SQE Objectives for Business Law:
Candidates are required to apply relevant core legal principles and rules appropriately and
effectively, at the level of a competent newly qualified solicitor in practice, to realistic client-
based and ethical problems and situations in the following areas:
1. Starting a new business through the vehicle of a company, partnership, LLP or as a
sole trader.
2. The management of a business and company decision making to ensure compliance
with statutory and other legal requirements.
3. The interests, rights, obligations and powers of stakeholders in a business.
4. Financing a business.
5. Taxation of a business and its stakeholders.
6. The termination of a solvent business, corporate insolvency and personal
bankruptcy.
,Basic forms of ownership
Sole Proprietorship:
A business owned by one person – a sole trader, in which there is no distinction
between owner and the business.
Partnership:
A business formed of two or more people who operate for a common goal, which is
often making profit.
There are general partnerships and limited liability partnerships.
Company:
A company is either limited or unlimited liability entity that has a separate legal
personability from its shareholders. A corporation can be owed by one or multiple
shareholders and is overseen by a board of directors, which hires managerial staff.
Limited liability v Unlimited Liability:
A company can be formed with limited liability which protects its owners or shareholders
from business failure, by doing business under a separate legal entity. Therefore, members
of a company will not be liable for the companies debts.
Unincorporated businesses or individuals are usually not as such protected, every partner of
a partnership is jointly liable for the debts of the business. Their own private property may be
sold to recover any outstanding debts.
Business organisation
Formation – there are no formalities or costs for setting up a business as a sole trader or as
a partnership.
Disclosure and compliance – a company has the ongoing obligation to make information
available to the public such as annual statements, forms and resolutions, which it is required
to file – a partnership or sole trader does not.
Tax advantages – different structures are treated differently in tax law such as:
Trading profits: if a business is successful, it should have a profit at the end. There
are two options as to what to do with these profits (1) retain the profits in the
business or (2) pay the profits as dividends to the shareholders.
, Limited companies – formalities, statutory filing and disclosure
A business may be incorporated as a limited company by registering it through the Registrar
of Companies. The limited company is an artificial person, separate from its directors and
shareholders.
Prior to incorporation
A company is formed under the Companies Act (parts 2 & 3). Form IN01 commences the
process in accordance with Section 9 Companies Act. The Application must state:
Companies proposed name;
Proposed place of registered office;
Whether liability is limited;
Whether the company is to be private or public.
The application must also include:
A statement of share capital and initial shareholdings;
Companies proposed officers;
Statement of initial significant control;
Intended registered office;
Articles of association
Articles of Association
All registered companies must have articles of association which must be contained in a
single document and divided into paragraphs.
Articles of association are a company’s constitution and oversee a range of internal rules
such as responsibilities which form a statutory contract between the company and its
members. The Companies Act considers the company’s articles of association (and any
resolutions and agreements relating to the incorporation of the company) as the company’s
constitution. The Companies (Model Articles) Regulations 2008 are the default company
constitution for limited companies, which apply to a limited company if it does not register its
own articles of association.
The Companies Act 2006 gives a company unlimited powers however, the articles can
include restrictions on a company’s powers.
Unless the company’s articles of association specifically restrict the objects of the company,
its objects are unrestricted. If a limited company registers its chosen articles, and the articles
do not exclude or modify the relevant model articles, the model articles, so far as applicable,
form part of the company’s articles in the same manner and to the same extent as if articles
in the form of those articles had been duly registered.
Amending the articles (S21 Companies Act):
Candidates are required to apply relevant core legal principles and rules appropriately and
effectively, at the level of a competent newly qualified solicitor in practice, to realistic client-
based and ethical problems and situations in the following areas:
1. Starting a new business through the vehicle of a company, partnership, LLP or as a
sole trader.
2. The management of a business and company decision making to ensure compliance
with statutory and other legal requirements.
3. The interests, rights, obligations and powers of stakeholders in a business.
4. Financing a business.
5. Taxation of a business and its stakeholders.
6. The termination of a solvent business, corporate insolvency and personal
bankruptcy.
,Basic forms of ownership
Sole Proprietorship:
A business owned by one person – a sole trader, in which there is no distinction
between owner and the business.
Partnership:
A business formed of two or more people who operate for a common goal, which is
often making profit.
There are general partnerships and limited liability partnerships.
Company:
A company is either limited or unlimited liability entity that has a separate legal
personability from its shareholders. A corporation can be owed by one or multiple
shareholders and is overseen by a board of directors, which hires managerial staff.
Limited liability v Unlimited Liability:
A company can be formed with limited liability which protects its owners or shareholders
from business failure, by doing business under a separate legal entity. Therefore, members
of a company will not be liable for the companies debts.
Unincorporated businesses or individuals are usually not as such protected, every partner of
a partnership is jointly liable for the debts of the business. Their own private property may be
sold to recover any outstanding debts.
Business organisation
Formation – there are no formalities or costs for setting up a business as a sole trader or as
a partnership.
Disclosure and compliance – a company has the ongoing obligation to make information
available to the public such as annual statements, forms and resolutions, which it is required
to file – a partnership or sole trader does not.
Tax advantages – different structures are treated differently in tax law such as:
Trading profits: if a business is successful, it should have a profit at the end. There
are two options as to what to do with these profits (1) retain the profits in the
business or (2) pay the profits as dividends to the shareholders.
, Limited companies – formalities, statutory filing and disclosure
A business may be incorporated as a limited company by registering it through the Registrar
of Companies. The limited company is an artificial person, separate from its directors and
shareholders.
Prior to incorporation
A company is formed under the Companies Act (parts 2 & 3). Form IN01 commences the
process in accordance with Section 9 Companies Act. The Application must state:
Companies proposed name;
Proposed place of registered office;
Whether liability is limited;
Whether the company is to be private or public.
The application must also include:
A statement of share capital and initial shareholdings;
Companies proposed officers;
Statement of initial significant control;
Intended registered office;
Articles of association
Articles of Association
All registered companies must have articles of association which must be contained in a
single document and divided into paragraphs.
Articles of association are a company’s constitution and oversee a range of internal rules
such as responsibilities which form a statutory contract between the company and its
members. The Companies Act considers the company’s articles of association (and any
resolutions and agreements relating to the incorporation of the company) as the company’s
constitution. The Companies (Model Articles) Regulations 2008 are the default company
constitution for limited companies, which apply to a limited company if it does not register its
own articles of association.
The Companies Act 2006 gives a company unlimited powers however, the articles can
include restrictions on a company’s powers.
Unless the company’s articles of association specifically restrict the objects of the company,
its objects are unrestricted. If a limited company registers its chosen articles, and the articles
do not exclude or modify the relevant model articles, the model articles, so far as applicable,
form part of the company’s articles in the same manner and to the same extent as if articles
in the form of those articles had been duly registered.
Amending the articles (S21 Companies Act):
