Business Law & Practice Revision Notes
Business Structures
Partnerships
Definition – The relation which subsists between persons carrying on a business in common with a view to profit.
Profit & Loss Sharing – Evidence of profit sharing is prima facie, but not necessarily conclusive, evidence of a
partnership. An agreement to share profits and losses is good evidence of a partnership.
Structure – Where persons are held out as partners and collectively take part in decision making, a
partnership is more likely.
Loans – A loan of money by one party to another does not create a partnership.
Number of Partners – Must have a minimum of two partners.
Fiduciary Relationship & Personal Liability
Fiduciary Relationship – A fiduciary relationship exists between partners, meaning they must:
o make full and frank disclosure to the other partners regarding the accounts and partnership affairs; and
o must comply with the No Profit and No Conflict rules.
Liability – Every partner is jointly liable for (a) contractual debts and obligations and (b) tortious liabilities that
are incurred whilst they are a partner.
New Partner – New partners are not liable for any partnership debts or tortious liabilities incurred before they
joined.
Former Partners – A former partner can become liable for partnership liabilities after they leave as a third party
is entitled to treat all apparent partners as jointly liable unless they have (a) actual notice (in cases of actual
dealings) or (b) constructive notice via publication in the London Gazette (in cases of actual dealings).
No Knowledge – Where a former partner was not known to a third party, they will not be liable for any
subsequent debts.
Retirement – A partner remains liable after retirement for debts incurred whilst they were a partner unless the
relevant agreement is novated, which requires the consent of the creditor(s).
Holding Out – Based on common law principles of agency, a non-partner may be liable for partnership debts if
they held themselves out as a partner. This requires:
o a representation to a third party to the effect that a person is a partner;
o the third party gives credit to the partnership by supplying a good or services; and
o the third party believes / has faith in the representation.
Authority
Partners – A contract will bind a partnership if it is made by a partner who has (a) general authority to bind or (b)
the authority to bind in relation to a particular matter.
Binding Lack of Consent – A partner’s unauthorised act will bind a partnership if the unauthorised act is for
carrying on (a) business of the kind carried on by the partnership and (b) such business in the usual way.
Non-Binding Lack of Consent – A partner’s unauthorised act will not bind a partnership if the third party
actually knew the partner lacked authorisation or did not know or believe the partner was a partner.
Non-Partners – A contract will be binding when made by a non-partner if an agency relationship exists and the
agent has apparent authority, which requires:
o the principal to represent or permit a representation to be made to a third party that a person has
authority to bind the partnership; and
o third party reliance on the representation.
Holding Out – Where a representation is that a particular person is a partner, but they are not, they are
being “held out” as a partner and will have apparent authority.
Partnership Agreements (“PAs”)
1
, Variation of Terms – The terms of a partnership can be varied at any time by their unanimous consent, which can
be express or inferred from a course of dealing.
Common Provisions
Commencement – A PA should stipulate a date on which the rights and obligations contained in the PA will
commence.
Prior Operation – Where a partnership operates prior to a commencement date, PA 1890 will apply until the
commencement date.
Fixed Term – Where a PA has a fixed term, but the partners continue beyond expiration without a new PA,
they are assumed to operate on the same terms as before.
Name – A partnership name must not (a) include company suffixes, (b) be offensive, (c) be the same as an
existing trademark, or (d) suggest a connection with government without permission.
Place of Business – A PA should set out the place and nature of the business.
Property, Capital, Profits, Losses & Salary
Property – All property brought into a partnership, whether by purchase or otherwise, on account of the
partnership or in the course of the partnership business, is partnership property.
Purchases – All property bought with partnership money is deemed to have been bought on account of the
partnership, unless contrary intention is shown. Intention is determined by the partners’ intentions at the
time of acquisition.
Income, Capital, Profits, & Losses – Without express agreement, all partners share equally in the income, capital,
and profits, and contribute equally towards its losses, even where partners have contributed capital unequally. A
PA should include a Profit Sharing Ratio (“PSR”).
Uneven Contribution – Uneven capital contributions may create an implied agreement to withdraw capital
unequally.
Salary – To be entitled to receive a salary share, there must be an express provision in the PA.
Operation & Decision-Making
Input & Roles – Every partner may take part in management need not do so. A PA should set out requirements
for each partner in terms of the work performed.
Authority – The roles of partners and any limits on their authority should be clearly defined.
Decision-Making – Unless expressly agreed otherwise, all partnership decisions must be decided by a majority,
other than the following which require unanimity:
o changes to the nature of the partnership business;
o introducing a new partner; and
o varying the rights and duties of partners.
Expulsion – A partner cannot be expelled by majority vote unless all of the partners have previously expressly
agreed that a majority can do this.
Restraint of Trade Clauses
Non-Compete Clause – A partner is prohibited from competing against the partnership without the consent of
the other partners. If breached, they must account for profits.
Non-Solicit Clause – A clause preventing former partners from soliciting business from the partnership’s clients.
Non-Dealing Clause – A clause preventing former partners from entering into contracts with clients, former
clients, or employees of the partnership.
Enforceability – Restraint of trade clauses will only be enforceable if reasonable in terms of duration,
geographical area, and scope.
Dissolution
2
, Dissolution – A partnership can be dissolved by (a) automatic dissolution, (b) expiry of a fixed term, (c)
completion of a specific venture, (d) the death or bankruptcy of any partner, (e) dissolution by notice from any
partner where the partnership (i) has no fixed duration or (ii) the partnership business becomes unlawful, or (f)
the court as a last resort.
Automatic Dissolution – If there is no PA or if a PA is silent on retirement or termination, a partner leaving will
dissolve a partnership.
Technical Dissolution – Where a partner leaves, dissolving a partnership, but the remaining partners
continue the business.
Winding up – Upon the departure of a partner, any other partner may apply to have the partnership wound
up.
Continuation Provision – A PA should state (a) that the partnership will continue between the remaining
partners and (b) how a partner can leave, including a buy-out mechanism.
Distribution – Subject to any PA, where a partnership is wound up, any money and assets will, following the
discharge of any debts and liabilities, be distributed to the partners so their initial capital contribution is repaid.
ASR – It is prudent to include an Asset Surplus Ratio (“ASR”) that sets out the proportions in which any
surplus assets are to be distributed. Without an ASR, any surplus assets will be distributed in accordance
with the agreed PSR. Where there is no PSR, the surplus assets will be distributed evenly.
LLPs
Incorporation & Record-Keeping
Procedure – The subscribing members must submit the relevant fees and a Form LL IN01 and submit it to CoHo.
The Form LL IN01 must state (a) the LLP’s name and registered office, (b) which members, if not all, are
designated members, and (c) any PSCs. CoHo will issue a certificate of incorporation as conclusive evidence of
incorporation.
Continuing Registration – An LLP must file with CoHo where there is (a) changes of name, of registered office, or
in membership, (b) creation of a charge, and annual confirmation statements and annual accounts.
Records – An LLP must maintain a Register of Members, including a record of PSCs.
Members
Number – An LLP must have at least two formally appointed members. There is no maximum number of
members.
Designated Member – At least two members must be “designated”. They must:
o sign the accounts on behalf of the members;
o make the appropriate filings at Companies House; and
o act on behalf of the LLP if it is wound up.
Termination – A member will cease to be a member upon their death, agreement with the other members,
notice to the other members, or dissolution if a body corporate.
Members’ Agreement (“MA”)
Liability – Members shall contribute to the assets of an LLP in the event of it being wound up as is provided in
the MA.
Capital & Profit – Members share equally in capital and profits.
Liabilities – An LLP must indemnify its members for payments made and personal liabilities incurred by them in
the ordinary and proper conduct of business.
Management – Every member may take part in management. No member is entitled to remuneration for
management.
Decision-Making – Ordinary decisions may be made by majority vote. Any change to the nature of the LLP’s
business requires unanimous consent.
New Members – No person can become a member or assign their membership without the unanimous consent
of the existing members.
3
, Records – The books and records of the LLP must be available for inspection by the members at the registered
office.
Disclosure – Each member must give true accounts and full information of all things affecting the LLP to any
member or his legal representative.
Non-Compete – If a member (without consent) carries on any business of the same nature as, and competing
with, the LLP, they must account for profits.
Account for Profits – Every member has a duty to account for benefits derived from transactions with the
LLP and its business or property.
Expulsion – There is no implied power of expulsion by the majority unless the members have expressly provided
for such a power.
Departure – Where there are only two partners and one leaves, the LLP is allowed to drop one designated
member for up to 6 months before the sole member will be liable for any debts incurred after that 6 month
period.
Private Companies
Incorporation
Incorporation from Scratch
Form IN01 – A Form IN01 must be completed, including:
o the company’s proposed name and registered office;
o whether liability is limited by shares or guarantee;
o whether the company is public or private;
o if limited by shares, a statement of capital and initial shareholdings;
o if limited by guarantee, details of the guarantee;
o a statement of the company’s proposed officers;
o a statement of PSCs; and
o a statement of compliance with CA 2006.
Documentation – A copy of the company’s Articles (unless MAs) and Memorandum must be submitted to CoHo.
Incorporation – CoHO will issue a Certificate of Incorporation. The company is a legal entity from the date of
incorporation, which is set out on the Certificate of Incorporation.
Same Day Incorporation – Only available if relying on the MAs.
Shelf Company Conversion
Step Resolution / Method Filing
Name SR Within 15 days, a Form NM01 must be filed
with CoHo, along with the SR, and a fee.
Registere BR A Form AD01 must be submitted to CoHo
d Office within 14 days.
Service remains valid on the old address for
14 days following registration.
Amendm SR The amended Article and SR must be
ent of submitted to CoHo with 15 days.
Articles
Directors A director may resign by letter to A Form TM01 must be filed with CoHo
: the Board, which will be accepted within 14 days.
Resignati by the Board at a BM
on
Directors OR or BR A Form AP01 must be filed with CoHo within
: 14 days.
Appointm
ent
4
Business Structures
Partnerships
Definition – The relation which subsists between persons carrying on a business in common with a view to profit.
Profit & Loss Sharing – Evidence of profit sharing is prima facie, but not necessarily conclusive, evidence of a
partnership. An agreement to share profits and losses is good evidence of a partnership.
Structure – Where persons are held out as partners and collectively take part in decision making, a
partnership is more likely.
Loans – A loan of money by one party to another does not create a partnership.
Number of Partners – Must have a minimum of two partners.
Fiduciary Relationship & Personal Liability
Fiduciary Relationship – A fiduciary relationship exists between partners, meaning they must:
o make full and frank disclosure to the other partners regarding the accounts and partnership affairs; and
o must comply with the No Profit and No Conflict rules.
Liability – Every partner is jointly liable for (a) contractual debts and obligations and (b) tortious liabilities that
are incurred whilst they are a partner.
New Partner – New partners are not liable for any partnership debts or tortious liabilities incurred before they
joined.
Former Partners – A former partner can become liable for partnership liabilities after they leave as a third party
is entitled to treat all apparent partners as jointly liable unless they have (a) actual notice (in cases of actual
dealings) or (b) constructive notice via publication in the London Gazette (in cases of actual dealings).
No Knowledge – Where a former partner was not known to a third party, they will not be liable for any
subsequent debts.
Retirement – A partner remains liable after retirement for debts incurred whilst they were a partner unless the
relevant agreement is novated, which requires the consent of the creditor(s).
Holding Out – Based on common law principles of agency, a non-partner may be liable for partnership debts if
they held themselves out as a partner. This requires:
o a representation to a third party to the effect that a person is a partner;
o the third party gives credit to the partnership by supplying a good or services; and
o the third party believes / has faith in the representation.
Authority
Partners – A contract will bind a partnership if it is made by a partner who has (a) general authority to bind or (b)
the authority to bind in relation to a particular matter.
Binding Lack of Consent – A partner’s unauthorised act will bind a partnership if the unauthorised act is for
carrying on (a) business of the kind carried on by the partnership and (b) such business in the usual way.
Non-Binding Lack of Consent – A partner’s unauthorised act will not bind a partnership if the third party
actually knew the partner lacked authorisation or did not know or believe the partner was a partner.
Non-Partners – A contract will be binding when made by a non-partner if an agency relationship exists and the
agent has apparent authority, which requires:
o the principal to represent or permit a representation to be made to a third party that a person has
authority to bind the partnership; and
o third party reliance on the representation.
Holding Out – Where a representation is that a particular person is a partner, but they are not, they are
being “held out” as a partner and will have apparent authority.
Partnership Agreements (“PAs”)
1
, Variation of Terms – The terms of a partnership can be varied at any time by their unanimous consent, which can
be express or inferred from a course of dealing.
Common Provisions
Commencement – A PA should stipulate a date on which the rights and obligations contained in the PA will
commence.
Prior Operation – Where a partnership operates prior to a commencement date, PA 1890 will apply until the
commencement date.
Fixed Term – Where a PA has a fixed term, but the partners continue beyond expiration without a new PA,
they are assumed to operate on the same terms as before.
Name – A partnership name must not (a) include company suffixes, (b) be offensive, (c) be the same as an
existing trademark, or (d) suggest a connection with government without permission.
Place of Business – A PA should set out the place and nature of the business.
Property, Capital, Profits, Losses & Salary
Property – All property brought into a partnership, whether by purchase or otherwise, on account of the
partnership or in the course of the partnership business, is partnership property.
Purchases – All property bought with partnership money is deemed to have been bought on account of the
partnership, unless contrary intention is shown. Intention is determined by the partners’ intentions at the
time of acquisition.
Income, Capital, Profits, & Losses – Without express agreement, all partners share equally in the income, capital,
and profits, and contribute equally towards its losses, even where partners have contributed capital unequally. A
PA should include a Profit Sharing Ratio (“PSR”).
Uneven Contribution – Uneven capital contributions may create an implied agreement to withdraw capital
unequally.
Salary – To be entitled to receive a salary share, there must be an express provision in the PA.
Operation & Decision-Making
Input & Roles – Every partner may take part in management need not do so. A PA should set out requirements
for each partner in terms of the work performed.
Authority – The roles of partners and any limits on their authority should be clearly defined.
Decision-Making – Unless expressly agreed otherwise, all partnership decisions must be decided by a majority,
other than the following which require unanimity:
o changes to the nature of the partnership business;
o introducing a new partner; and
o varying the rights and duties of partners.
Expulsion – A partner cannot be expelled by majority vote unless all of the partners have previously expressly
agreed that a majority can do this.
Restraint of Trade Clauses
Non-Compete Clause – A partner is prohibited from competing against the partnership without the consent of
the other partners. If breached, they must account for profits.
Non-Solicit Clause – A clause preventing former partners from soliciting business from the partnership’s clients.
Non-Dealing Clause – A clause preventing former partners from entering into contracts with clients, former
clients, or employees of the partnership.
Enforceability – Restraint of trade clauses will only be enforceable if reasonable in terms of duration,
geographical area, and scope.
Dissolution
2
, Dissolution – A partnership can be dissolved by (a) automatic dissolution, (b) expiry of a fixed term, (c)
completion of a specific venture, (d) the death or bankruptcy of any partner, (e) dissolution by notice from any
partner where the partnership (i) has no fixed duration or (ii) the partnership business becomes unlawful, or (f)
the court as a last resort.
Automatic Dissolution – If there is no PA or if a PA is silent on retirement or termination, a partner leaving will
dissolve a partnership.
Technical Dissolution – Where a partner leaves, dissolving a partnership, but the remaining partners
continue the business.
Winding up – Upon the departure of a partner, any other partner may apply to have the partnership wound
up.
Continuation Provision – A PA should state (a) that the partnership will continue between the remaining
partners and (b) how a partner can leave, including a buy-out mechanism.
Distribution – Subject to any PA, where a partnership is wound up, any money and assets will, following the
discharge of any debts and liabilities, be distributed to the partners so their initial capital contribution is repaid.
ASR – It is prudent to include an Asset Surplus Ratio (“ASR”) that sets out the proportions in which any
surplus assets are to be distributed. Without an ASR, any surplus assets will be distributed in accordance
with the agreed PSR. Where there is no PSR, the surplus assets will be distributed evenly.
LLPs
Incorporation & Record-Keeping
Procedure – The subscribing members must submit the relevant fees and a Form LL IN01 and submit it to CoHo.
The Form LL IN01 must state (a) the LLP’s name and registered office, (b) which members, if not all, are
designated members, and (c) any PSCs. CoHo will issue a certificate of incorporation as conclusive evidence of
incorporation.
Continuing Registration – An LLP must file with CoHo where there is (a) changes of name, of registered office, or
in membership, (b) creation of a charge, and annual confirmation statements and annual accounts.
Records – An LLP must maintain a Register of Members, including a record of PSCs.
Members
Number – An LLP must have at least two formally appointed members. There is no maximum number of
members.
Designated Member – At least two members must be “designated”. They must:
o sign the accounts on behalf of the members;
o make the appropriate filings at Companies House; and
o act on behalf of the LLP if it is wound up.
Termination – A member will cease to be a member upon their death, agreement with the other members,
notice to the other members, or dissolution if a body corporate.
Members’ Agreement (“MA”)
Liability – Members shall contribute to the assets of an LLP in the event of it being wound up as is provided in
the MA.
Capital & Profit – Members share equally in capital and profits.
Liabilities – An LLP must indemnify its members for payments made and personal liabilities incurred by them in
the ordinary and proper conduct of business.
Management – Every member may take part in management. No member is entitled to remuneration for
management.
Decision-Making – Ordinary decisions may be made by majority vote. Any change to the nature of the LLP’s
business requires unanimous consent.
New Members – No person can become a member or assign their membership without the unanimous consent
of the existing members.
3
, Records – The books and records of the LLP must be available for inspection by the members at the registered
office.
Disclosure – Each member must give true accounts and full information of all things affecting the LLP to any
member or his legal representative.
Non-Compete – If a member (without consent) carries on any business of the same nature as, and competing
with, the LLP, they must account for profits.
Account for Profits – Every member has a duty to account for benefits derived from transactions with the
LLP and its business or property.
Expulsion – There is no implied power of expulsion by the majority unless the members have expressly provided
for such a power.
Departure – Where there are only two partners and one leaves, the LLP is allowed to drop one designated
member for up to 6 months before the sole member will be liable for any debts incurred after that 6 month
period.
Private Companies
Incorporation
Incorporation from Scratch
Form IN01 – A Form IN01 must be completed, including:
o the company’s proposed name and registered office;
o whether liability is limited by shares or guarantee;
o whether the company is public or private;
o if limited by shares, a statement of capital and initial shareholdings;
o if limited by guarantee, details of the guarantee;
o a statement of the company’s proposed officers;
o a statement of PSCs; and
o a statement of compliance with CA 2006.
Documentation – A copy of the company’s Articles (unless MAs) and Memorandum must be submitted to CoHo.
Incorporation – CoHO will issue a Certificate of Incorporation. The company is a legal entity from the date of
incorporation, which is set out on the Certificate of Incorporation.
Same Day Incorporation – Only available if relying on the MAs.
Shelf Company Conversion
Step Resolution / Method Filing
Name SR Within 15 days, a Form NM01 must be filed
with CoHo, along with the SR, and a fee.
Registere BR A Form AD01 must be submitted to CoHo
d Office within 14 days.
Service remains valid on the old address for
14 days following registration.
Amendm SR The amended Article and SR must be
ent of submitted to CoHo with 15 days.
Articles
Directors A director may resign by letter to A Form TM01 must be filed with CoHo
: the Board, which will be accepted within 14 days.
Resignati by the Board at a BM
on
Directors OR or BR A Form AP01 must be filed with CoHo within
: 14 days.
Appointm
ent
4
