Business – Unit 1. The Different Types of Business
The Limited Company (referring to private companies)
Forming a company
- Submit:
o Companies House form IN01
o Memorandum of association
o Articles of association (if different)
o Applicable fee
- Once submitted:
o CH check Disqualified Directors’ Register and correct fee
o Once satisfied CA 2006 has been met, they incorporate & issue a certificate of incorporation stating:
Name and registered number
Date
Unlimited/Limited (shares/guarantee)
Private/Public
Signed by Registrar’s seal
Constitution
- Formed of
o Memorandum of association & articles
o Certificate of incorporation
o Current statement of capital
o Copies of court order & legislation altering constitution
o Shareholders’ resolutions affecting the constitution
o Certain agreements involving shareholders
Amending the articles
- By special resolution (75%)
- When changing, must file at CH within 15 days
People with significant control
- Holds more than 25% of shares
- Holds more than 25% of voting rights
- Holds the right to appoint/remove a majority of the board of directors
- Must declare on IN01 if someone holds:
o 25%<50% company shares / voting rights
o 50%<75%
o 75%+
Converting to a public company
- Special resolution approving
o Re-registration
o Altering company’s name
o Altering the articles
- No need for a trading certificate
- Application at CH
o Special resolutions
o Form RR01 (application for re-registration) inc. statement of compliance
o Fee
o Revised articles
, o Balance sheet and written statement from auditors
Business – Unit 2. Partnership
General Partnerships
- ‘Carrying on a business in common with a view of profit’
o Do the individuals all take part in decision-making?
o Whose names are on the title deeds of any property?
o How are profits shared?
Partnership Act 1890
- Default contract
- Some sections can be overridden by agreement, and some cannot
The partnership agreement
- Name
- Place & nature of business
- Commencement & duration
- Work input
- Roles
- Decision-making
o All decisions must be taken by majority
o Exceptions (unanimous):
Changing the nature of the business
Introducing a new partner
Changing the terms of the partnership agreement
- Financial input
- Status in income & capital profits & losses
- Drawings & salaries
- Ownership of assets
- Expulsion
o PA – no majority of partners may expel another (unless expressly agreed)
- Dissolution
o PA – dissolved when:
A partner retires
On expiry of a fixed term
By the death/bankruptcy of any of the partners
If the partners give notice of dissolution to a partner who has granted a charge over their
share of the partnership property, for a debt owed by them alone & not the partnership as a
whole
- The effect of dissolution
- Goodwill (reputation)
- Distribution of proceeds of sale
- Restraint of trade (not implied
- Dispute resolution
Partners’ responsibilities under the PA 1890
- Must be completely open
- Must account for any private profits without partners’ consent
- Must not compete with the firm
- Bear a share of any loss made
- Indemnify fellow partners
,When is the firm liable to 3rd parties?
- Contracts
- Actual authority
o The firm is bound by a contract/deed entered into by partners in the firm’s name provided the
partner’s actions were authorised by the partners. May be authorised in various ways
Acting jointly
Express actual authority
Implied actual authority
- Apparent authority: Not actually authorised but appear to be.
o Firms will be liable when:
The transaction relates to business of the kind carried on by the firm
The transaction is one for which a partner in such a firm would usually be expected to have
the authority to act
The other party deals with a person whom they know/believe to be a partner
Personal liability
- Acted with apparent authority – firm liable to the 3 rd party under the contract
o Partner who made the firm liable – liable to indemnify partners
Partners’ liability for partnership debts
- Debt incurred:
o Before leaving the partnership
Jointly & severally liable
A claimant can sue any/all of the partners & collect the total damages awarded by a court
from any/all
o Novation agreements
A retiring partner will be released from an existing debt, by entering into a contract with the
creditor and other partners
o After leaving the partnership
Still remain liable for debts incurred whilst a partner
Escapes liability for any debts entered into after leaving the partnership (as long as complicit
with requirements)
o S.36
Current clients – need to be directly informed of a partner leaving
Anyone else – notified by the London Gazette
o Holding out
A creditor relying on a representation that a particular person was a partner in the firm may
be able to hold that person liable for the firm’s debts
Enforcing the firm’s liabilities
- Who can be sued?
o Partner(s) with whom they made the contract
Problem if they acted without authority
o Anyone who was a partner at the time when debt was incurred
Partner can claim indemnity from their partners to share liability
o The firm, in the firm’s name
Judgement can be enforced against the partnership assets as well as personal assets
, Limited Liability Partnerships
- Hybrid of company & a partnership
o Limited liability
o Fewer administrative requirements
Legal requirements
- Must have designated members (similar to directors)
o Responsibilities include:
Signing & filing annual accounts with the Registrar
Appointing, removing, remunerating the auditors
Filing the annual confirmation statement
Sending notices to the Registrar of Companies
Winding up the LLP
Limited liability
- If insolvent members may be liable for misfeasance, fraudulent trading, wrongful trading
o May be required to contribute to the assets of the insolvent LLP
The LLP agreement
- Capital & profits
- Management & decision-making
- Leaving the LLP (reasonable notice)
o Members cannot be expelled
The Limited Company (referring to private companies)
Forming a company
- Submit:
o Companies House form IN01
o Memorandum of association
o Articles of association (if different)
o Applicable fee
- Once submitted:
o CH check Disqualified Directors’ Register and correct fee
o Once satisfied CA 2006 has been met, they incorporate & issue a certificate of incorporation stating:
Name and registered number
Date
Unlimited/Limited (shares/guarantee)
Private/Public
Signed by Registrar’s seal
Constitution
- Formed of
o Memorandum of association & articles
o Certificate of incorporation
o Current statement of capital
o Copies of court order & legislation altering constitution
o Shareholders’ resolutions affecting the constitution
o Certain agreements involving shareholders
Amending the articles
- By special resolution (75%)
- When changing, must file at CH within 15 days
People with significant control
- Holds more than 25% of shares
- Holds more than 25% of voting rights
- Holds the right to appoint/remove a majority of the board of directors
- Must declare on IN01 if someone holds:
o 25%<50% company shares / voting rights
o 50%<75%
o 75%+
Converting to a public company
- Special resolution approving
o Re-registration
o Altering company’s name
o Altering the articles
- No need for a trading certificate
- Application at CH
o Special resolutions
o Form RR01 (application for re-registration) inc. statement of compliance
o Fee
o Revised articles
, o Balance sheet and written statement from auditors
Business – Unit 2. Partnership
General Partnerships
- ‘Carrying on a business in common with a view of profit’
o Do the individuals all take part in decision-making?
o Whose names are on the title deeds of any property?
o How are profits shared?
Partnership Act 1890
- Default contract
- Some sections can be overridden by agreement, and some cannot
The partnership agreement
- Name
- Place & nature of business
- Commencement & duration
- Work input
- Roles
- Decision-making
o All decisions must be taken by majority
o Exceptions (unanimous):
Changing the nature of the business
Introducing a new partner
Changing the terms of the partnership agreement
- Financial input
- Status in income & capital profits & losses
- Drawings & salaries
- Ownership of assets
- Expulsion
o PA – no majority of partners may expel another (unless expressly agreed)
- Dissolution
o PA – dissolved when:
A partner retires
On expiry of a fixed term
By the death/bankruptcy of any of the partners
If the partners give notice of dissolution to a partner who has granted a charge over their
share of the partnership property, for a debt owed by them alone & not the partnership as a
whole
- The effect of dissolution
- Goodwill (reputation)
- Distribution of proceeds of sale
- Restraint of trade (not implied
- Dispute resolution
Partners’ responsibilities under the PA 1890
- Must be completely open
- Must account for any private profits without partners’ consent
- Must not compete with the firm
- Bear a share of any loss made
- Indemnify fellow partners
,When is the firm liable to 3rd parties?
- Contracts
- Actual authority
o The firm is bound by a contract/deed entered into by partners in the firm’s name provided the
partner’s actions were authorised by the partners. May be authorised in various ways
Acting jointly
Express actual authority
Implied actual authority
- Apparent authority: Not actually authorised but appear to be.
o Firms will be liable when:
The transaction relates to business of the kind carried on by the firm
The transaction is one for which a partner in such a firm would usually be expected to have
the authority to act
The other party deals with a person whom they know/believe to be a partner
Personal liability
- Acted with apparent authority – firm liable to the 3 rd party under the contract
o Partner who made the firm liable – liable to indemnify partners
Partners’ liability for partnership debts
- Debt incurred:
o Before leaving the partnership
Jointly & severally liable
A claimant can sue any/all of the partners & collect the total damages awarded by a court
from any/all
o Novation agreements
A retiring partner will be released from an existing debt, by entering into a contract with the
creditor and other partners
o After leaving the partnership
Still remain liable for debts incurred whilst a partner
Escapes liability for any debts entered into after leaving the partnership (as long as complicit
with requirements)
o S.36
Current clients – need to be directly informed of a partner leaving
Anyone else – notified by the London Gazette
o Holding out
A creditor relying on a representation that a particular person was a partner in the firm may
be able to hold that person liable for the firm’s debts
Enforcing the firm’s liabilities
- Who can be sued?
o Partner(s) with whom they made the contract
Problem if they acted without authority
o Anyone who was a partner at the time when debt was incurred
Partner can claim indemnity from their partners to share liability
o The firm, in the firm’s name
Judgement can be enforced against the partnership assets as well as personal assets
, Limited Liability Partnerships
- Hybrid of company & a partnership
o Limited liability
o Fewer administrative requirements
Legal requirements
- Must have designated members (similar to directors)
o Responsibilities include:
Signing & filing annual accounts with the Registrar
Appointing, removing, remunerating the auditors
Filing the annual confirmation statement
Sending notices to the Registrar of Companies
Winding up the LLP
Limited liability
- If insolvent members may be liable for misfeasance, fraudulent trading, wrongful trading
o May be required to contribute to the assets of the insolvent LLP
The LLP agreement
- Capital & profits
- Management & decision-making
- Leaving the LLP (reasonable notice)
o Members cannot be expelled
