice being registered by the registrar, but until the end of the period of 14 days beginning with the date on which it is registered a person may validly serve any document on the company at the address previously registered. (3)For the purposes of any duty of a company— (a)to keep available for inspection at its registered office any register, index or other document, or (b)to mention the address of its registered office in any document, a company that has given notice to the registrar of a change in the address of its registered office may act on the change as from such date, not more than 14 days after the notice is given, as it may determine. (4)Where a company unavoidably ceases to perform at its registered office any such duty as is mentioned in subsection (3)(a) in circumstances in which it was not practicable to give prior notice to the registrar of a change in the address of its registered office, but— (a)resumes performance of that duty at other premises as soon as practicable, and (b)gives notice accordingly to the registrar of a change in the situation of its registered office within 14 days of doing so, it is not to be treated as having failed to comply with that duty.

Answer 44

113Register of members (1)Every company must keep a register of its members. (2)There must be entered in the register— (a)the names and addresses of the members, (b)the date on which each person was registered as a member, and (c)the date at which any person ceased to be a member. (3)In the case of a company having a share capital, there must be entered in the register, with the names and addresses of the members, a statement of— (a)the shares held by each member, distinguishing each share— (i)by its number (so long as the share has a number), and (ii)where the company has more than one class of issued shares, by its class, and (b)the amount paid or agreed to be considered as paid on the shares of each member. (4)If the company has converted any of its shares into stock, and given notice of the conversion to the registrar, the register of members must show the amount and class of stock held by each member instead of the amount of shares and the particulars relating to shares specified above. (5)In the case of joint holders of shares or stock in a company, the company's register of members must state the names of each joint holder. In other respects joint holders are regarded for the purposes of this Chapter as a single member (so that the register must show a single address). (6)In the case of a company that does not have a share capital but has more than one class of members, there must be entered in the register, with the names and addresses of the members, a statement of the class to which each member belongs. (7)If a company makes default in complying with this section an offence is committed by— (a)the company, and (b)every officer of the company who is in default. (8)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Answer 45

162Register of directors (1)Every company must keep a register of its directors. (2)The register must contain the required particulars (see sections 163, 164 and 166) of each person who is a director of the company. (3)The register must be kept available for inspection— (a)at the company's registered office, or (b)at a place specified in regulations under section 1136. (4)The company must give notice to the registrar— (a)of the place at which the register is kept available for inspection, and (b)of any change in that place, unless it has at all times been kept at the company's registered office. (5)The register must be open to the inspection— (a)of any member of the company without charge, and (b)of any other person on payment of such fee as may be prescribed. (6)If default is made in complying with subsection (1), (2) or (3) or if default is made for 14 days in complying with subsection (4), or if an inspection required under subsection (5) is refused, an offence is committed by— (a)the company, and (b)every officer of the company who is in default. For this purpose a shadow director is treated as an officer of the company. (7)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding [F1one-tenth of level 5 on the standard scale][F1one-tenth of the greater of £5,000 or level 4 on the standard scale]. (8)In the case of a refusal of inspection of the register, the court may by order compel an immediate inspection of it

Answer 46

165Register of directors' residential addresses (1)Every company must keep a register of directors' residential addresses. (2)The register must state the usual residential address of each of the company's directors. (3)If a director's usual residential address is the same as his service address (as stated in the company's register of directors), the register of directors' residential addresses need only contain an entry to that effect. This does not apply if his service address is stated to be “The company's registered office”. (4)If default is made in complying with this section, an offence is committed by— (a)the company, and (b)every officer of the company who is in default. For this purpose a shadow director is treated as an officer of the company. (5)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding [F1one-tenth of level 5 on the standard scale][F1one-tenth of the greater of £5,000 or level 4 on the standard scale]. (6)This section applies only to directors who are individuals, not where the director is a body corporate or a firm that is a legal person under the law by which it is governed.

Answer 47

167Duty to notify registrar of changes (1)A company must, within the period of 14 days from— (a)a person becoming or ceasing to be a director, or (b)the occurrence of any change in the particulars contained in its register of directors or its register of directors' residential addresses, give notice to the registrar of the change and of the date on which it occurred. (2)Notice of a person having become a director of the company must— (a)contain a statement of the particulars of the new director that are required to be included in the company's register of directors and its register of directors' residential addresses, and [F1(b)be accompanied by a statement by the company that the person has consented to act in that capacity.] (3)Where— (a)a company gives notice of a change of a director's service address as stated in the company's register of directors, and (b)the notice is not accompanied by notice of any resulting change in the particulars contained in the company's register of directors' residential addresses, the notice must be accompanied by a statement that no such change is required. (4)If default is made in complying with this section, an offence is committed by— (a)the company, and (b)every officer of the company who is in default. For this purpose a shadow director is treated as an officer of the company. (5)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding [F2one-tenth of level 5 on the standard scale][F2one-tenth of the greater of £5,000 or level 4 on the standard scale].

Answer 48

177Duty to declare interest in proposed transaction or arrangement (1)If a director of a company is in any way, directly or indirectly, interested in a proposed transaction or arrangement with the company, he must declare the nature and extent of that interest to the other directors. (2)The declaration may (but need not) be made— (a)at a meeting of the directors, or (b)by notice to the directors in accordance with— (i)section 184 (notice in writing), or (ii)section 185 (general notice). (3)If a declaration of interest under this section proves to be, or becomes, inaccurate or incomplete, a further declaration must be made. (4)Any declaration required by this section must be made before the company enters into the transaction or arrangement. (5)This section does not require a declaration of an interest of which the director is not aware or where the director is not aware of the transaction or arrangement in question. For this purpose a director is treated as being aware of matters of which he ought reasonably to be aware. (6)A director need not declare an interest— (a)if it cannot reasonably be regarded as likely to give rise to a conflict of interest; (b)if, or to the extent that, the other directors are already aware of it (and for this purpose the other directors are treated as aware of anything of which they ought reasonably to be aware); or (c)if, or to the extent that, it concerns terms of his service contract that have been or are to be considered— (i)by a meeting of the directors, or (ii)by a committee of the directors appointed for the purpose under the company's constitution

Answer 49

188Directors' long-term service contracts: requirement of members' approval (1)This section applies to provision under which the guaranteed term of a director's employment— (a)with the company of which he is a director, or (b)where he is the director of a holding company, within the group consisting of that company and its subsidiaries, is, or may be, longer than two years. (2)A company may not agree to such provision unless it has been approved— (a)by resolution of the members of the company, and (b)in the case of a director of a holding company, by resolution of the members of that company. (3)The guaranteed term of a director's employment is— (a)the period (if any) during which the director's employment— (i)is to continue, or may be continued otherwise than at the instance of the company (whether under the original agreement or under a new agreement entered into in pursuance of it), and (ii)cannot be terminated by the company by notice, or can be so terminated only in specified circumstances, or (b)in the case of employment terminable by the company by notice, the period of notice required to be given, or, in the case of employment having a period within paragraph (a) and a period within paragraph (b), the aggregate of those periods. (4)If more than six months before the end of the guaranteed term of a director's employment the company enters into a further service contract (otherwise than in pursuance of a right conferred, by or under the original contract, on the other party to it), this section applies as if there were added to the guaranteed term of the new contract the unexpired period of the guaranteed term of the original contract. (5)A resolution approving provision to which this section applies must not be passed unless a memorandum setting out the proposed contract incorporating the provision is made available to members— (a)in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him; (b)in the case of a resolution at a meeting, by being made available for inspection by members of the company both— (i)at the company's registered office for not less than 15 days ending with the date of the meeting, and (ii)at the meeting itself. (6)No approval is required under this section on the part of the members of a body corporate that— (a)is not a UK-registered company, or (b)is a wholly-owned subsidiary of another body corporate. (7)In this section “employment” means any employment under a director's service contract.

Answer 50

228Copy of contract or memorandum of terms to be available for inspection (1)A company must keep available for inspection— (a)a copy of every director's service contract with the company or with a subsidiary of the company, or (b)if the contract is not in writing, a written memorandum setting out the terms of the contract. (2)All the copies and memoranda must be kept available for inspection at— (a)the company's registered office, or (b)a place specified in regulations under section 1136. (3)The copies and memoranda must be retained by the company for at least one year from the date of termination or expiry of the contract and must be kept available for inspection during that time. (4)The company must give notice to the registrar— (a)of the place at which the copies and memoranda are kept available for inspection, and (b)of any change in that place, unless they have at all times been kept at the company's registered office. (5)If default is made in complying with subsection (1), (2) or (3), or default is made for 14 days in complying with subsection (4), an offence is committed by every officer of the company who is in default. (6)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale. (7)The provisions of this section apply to a variation of a director's service contract as they apply to the original contract.

Answer 51

248Minutes of directors' meetings (1) Every company must cause minutes of all proceedings at meetings of its directors to be recorded. (2) The records must be kept for at least ten years from the date of the meeting. (3) If a company fails to comply with this section, an offence is committed by every officer of the company who is in default. (4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.

Answer 52

392Alteration of accounting reference date (1)A company may by notice given to the registrar specify a new accounting reference date having effect in relation to— (a)the company's current accounting reference period and subsequent periods, or (b)the company's previous accounting reference period and subsequent periods. A company's “previous accounting reference period” means the one immediately preceding its current accounting reference period. (2)The notice must state whether the current or previous accounting reference period— (a)is to be shortened, so as to come to an end on the first occasion on which the new accounting reference date falls or fell after the beginning of the period, or (b)is to be extended, so as to come to an end on the second occasion on which that date falls or fell after the beginning of the period. (3)A notice extending a company's current or previous accounting reference period is not effective if given less than five years after the end of an earlier accounting reference period of the company that was extended under this section. This does not apply— (a)to a notice given by a company that is a subsidiary undertaking or parent undertaking of another EEA undertaking if the new accounting reference date coincides with that of the other EEA undertaking or, where that undertaking is not a company, with the last day of its financial year, or (b)where the company is in administration under Part 2 of the Insolvency Act 1986 (c. 45) or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), or (c)where the Secretary of State directs that it should not apply, which he may do with respect to a notice that has been given or that may be given. (4)A notice under this section may not be given in respect of a previous accounting reference period if the period for filing accounts and reports for the financial year determined by reference to that accounting reference period has already expired. (5)An accounting reference period may not be extended so as to exceed 18 months and a notice under this section is ineffective if the current or previous accounting reference period as extended in accordance with the notice would exceed that limit. This does not apply where the company is in administration under Part 2 of the Insolvency Act 1986 (c. 45) or Part 3 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)). (6)In this section “EEA undertaking” means an undertaking established under the law of any part of the United Kingdom or the law of any other EEA State.

Answer 53

43Company contracts (1) Under the law of England and Wales or Northern Ireland a contract may be made— (a) by a company, by writing under its common seal, or (b) on behalf of a company, by a person acting under its authority, express or implied. (2) Any formalities required by law in the case of a contract made by an individual also apply, unless a contrary intention appears, to a contract made by or on behalf of a company.

Answer 54

44Execution of documents (1)Under the law of England and Wales or Northern Ireland a document is executed by a company— (a)by the affixing of its common seal, or (b)by signature in accordance with the following provisions. (2)A document is validly executed by a company if it is signed on behalf of the company— (a)by two authorised signatories, or (b)by a director of the company in the presence of a witness who attests the signature. (3)The following are “authorised signatories” for the purposes of subsection (2)— (a)every director of the company, and (b)in the case of a private company with a secretary or a public company, the secretary (or any joint secretary) of the company. (4)A document signed in accordance with subsection (2) and expressed, in whatever words, to be executed by the company has the same effect as if executed under the common seal of the company. (5)In favour of a purchaser a document is deemed to have been duly executed by a company if it purports to be signed in accordance with subsection (2). A “purchaser” means a purchaser in good faith for valuable consideration and includes a lessee, mortgagee or other person who for valuable consideration acquires an interest in property. (6)Where a document is to be signed by a person on behalf of more than one company, it is not duly signed by that person for the purposes of this section unless he signs it separately in each capacity. (7)References in this section to a document being (or purporting to be) signed by a director or secretary are to be read, in a case where that office is held by a firm, as references to its being (or purporting to be) signed by an individual authorised by the firm to sign on its behalf. (8)This section applies to a document that is (or purports to be) executed by a company in the name of or on behalf of another person whether or not that person is also a company.

Answer 55

46Execution of deeds (1) A document is validly executed by a company as a deed for the purposes of section 1(2)(b) of the Law of Property (Miscellaneous Provisions) Act 1989 (c. 34) and for the purposes of the law of Northern Ireland if, and only if— (a) it is duly executed by the company, and (b) it is delivered as a deed. (2) For the purposes of subsection (1)(b) a document is presumed to be delivered upon its being executed, unless a contrary intention is proved.

Answer 56

87Change of address of registered office (1)A company may change the address of its registered office by giving notice to the registrar. (2)The change takes effect upon the notice being registered by the registrar, but until the end of the period of 14 days beginning with the date on which it is registered a person may validly serve any document on the company at the address previously registered. (3)For the purposes of any duty of a company— (a)to keep available for inspection at its registered office any register, index or other document, or (b)to mention the address of its registered office in any document, a company that has given notice to the registrar of a change in the address of its registered office may act on the change as from such date, not more than 14 days after the notice is given, as it may determine. (4)Where a company unavoidably ceases to perform at its registered office any such duty as is mentioned in subsection (3)(a) in circumstances in which it was not practicable to give prior notice to the registrar of a change in the address of its registered office, but— (a)resumes performance of that duty at other premises as soon as practicable, and (b)gives notice accordingly to the registrar of a change in the situation of its registered office within 14 days of doing so, it is not to be treated as having failed to comply with that duty.

Answer 57

163Particulars of directors to be registered: individuals (1)A company's register of directors must contain the following particulars in the case of an individual— (a)name and any former name; (b)a service address; (c)the country or state (or part of the United Kingdom) in which he is usually resident; (d)nationality; (e)business occupation (if any); (f)date of birth. F1(2)For the purposes of this section “name” means a person's Christian name (or other forename) and surname, except that in the case of— (a)a peer, or (b)an individual usually known by a title, the title may be stated instead of his Christian name (or other forename) and surname or in addition to either or both of them. (3)For the purposes of this section a “former name” means a name by which the individual was formerly known for business purposes. Where a person is or was formerly known by more than one such name, each of them must be stated. (4)It is not necessary for the register to contain particulars of a former name in the following cases— (a)in the case of a peer or an individual normally known by a British title, where the name is one by which the person was known previous to the adoption of or succession to the title; (b)in the case of any person, where the former name— (i)was changed or disused before the person attained the age of 16 years, or (ii)has been changed or disused for 20 years or more. (5)A person's service address may be stated to be “The company's registered office”.

Answer 58

270Private company not required to have secretary (1) A private company is not required to have a secretary. (2) References in the Companies Acts to a private company “without a secretary” are to a private company that for the time being is taking advantage of the exemption in subsection (1); and references to a private company “with a secretary” shall be construed accordingly. (3) In the case of a private company without a secretary— (a) anything authorised or required to be given or sent to, or served on, the company by being sent to its secretary— (i) may be given or sent to, or served on, the company itself, and (ii) if addressed to the secretary shall be treated as addressed to the company; and (b) anything else required or authorised to be done by or to the secretary of the company may be done by or to— (i) a director, or (ii) a person authorised generally or specifically in that behalf by the directors.

Answer 59

275Duty to keep register of secretaries (1)A company must keep a register of its secretaries. (2)The register must contain the required particulars (see sections 277 to 279) of the person who is, or persons who are, the secretary or joint secretaries of the company. (3)The register must be kept available for inspection— (a)at the company's registered office, or (b)at a place specified in regulations under section 1136. (4)The company must give notice to the registrar— (a)of the place at which the register is kept available for inspection, and (b)of any change in that place, unless it has at all times been kept at the company's registered office. (5)The register must be open to the inspection— (a)of any member of the company without charge, and (b)of any other person on payment of such fee as may be prescribed. (6)If default is made in complying with subsection (1), (2) or (3), or if default is made for 14 days in complying with subsection (4), or if an inspection required under subsection (5) is refused, an offence is committed by— (a)the company, and (b)every officer of the company who is in default. For this purpose a shadow director is treated as an officer of the company. (7)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding [F1one-tenth of level 5 on the standard scale][F1one-tenth of the greater of £5,000 or level 4 on the standard scale]. (8)In the case of a refusal of inspection of the register, the court may by order compel an immediate inspection of it.

Answer 60

276 276Duty to notify registrar of changes (1)A company must, within the period of 14 days from— (a)a person becoming or ceasing to be its secretary or one of its joint secretaries, or (b)the occurrence of any change in the particulars contained in its register of secretaries, give notice to the registrar of the change and of the date on which it occurred. (2)Notice of a person having become secretary, or one of joint secretaries, of the company must be accompanied by a [F1statement by the company that the person has consented] to act in the relevant capacity. (3)If default is made in complying with this section, an offence is committed by every officer of the company who is in default. For this purpose a shadow director is treated as an officer of the company. (4)A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding [F2one-tenth of level 5 on the standard scale][F2one-tenth of the greater of £5,000 or level 4 on the standard scale].

Answer 61

Defined terms 1 In the articles, unless the context requires otherwise— “articles” means the company’s articles of association; “bankruptcy” includes individual insolvency proceedings in a jurisdiction other than England and Wales or Northern Ireland which have an effect similar to that of bankruptcy; “chairman” has the meaning given in article 12; “chairman of the meeting” has the meaning given in article 39; “Companies Acts” means the Companies Acts (as defined in section 2 of the Companies Act 2006), in so far as they apply to the company; “director” means a director of the company, and includes any person occupying the position of director, by whatever name called; “distribution recipient” has the meaning given in article 31; “document” includes, unless otherwise specified, any document sent or supplied in electronic form; “electronic form” has the meaning given in section 1168 of the Companies Act 2006; “fully paid” in relation to a share, means that the nominal value and any premium to be paid to the company in respect of that share have been paid to the company; “hard copy form” has the meaning given in section 1168 of the Companies Act 2006; “holder” in relation to shares means the person whose name is entered in the register of members as the holder of the shares; “instrument” means a document in hard copy form; “ordinary resolution” has the meaning given in section 282 of the Companies Act 2006; “paid” means paid or credited as paid; “participate”, in relation to a directors’ meeting, has the meaning given in article 10; “proxy notice” has the meaning given in article 45; “shareholder” means a person who is the holder of a share; “shares” means shares in the company; “special resolution” has the meaning given in section 283 of the Companies Act 2006; “subsidiary” has the meaning given in section 1159 of the Companies Act 2006; “transmittee” means a person entitled to a share by reason of the death or bankruptcy of a shareholder or otherwise by operation of law; and “writing” means the representation or reproduction of words, symbols or other information in a visible form by any method or combination of methods, whether sent or supplied in electronic form or otherwise. Unless the context otherwise requires, other words or expressions contained in these articles bear the same meaning as in the Companies Act 2006 as in force on the date when these articles become binding on the company.

Answer 62

Liability of members 2 | The liability of the members is limited to the amount, if any, unpaid on the shares held by them.

Answer 63

Directors’ general authority 3 Subject to the articles, the directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company.

Answer 64

Shareholders’ reserve power 4 (1) The shareholders may, by special resolution, direct the directors to take, or refrain from taking, specified action. (2) No such special resolution invalidates anything which the directors have done before the passing of the resolution

Answer 65

Directors may delegate 5 (1) Subject to the articles, the directors may delegate any of the powers which are conferred on them under the articles— (a) to such person or committee; (b) by such means (including by power of attorney); (c) to such an extent; (d) in relation to such matters or territories; and (e) on such terms and conditions; as they think fit. (2) If the directors so specify, any such delegation may authorise further delegation of the directors’ powers by any person to whom they are delegated. (3) The directors may revoke any delegation in whole or part, or alter its terms and conditions. Directors to take decisions collectively 7 (1) The general rule about decision-making by directors is that any decision of the directors must be either a majority decision at a meeting or a decision taken in accordance with article 8. (2) If- (a) the company only has one director, and (b) (b) no provision of the articles requires it to have more than one director, the general rule does not apply, and the director may take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.

Answer 66

Calling a directors’ meeting 9 ( 1 ) Any director may call a directors’ meeting by giving notice of the meeting to the directors or by authorising the company secretary (if any) to give such notice. (2) Notice of any directors’ meeting must indicate— (a) its proposed date and time; (b) where it is to take place; and (c) if it is anticipated that directors participating in the meeting will not be in the same place, how it is proposed that they should communicate with each other during the meeting. (3) Notice of a directors’ meeting must be given to each director, but need not be in writing. (4) Notice of a directors’ meeting need not be given to directors who waive their entitlement to notice of that meeting, by giving notice to that effect to the company not more than 7 days after the date on which the meeting is held. Where such notice is given after the meeting has been held, that does not affect the validity of the meeting, or of any business conducted at it.

Answer 67

Quorum for directors’ meetings 11 (1) At a directors’ meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting. (2) The quorum for directors’ meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed it is two. (3) If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision— (a) to appoint further directors, or (b) to call a general meeting so as to enable the shareholders to appoint further directors.

Answer 68

Casting vote 13 (1) If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote. But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decision-making process for quorum or voting purposes

Answer 69

Conflicts of interest 14 ( 1 ) If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision-making process for quorum or voting purposes. (2) But if paragraph (3) applies, a director who is interested in an actual or proposed transaction or arrangement with the company is to be counted as participating in the decision-making process for quorum and voting purposes. (3) This paragraph applies when— (a) the company by ordinary resolution disapplies the provision of the articles which would otherwise prevent a director from being counted as participating in the deci¬sion-making process; (b) the director’s interest cannot reasonably be regarded as likely to give rise to a conflict of interest; or (c) the director’s conflict of interest arises from a permitted cause. (4) For the purposes of this article, the following are permitted causes— (a) a guarantee given, or to be given, by or to a director in respect of an obligation incurred by or on behalf of the company or any of its subsidiaries; (b) subscription, or an agreement to subscribe, for shares or other securities of the com¬pany or any of its subsidiaries, or to underwrite, sub-underwrite, or guarantee sub¬scription for any such shares or securities; and (c) arrangements pursuant to which benefits are made available to employees and direc¬tors or former employees and directors of the company or any of its subsidiaries which do not provide special benefits for directors or former directors. (5) For the purposes of this article, references to proposed decisions and decision-making processes include any directors’ meeting or part of a directors’ meeting. (6) Subject to paragraph (7), if a question arises at a meeting of directors or of a committee of directors as to the right of a director to participate in the meeting (or part of the meeting) for voting or quorum purposes, the question may, before the conclusion of the meeting, be referred to the chairman whose ruling in relation to any director other than the chairman is to be final and conclusive. (7) If any question as to the right to participate in the meeting (or part of the meeting) should arise in respect of the chairman, the question is to be decided by a decision of the directors at that meeting, for which purpose the chairman is not to be counted as participating in the meeting (or that part of the meeting) for voting or quorum purposes.

Answer 70

Records of decisions to be kept 15 The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors.

Answer 71

Methods of appointing directors 17 (1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director— (a) by ordinary resolution, or (b) by a decision of the directors. (2) In any case where, as a result of death, the company has no shareholders and no directors, the personal representatives of the last shareholder to have died have the right, by notice in writing, to appoint a person to be a director. (3) For the purposes of paragraph (2), where 2 or more shareholders die in circumstances rendering it uncertain who was the last to die, a younger shareholder is deemed to have survived an older shareholder.

Answer 72

Directors’ remuneration 19 (1) Directors may undertake any services for the company that the directors decide. (2) Directors are entitled to such remuneration as the directors determine— (a) for their services to the company as directors, and (b) for any other service which they undertake for the company. (3) Subject to the articles, a director’s remuneration may— (a) take any form, and (b) include any arrangements in connection with the payment of a pension, allowance or gratuity, or any death, sickness or disability benefits, to or in respect of that director. (4) Unless the directors decide otherwise, directors’ remuneration accrues from day to day. (5) Unless the directors decide otherwise, directors are not accountable to the company for any remuneration which they receive as directors or other officers or employees of the company’s subsidiaries or of any other body corporate in which the company is interested.

Answer 73

All shares to be fully paid up 21 (1 ) No share is to be issued for less than the aggregate of its nominal value and any premium to be paid to the company in consideration for its issue. This does not apply to shares taken on the formation of the company by the subscribers to the company’s memorandum

Answer 74

Share transfers 26 (1) Shares may be transferred by means of an instrument of transfer in any usual form or any other form approved by the directors, which is executed by or on behalf of the transferor. (2) No fee may be charged for registering any instrument of transfer or other document relating to or affecting the title to any share. (3) The company may retain any instrument of transfer which is registered. (4) The transferor remains the holder of a share until the transferee’s name is entered in the register of members as holder of it. (5) The directors may refuse to register the transfer of a share, and if they do so, the instrument of transfer must be returned to the transferee with the notice of refusal unless they suspect that the proposed transfer may be fraudulent.

Answer 75

‘Partnership’ is defined by section 1 of the Partnership Act. It is a relationship which exists when two or more persons carry on business together to make a profit.

Answer 76

1) Legal personality of its own. 2) Owners have limited liability (defined in s.3(l)CA 2006). 3) Ownership and control are separated. 4) Ownership can be easily transferred. 5) Can raise money by borrowing. 6) Can give security by way of floating charge

Answer 77

A company's acts are its own. This is the case even if there is only one director (D) and one shareholder (SH) and these are the same person (Salomon v Salomon). • A company can be subject to criminal prosecution. • Born on incorporation, dies on being wound up. • Has rights under ECHR. • A claim against a subsidiary can't be brought against a parent company. • Signs contracts in company name, insurance policies.

Answer 78

• Giving a guarantee: bank giving loan for business may ask for personal guarantee from the owners/members - i.e. that if unable to repay loan they will have to personally repay the bank. But in principle owners/members are NOT liable. • Corporate veil: incorporating a company is said to establish a veil, or barrier, between the owners of the company, the shareholders and the company. Will be disregarded only when 'a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades, or whose enforcement he deliberately frustrates, by interposing a company under his control' IP rest y Pet rode I Resources Ltd). • Usually parent companies and subsidiaries will be considered separate economic entities. Adams v Cape Industries pic: claimants unable to bring proceedings against parent company even though subsidiary was insolvent (asbestos case). But in rare instances parent companies have been held liable, although not through principle of piercing the veil of corporation. > Chandlery Cape pic: parent company held liable for asbestos-induced illness of employee of subsidiary company, but on grounds of duty of care, not lifting of corporate veil. > Prest v Petrodel Resources Ltd: husband/company director held to be beneficial owner of company and wife was entitled to her share following divorce.

Answer 79

This is comprised of those documents required by ss.17, 29 & 32 CA 2006, including: • certificate of incorporation; • current statement of capital; • copies of resolutions affecting the articles; • agreements involving SH affecting the articles; and • articles of association.

Answer 80

* The internal rules which govern how a company is run - every company must have them (s.18). * They may not conflict with mandatory provisions of the CA 2006. * They are a contract between the company and its members. * May be bespoke, amended or default (Table A or Model articles). * Always available for inspection by public at Companies House. * Must be in a single document with numbered paragraphs (s.l8(3)). * Some articles may be entrenched (s.22) - i.e. harder to change. Must notify registrar which articles are entrenched (s.23), members must pass SR to decide to entrench and send Form CC01 and a copy of the resolution to the registrar.

Answer 81

Where the constitution is silent on articles and it is a private company, you should assume the company is using the model articles. £ Articles may either be changed by ordinary or special resolution. Ordinary resolutions require a simple majority to pass while special resolutions require 75% or above.

Answer 82

How many are needed? • Under the CA 2006 there is no maximum, but there is a minimum. Private company must have at least ONE (S.154(1)). Public company must have at least TWO (S.154(2)). Do they need to hold shares? Not under the CA 2006 or 1985 and not under MA. Who can't you appoint? • Undischarged bankrupts (s.ll CDDA 1986). • Under 16s ($.157 CA 2006). • Disqualified persons (s.13 CDDA 1986). How do you appoint? • By OR of SH at General Meeting; or by Board Resolution of directors (MA17). • If shareholders pass an ordinary resolution to appoint a new director at same meeting where they remove one, special notice of that resolution must be given by the proposing shareholders of the company (s.168). • Where a service contract for over two years is given to directors, they must obtain prior consent by OR of the SH. Administration Registrar must be notified - Form AP01 if human or AP02 if corporate - within 14 days of becoming director (s.l67(l)(a)) and Register Of Directors updated.

Answer 83

* Directors must obtain prior consent by OR of the SH for any service contract over two years in length (s.188). * Memo setting out the contract must be sent out for 15 days at R/O AND made available at the GM for inspection. (If done by WR - send out memo and the contract out with the resolution (s.188)). * All service contracts must be available for inspection by SH at the R/O (s.229) for the duration and one year after they expire. SH can also request a copy. * If no resolution is achieved, the contract is still binding except as to duration and he/she can be dismissed on reasonable notice.

Answer 84

• Company accounts Must file accounts (s.441). > Private companies: within nine months from end of accounting reference period each financial year (s.442(2)(a)). > Public companies: within six months from end of accounting reference period each financial year (s.442(2)(b)). There is a duty to keep accurate records - s.386(1). It is the directors' responsibility to ensure full accounts are produced - s.394. The accounts must give a true and fair view - s.396(2). Directors must not give in the accounts unless they are satisfied that s.396(2) is satisfied - s.393(1). • Director's report: must be produced - s.415. It is the directors' responsibility to ensure both documents (along with the auditors' report if required) are circulated to every SH (s.423(1)). Directors' report must include comprehensive and balanced review of performance of business (s.417).

Answer 85

Under S.853A CA 2006, companies are required to file a confirmation statement to Companies House once in every 12 month period, detailing any changes since the previous statement. ^ ^ The confirmation statement must be submitted within 14 days of the 'confirmation date' (i.e. anniversary of incorporation), using form CS01. Failure to submit the confirmation statement on time is a criminal offence.

Answer 86

Documents the company must keep at registered office/SAIL

Answer 87

* S.162(1): every company must keep this available for SH inspection without charge. * S.162(6): if not done all officers in default and the company commit an offence. * S.163(l) & (5) & s.164 sets out what info is on there. * S.167: duty to notify Companies House of change within 14 days.

Answer 88

* S. 165(1): every company must keep this register. * S.165(4): failure to keep this is an offence. * S.167(l)(b): any change must be notified to Companies House within 14 days of the change using CHOI (TM01 if someone leaves).

Answer 89

* Must keep a register of members available for inspection. * Only become a SH when your name is entered on this register. * S.113(7) & (8): failure to keep it up to date is a criminal offence. * When a transfer of shares occurs, before new owner's name is on the register the old owner is the legal owner holding the shares and the new owner has the beneficial interest. The original SH is given all official notifications/dividends/opps to vote, but must account to new SH for all the dividends and note as he instructs.

Answer 90

* Must be kept for all GMs s.355(l)(b) for 10 years s.355(2). Also MA15. * Can be kept at R/O or SAIL s.358(l) in hard copy or electronically s. 1135(1). * Or an offence is kept by all officers in default and the company. * May be inspected free of charge by SH or a copy can be requested s.358(3).

Answer 91

.790M: private companies (and public companies which are not publicly traded) must keep a register of persons who have significant control over the company (a 'PSC register'). • S.790C and Sch 1A a PSC is a person who: owns or controls more than 25% of voting rights in company; has right to appoint/remove a majority of the directors of the company; or has right to exercise/actually exercises, significant influence/control over company. The Register of People with Significant Control Regulations 2016 indicate that there are three different levels of 'significant control' that need to be notified: where the person holds > 25% and < 50% of the shares; where the person holds > 50% < 75% of the shares; where the person holds > 75% of the shares. • Therefore, PSCs may include parent companies, as well as individual owners. • PSC register must be made public (with the aim of increasing transparency). • Ss.790D and 790E: company must investigate and update relevant information on PSC register and with Companies House. • Ss.790G and 790H: PSCs must notify the company of their significant control. • S.790K: the following information must be included in PSC register. For an individual: name, date of birth, nationality, country of residence, residential address and address for service of documents. For a company: corporate/firm name, registered or principal office, legal form of entity, law by which governed, register of companies in which entered, registered number. • S.790X: private companies may elect not to keep a PSC register and instead ensure necessary information filed and up-to-date at Companies House.

Answer 92

If not specified, assume an ordinary resolution (OR) is meant (s.281(3)). S.21 CA 2006: a special resolution (SR) must be used to change the articles or the company t 5S71 CA 2006 j name. S.168 CA 2006: removal of a director/auditor always requires an OR. If the article refers to the 'company', you should assume a board resolution by directors is required

Answer 93

Taken by simple majority (MA7(1)) or unanimity (MA8) of those present at the meeting on a show of hands. They can also pass resolutions using a written resolution and in this case unanimous consent is necessary. Sole directors take decisions however they wish (for example, MA7(2)) but are still subject to statutory rules on minutes and declarations (s.186 & s.268).

Answer 94

At least 75% of shareholders at the meeting must vote in favour to pass it

Answer 95

More than 50% of shareholders at the meeting must vote in favour.

Answer 96

Article 3 Directors Board resolution (MA7 and 8)

Answer 97

S.77 CA 2006 Shareholders Special resolution, unless articles say differently.

Answer 98

S.87(l) CA 2006 Directors Board resolution

Answer 99

S.392 CA 2006 Directors Board resolution

Answer 100

Article 30 Directors first and then shareholders First by board resolution and then by ordinary resolution of the shareholders

Answer 101

Article 17(1) s.167 CA 2006 Directors or shareholders Board resolution or ordinary resolution of the shareholders

Answer 102

S.168 CA 2006 Shareholders Ordinary resolution

Answer 103

Article 3 Director Board resolution

Answer 104

Article 3 Directors Board resolution

Answer 105

S.188(2) CA 2006 Directors (note: over two years, requires shareholder meetings) Board resolution

Answer 106

S.21 CA 2006 Shareholders Special resolution

Answer 107

Decisions are taken collectively as a board, except where they are delegated. • Board takes decisions at board meetings or by written resolution (board resolution/directors' written resolution). • A sole director must still comply with requirements of CA 2006 and keep record of decisions taken

Answer 108

Any director can call a meeting at any time or authorise a secretary to do so. Art 9

Answer 109

* Must be given to each director before meeting takes place (Art 9(1) & (3)), wherever he is in the world (contrast with Table A) * This right can be waived by individual director (art 9(4)) * Must be reasonable notice (Re Homer) * Notice need not be in writing, mav be oral (art 9(3). La Trinidad) * Notice must give date, time, place, method of communication (art 9(2)) - under model articles, skype, texting all ok)

Answer 110

``` • Is there a duty to declare an interest under s.177 CA 2006 or s.182? • Has the necessary declaration been properly made? • If a director has an interest in a transaction, cannot be counted in quorum or vote (art 14(1)), subject to the exceptions in art 14(3)&(4). Art 14(3): where the matter cannot reasonably be regarded as likely to give rise to conflict of interest. 14(4)(a): where the interest is a guarantee given to or by director for an obligation of the company. 14(4)(b): where the interest is a contract with director and company to buy shares in the company. • Consider disapplying art 14(1) temporarily using art 14(3) to allow a director to count - a shareholder's ordinary resolution will be needed. • Where a chairman cannot vote because of his interest, he cannot use his casting vote either. ```

Answer 111

* Unless meeting is quorate, no proposal may be voted on except to call another meeting or to appoint more directors (art 11(1)). * Unless otherwise fixed it is TWO (art 11(2)). Quorum may be fixed from time to time by a board decision but may not be less than TWO (art 11(2)). * Director can still attend board meeting even if can't vote (Haves v Bristol Plant Hire). * Alternates are not mentioned in the model articles.

Answer 112

* List the resolutions and state in relation to each: who can vote and will it pass? * Is a GM or WR of shareholders needed? If so, resolve to call one

Answer 113

* Only directors 'present' at the meeting may vote (art 7) but their votes can be communicated in all sorts of ways (see art 10). * Voting proceeds on a simple majority basis - i.e. if there is deadlock the negative view prevails (art 7(1)). * In the case of deadlock the chair may use his casting vote (art 13(1)) unless excluded from the quorum (13(2)). A chairman may be appointed under art 12(1) but need not be.

Answer 114

* Directors must ensure that the comoanv keeps a record, in writine. for at least 10 vears from the date of the decision recorded, of every unanimous or majority decision taken by the directors (art 15). * Minutes must be recorded for every board meeting and kept at the company's registered office or SAIL for 10 years, otherwise an offence is committed by every officer of the company in default (s.248 CA 2006).

Answer 115

• Flexible: email etc. acceptable; no need for a signature; no need to be in the same place at the same time. • Used if it is a single director company.

Answer 116

Permitted? Yes, under art 8(2); Table A, art 93 ``` Who can vote? Art 8(1) of the model articles for private companies: all eligible directors must agree to the proposed resolution - i.e. it must be unanimous. 'Eligible director' is one who would have been able to vote at a board meeting if one had been held (art 8(3)). If the director has an interest they are not 'eligible'. ``` ``` Quorum Art 8(4) as for board meeting resolutions. ``` Signifying Agreement Directors receive copies of proposed resolution and return any sort of written signifier of agreement or just sign and return it. Resolution passed as soon as the requisite amount of consents is received back. Minutes S.248 does not apply so no need to record the decision as minutes. MA15 does require a written record of a unanimous or written resolution to be kept for 10 years. In any case, it is good practice to keep them.

Answer 117

Shareholders may call a GM - s.305 CA 2006 (usually in conflict cases). See WS 4. • They must requisition the board of directors to call the GM under s.303 CA 2006. • Can only do so if have at least 5% of paid-up share capital of the company with voting rights and meet other conditions in s.303. • Directors then have 21 days to pass board resolution to call GM, to be held not more than 28 days after notice has been sent (s.305). • If board fails to do this, shareholders can step in and call GM and claim reasonable expenses

Answer 118

Any shareholder • Vote (if holds voting shares) • Receive dividends if declared • Receive notice of general meetings • To have name on the register of members and hold share certificates (subject to articles on transfers) • To receive a copy of the accounts • To inspect the minutes, registers and key contacts • To apply to court for a general meeting to be held • To restrain breaches of directors' duties • To bring unfair prejudice petition • To bring winding up proceedings if the company is solvent (MVL - see insolvency) 5% • Circulate a written resolution • Requisition a general meeting • Circulate a written statement 10% • Demand a poll vote Over 25% • Block special resolution Over 50% • Block an ordinary resolution 75% • Pass a special resolution 100% • Pass all resolutions at will (that are not illegal)

Answer 119

* Amending company's articles (s.21(l)). * Approving a substantial property transaction (SPT) by ordinary resolution (s.190). * Approving a director's service contract for a fixed term over two years by ordinary resolution (s.188). * Approving compensation to a director for loss of office by ordinary resolution (s.217). * Authorising directors to allow shares by ordinary resolution (s.551(l)). * Dis-applying shareholders' pre-emption rights by special resolution (ss.569(l), 570(1) and 571(1)). * Approving contract to buy back company shares by special resolution (s.694(2)) and payment to buy back company's shares out of capital by special resolution (s.716(1)). * Ratifying director's breach of duty by ordinary resolution (s.239(2)). * Authorising political donations by ordinary resolution (s.366(l)). * Deciding to register private company as a public one by special resolution (s.97(l)(a)). * Removing a director of company against his will by ordinary resolution (s.168(1)). * Removing an auditor of the company by ordinary resolution (s.510(2)). * Changing company's name by special resolution, provided no other procedure is set out in the articles (s.77(l)).

Answer 120

Leneth of notice Should be the notice period + 48 hours to allow for deemed service (s.1147 - unless varied by special article). 14 clear days' notice is required (s.307(Al) and (1) and s.360). Clear davs means the dav on which notice is eiven and on which meetins held are not counted. So 1 July notice is given -16 July is first day meeting can be held. This includes weekends and bank holidays. If you include deemed service to be safe - 18th July is the first day the meeting can be held. Short notice Short notice can be agreed under s.307(5) CA 2006 if the members consent. This can be any period less than the required amount of clear days. • Conditions A majority in number of SH must agree to holding the meeting on short notice (s.307(5)). Those SH must hold at least 90% of the total share capital (s.307(5)(a)). > This can be raised by articles, but to no more than 95% of voting shares (s.307(6)(a)). > Table A raises this to 95%. Model articles do not alter it. It cannot be used for s.168 removal of directors.

Answer 121

* Quorum required is generally TWO qualifying persons (s.318(2)). * UNLESS single member company in which case ONE (s.318(1)). * In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other (art 37(4)). * No business other than the appointment of the chairman of the meeting is to be transacted at a general meeting if the persons attending it do not constitute a quorum (art 38). * Directors may attend and speak at general meetings, whether or not they are shareholders, (art 40(1)). Auditors may attend s.502(2). * A proxy can count in the quorum s.324(1), but not if he is the only one there, i.e. he is representing his friend and himself (Re Sanitarv Carbon Co). * Auditors may attend s.502(2).

Answer 122

Members must vote on resolutions in order to take decisions s.281(l)(b). 1. (a) default: on show of hands. Under art 42 a resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is duly demanded in accordance with the articles. • Every SH has 1 vote (s.284(2)). 1. (b) on Doll vote (ss.282 & 2831 One vote per share. Reauestina a coll vote: mav be demanded bv any shareholder (or proxy) (s.321(D). A poll on a resolution may be demanded under art 44: a) in advance of the general meeting where it is to be put to the vote; or b) at a general meeting, either before a show of hands on that resolution or immediately after the result of a show of hands on that resolution is declared. A poll may be demanded by (art 44(2)) — a) the chairman of the meeting; b) the directors; c) two or more persons having the right to vote on the resolution; or d) a person or persons representing not less than one tenth of the total voting rights of all the shareholders having the right to vote on the resolution. 2. Is the resolution Dassed? OR: more than 50% - s.282 - show of hands - s.282(3) - poll - s.282(4) SR: at least 75% - s.283(l) - show of hands - s.283(4) - poll - s.283(5) N.B. This is the percentage out of those who vote, not of all members. Unanimous voting ALL shareholders present ALL give consent, does not matter if resolution was not formally put to the vote (Wriaht v Atlas Wriahtl. BUT cannot make unlawful decisions.

Answer 123

This will be done by directors in a follow-up or re-convened board meeting. • GM minutes kept for at least 10 years (s.355) as well as records of written resolutions. • Shareholders' resolutions and any related documents should be filed (in registered office or SAIL). • Relevant forms as well as copies of all SRs and decisions taken by unanimous consent must be sent to Registrar of Companies within 15 days of their being made (ss.29 and 30), otherwise offence is committed by company and every officer in default. Some ORs must be sent but rare (OR giving directors authority to allot shares, etc.). • Some contracts must be kept and made available for inspection by shareholders and some others. Director's service of contract for at least one year after end of contract (s.228), contract to buy back company shares must be kept for at least 10 years (s.702). • Maintain relevant registers. • Small Business, Enterprise and Employment Act 2015 - companies can elect to keep all the info filed and up-to-date in Companies House and not in their own offices (all shareholders must agree and registrar must be notified). N.B. Do not forget to consider the admin from the board meeting as well, as directors will usually have to pass decisions to implement SH resolutions.

Answer 124

someone who attends a GM in place of the shareholder - s.324. • The proxy must be formally appointed and removed (company cannot request more than 48 hours notice of this - s.327 and s.330(6)). • Can vote on a show of hands or a poll. • Can request a poll and speak at a GM. • Cannot form part of quorum.

Answer 125

* Cannot be used by public companies (s.281(2)). | * Cannot be used to dismiss a director or the auditors.

Answer 126

* Directors or shareholders with at least 5% of voting shares (s.292) may call. * Board will usually initiate procedure by passing board resolution.

Answer 127

• Who: must be given to all ELIGIBLE members (see s.291(2) and s.293(l)) and to the auditors (s.502(1)). An 'eligible member' is a shareholder who would have been entitled to vote on the 'circulation date' (first day sent out - s.290) of the written resolution (s.289(l)). NB: Where a shareholder transfers his shares to a new shareholder on the circulation date, the one who owned the shares at the time the first copy of the resolution was circulated is the eligible member (s.289(2)). • What: must contain a statement of how to signify agreement and the date by which the resolution must be passed (s.291(4)) (usually 28 days). May also send out any other useful documents (i.e. contract being voted on). • How: in hard copy or by email or by a website provided shareholders have consented to electronic communications (s.291).

Answer 128

• Every eligible member has one vote per share (s.281(l)(a)). May be an SR (at least 75% - s.283) or an OR (over 50% - s.282) and the same rules as to the requisite majorities apply. • The % is calculated by reference to those who can vote, not just those who reply. • As soon as the requisite number of agreements is received, the resolution is passed. There is no need to wait for the rest of the forms to be returned.

Answer 129

The company must receive an authenticated document (signed) identifying the resolution and indicating agreement (s.296(l)(a) and (b) BEFORE THE PERIOD LAPSES (s.297

Answer 130

Usually 28 days beginning with the circulation date (first date on which copies of the resolution are sent to the members) (s.297(l)). After this date any agreement received doesn't count (so the deadline would be midnight on 29th January for a 2™* January board meeting if the resolution was circulated immediately).

Answer 131

* Copy of WR to be sent to Companies House within 15 days (ss.29 and 30 CA 2006). * Record of WR kept for 10 years (s.355(l)(a)).

Answer 132

* Involvement in making decisions that affect the business. * Share gross profits and losses (see s.24(l)). * Right to examine the accounts. * Fiduciary relationship with other partners. * Can veto on the introduction of a new partner. (N.B. Legal title to an asset being vested in one name is not conclusive evidence of personal ownership: it may be held on trust for other partners.)

Answer 133

* Allows commercial secrecy. * Informal in nature, very easy to start up. * Flexible - make own agreement/rules. * Tax relief for start-up losses can be claimed.

Answer 134

* Can create fixed charges (but not floating). * Each partner is fully liable for all debts of business. * Any partner may act in apparent authority and bind the firm.

Answer 135

The main duty is the common law one of utmost good faith/fiduciary relationship. This is codified in ss.28-30 PA 1890. • Must divulge all relevant information regarding their business or relationship (s.28). • Must share all profits derived from partnership business or property. • Must share all profits they make from a competing business carried on without partner's consent (s.30). • Must bear their share of any losses made by the business (s.24(l)). • As a firm, must indemnify fellow partners against bearing more than their fair share of any liability (s.24(2)).

Answer 136

• Fixed term comes to an end (unless agreement provides for continuance) (s.32) If they continue, partnership will be considered to be bound by the same terms but it will be a partnership-at-will (s.27). • Notice (for partnerships-at-will - i.e. ones with no restriction (s.26)) Notice may be given by one partner to the others (s.26(l) & 32). No reason need be given. Has immediate effect. Need not be in writing unless the partnership agreement was made by DEED (s.26(2)). • Retirement/expulsion of a partner PA 1890 doesn't provide for this so technically a retirement would count as notice to dissolve as above. • Death or bankruptcy Automatic termination of partnership (s.33). Estate of the partner in question may be liable for any debts owed by the partnership. PRs/Trustees in bankruptcy may collect any share of the partnership to which he was entitled. • Illegality (s.34) For example: lose business licence or a partner is struck off professional register. This cannot be excluded by a partnership agreement. • Charging order is taken over a partner's assets (debt action) A judgment creditor may charge partnership assets to recover a certain partner's debt owed in his personal capacity (s.23). In this event, the other partners would give notice to the debtor to dissolve the partnership and reform without him. • Court Order (s.35) Used normally where an agreement prevents dissolution without unanimous agreement. Effect: breaks partnership agreement without any partner being liable for breach of contract.

Answer 137

• Contractual relation between the partners comes to an end. • Business is either broken up (assets sold separately) or sold as a going concern (more expensive as get goodwill). • Any partner (unless bankrupt) has the authority to wind up the firm's affairs. • Proceeds are shared out in the following order (s.44): creditors; partners who have lent money to firm; partners' capital entitlement repaid; and then any surplus is shared between the partners.

Answer 138

The firm will be liable for the partner's actions if they had actual or ostensible authority. 1. Actual authority S.6 PA: the firm will always be liable for actions which were actually authorised. a) The agent acts on behalf of the firm. b) The agent acts within its authority/implied actual authority based on prior conduct (regularly acting in this way - partners impliedly acquiesce to these actions). NB. Differentiate from whether a partner goes beyond his authority or not. 2. Ostensible authority S.5 PA: the firm may be liable for actions which are NOT actually authorised BUT which have appeared to an outsider to be authorised. Objective test a) Transaction must relate to the type of business in which the firm is apparently engaged (question of fact: depends on practices normally adopted in businesses of that type). b) Transaction is one which a partner in such a firm would usually be expected to have authority to. Subjective test a) The other party of the transaction did NOT know that the partner did NOT actually have authority to act. b) The other party deals with a person whom he knows or believes to be a partner. 3. No authority The firm is not liable, but the contracting partner is personally liable. He/she must indemnify the other partners for any loss they incur as a result.

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