Revision / Lecture Notes for Business Law and Practice

BLP Revision Document

- Always read the question fully
o Classes of share different?
o Written resolution procedure ruled out?

Business Models

Table of business models

Sole trader

- No governing statute
- Unlimited personal liability
- No separate legal entity
- 1 person
- No set-up expenses
- No public disclosure required
- No ongoing expenses – usually pay accountants
- No legal requirements re management structure
- Financing methods
o Can borrow
o Cannot create floating charges or finance by issuing shares

Partnership

- Governed by partnership act 1980
- Partners have unlimited personal liability on joint or joint/several basis
- Not separate legal entity – each partner personally responsible
- 2 people minimum
- No set-up costs – but recommended to have partnership agreement drawn up
- No disclosure required
- No ongoing expenses – usually accountants
- Management dictated by partnership agreement, Partnership Act 1980 default as
backup
- Financing
o Can borrow
o Cannot issue shares/create floating charges

- If two people in business together, they are automatically a partnership
- Without written partnership agreement, they are governed by the Partnership Act
1980 – equal partnership
o Despite different input to capital, each entitled to 50/50 of firm’s profits
o No salaries
o Day-to-day decisions decided by majority, unanimity for important decisions
o Dissolution on any partner deciding to leave
o Cannot remove a partner against their will

1

, - Thus partnership agreement much more agreeable

LLP

- Governed by LLP Act 2000 and subsequent regulations regarding capital/profit share,
accounting requirements, register of charges etc.
- Limited liability – individual members not personally liable above their capital share
- Separate legal entity
- Minimum 2 people required
o Benefit of limited liability lost if down to 1 member for +6 months
- Set up costs
o Incorporation document needed
o Registration fee
o LLP agreement highly recommended to be made by lawyers – no articles
o Stationery printing
- Similar disclosure reqs to companies
o Registered office
o Details of members
o Details of designated members
o Accounts
o Persons with significant control
o If large enough, details of their payment practices/policies
 Annual turnover +£36 mill, balance sheet assets +£18 mill, or 250
average employees
- Ongoing expenses
o Annual accounts
o Most of these must be audited
o File annual confirmation statement – fee required
- Management structure
o Largely left to LLP agreement
o Few formalities for LLP re management procedures
- Financing
o LLP can borrow
o Can create floating charges
 But if financing underwritten by member’s personal guarantee,
they’re personally liable – removes safety of limited liability
o Cannot raise through share issuance

Company

- Governed by companies Act 2006
- Limited liability – each SH’s liability limited to unpaid amount of each share
- Separate legal entity
- Minimum 1 person
- Expenses on set-up
o Incorporation documents (articles/memorandum)
o Lawyer recommended to draw these up
2

, o Registration fee, printing company stationery
- Publicity and disclosure
o More than any other
o Registered office – s.86
o Accounts – s.441
o Info on directors
o Info on company share capital
o Members’ resolutions need to be filed at CH – ss.29/30
o PSC register
 Those who own/hold +25% company’s shares/voting rights
 Hold right to appoint/remove majority of directors
 Has right to/actually exercises significant control
o If large, must publish payment practices and policies bi-annually
 Same criteria for ‘large’ as LLP
- Ongoing expenses
o Annual accounts
o Most must have these audited
o Must file annual confirmation statement with yearly fee
- Management structure
o Per articles and CA provisions, meetings of directors and SHs held to decide
matters
- Financing
o Can borrow
o Can create floating charges
o Can raise finance by issuing shares – easier than others to obtain financing

Differences between Public and private companies

- Private Limited Company – any company that isn’t a public company – s.4(1)
- Public Limited Company – company whose certificate of incorporation states it’s a
public company – s.4(2)
- Public Listed Company – public company offering shares to public on recognised
stock exchange

- Name must end with
o Private – s.59(1) – Limited/Ltd
o Public – s.58(1) – Public Limited Company/PLC
- Minimum no. shareholders
o Private – s.7(1) and 8(1) – 1
o Public – s.7(1) and 8(1) - 1
- Minimum no. directors
o Private – s.154(1) – 1
o Public – s.154(2) – 2
- Company secretary
o Private – s.270(1) – not required
o Public – s.271 – required


3

, - Certificates required before commencing trading
o Private – s.15(4) – certificate of incorporation
o Public – s.15(4) – certificate of incorporation
 S.761(1)(2) Cannot trade until trading certificate issued by Registrar
showing allotted share capital not less than minimum
- Minimum share capital to be issued
o Private – s.8(1)(b) – at least 1 share
o Public – minimum of £50,000 – s.763(1)(a)
- Shares to public
o Private – s.755(1) – prohibited
o Public – permitted
- Method of payment/minimum amount payable for shares
o Private – s.582(1) – no restriction on method
 Shares can be issued without immediate payment
o Public – s.593(1) – cash only, or where independently valued
 S.586(1) – 25% nominal value must be paid on allotment + whole
premium

Question types

- First run checks on client
o PCR
 Conflict of interest check – check redundancy plan, ensure no non-
compete
 With a related client or with our own client
 Explain fees/cost structures and check client ability to pay
 Check we have right competence and resources
 Explain GDPR and data handling
 Explain complaints procedure
 Do both of these in a client care letter also

- Which kind of business medium is most favourable?
o Advantages and disadvantages of each of the four based on what the client
wants from you

- SGS has question on accidental partnership
o Default provision – in business together, so equal partnership
o Also one wanting to leave = dissolution
o So partnership agreement better as it ensures proportionate split




4