LPC Notes Core modules - BLP, PLP, Civil and Criminal litigation 2023

NOTE TO READER: These notes were created for the 22/23 semester of the LPC at BPP and using these alone I got a distinction grade. They are a compilation of lecture notes, SGS solutions, practice/mock/sample papers and previous student’s legacy notes. If you wish to use them, I would recommend using them as a skeleton as you go along the course and supplementing/cross-checking with the content you learn. These are by no means exhaustive and some areas may be missing and/or lacking. Regardless, I hope they prove helpful - good luck! Table of Contents 1. Incorporation, procedure and constitution ................................................................... 6 a. Types of business structure.....................................................................................................7 b. Directors’ duties (ss.171-177 CA 2006) .................................................................................11 c. Pre-incorporation contracts......................................................................................................15 d. Choice of company’s name....................................................................................................16 e. Procedure plans for amending shelf company .....................................................................16 f. Procedure plan for use of written resolution...........................................................................19 Board Meeting Part I ........................................................................................................................19 g. Function and content of articles............................................................................................21 h. Legality and commerciality testing of articles ......................................................................22 i. Restriction by way of board resolutions as well as articles .....................................................25 j. Procedure for amending a company’s articles.........................................................................26 2. Directors........................................................................................................................ 30 a. Substantial property transactions (SPTs)..............................................................................30 b. Directors’ long-term service contracts..................................................................................31 c. Loans, quasi-loans and credit transactions ..............................................................................32 d. Directors’ indemnities, QTPIPs..............................................................................................37 3. Shareholders................................................................................................................. 38 a. Procedure plan to forcibly remove a director.......................................................................38 b. Recalculating shareholdings..................................................................................................42 c. Basic understanding of a director’s employment rights ..........................................................43 d. Shareholders’ agreements/Protecting minority shareholders ............................................44 e. Derivative actions ..................................................................................................................45 5. Joint ventures ............................................................................................................... 46 a. Possible forms for a JV (different types of business structure or cooperation agreement) 46 ADVANTAGES AND DISADVANTAGES SPECIFIC TO JVS [see more general ones also]..................................46 1 REQUISITIES/PROCEDURE FOR EACH STRUCTURE........................................................................................48lOMoAR cPSD| b. Commercial issues in relation to a JV ....................................................................................49 c. Deadlock provisions ..................................................................................................................50 DRAFTING A JV PROVISION...........................................................................................................................51 d. International aspects of a JV..................................................................................................53 6. Business accounts......................................................................................................... 55 a. Effect of a transaction on a company’s balance sheet..........................................................55 b. Interpreting accounts.............................................................................................................57 c. Responsibility of directors/auditors for company’s accounts..................................................57 The responsibilities of directors and the requirements of the CA 2006..........................................57 7. Financing the company ................................................................................................ 59 a. Statutory procedure for issuing shares .................................................................................59 Calculating how many shares need to be issued to give a specific voting right............................................62 What resolutions will need to take place for the issuing of shares.................................................65 b. Reviewing preference share rights........................................................................................65 Altering the preference share rights.............................................................................................................65 c. Procedure for arranging a term loan.........................................................................................68 • Term sheet.................................................................................................................................68 Steps in a loan transaction ...............................................................................................................69 d. Commercial issues in relation to lending and taking security ..............................................72 e. Basic understanding of key clauses in loan and security documentation............................75 f. Comparing debt finance with equity finance/term loans and overdrafts/different types of shares ................................................................................................................................................77 Calculation: adjusting voting power through shares.....................................................................................78 8. Taxation........................................................................................................................ 79 Income receipts – subject to income tax..........................................................................................81 If a receipt is the product of how the taxpayer generates money on a regular basis this will be classified as an income receipt. For example..................................................................................81 • the trading profits of a newsagent’s business will be income (as will the trading profits of any other trade or profession); ........................................................................................................81 • interest charged on loans is usually of an income nature as it will be paid to the lender on a regular basis (whether that is monthly or quarterly) over a period of time; and...........................81 • rent paid by a tenant for the occupation of property is income of the landlord.....................81 Capital receipts – subject to CGT......................................................................................................81 If a receipt is the product of a transaction that is not integral to such regular activity this is likely to be classified as a capital receipt. Think of capital transactions as ‘one-off’ transactions..........81 Therefore if the newsagent’s business mentioned above owned the premises from which the business operates, then any gain on the sale of those premises would be a capital receipt.........81 a. Individual taxation.................................................................................................................83 2 Income tax calculation ..................................................................................................................................83 Capital gains calculation ...............................................................................................................................88lOMoAR cPSD| b. Corporate taxation.................................................................................................................95 9. Acquisitions................................................................................................................. 100 a. Share sales vs asset sales.....................................................................................................100 Share Sale...................................................................................................................................................100 Asset Sale ...................................................................................................................................................100 b. Financial assistance..............................................................................................................101 c. Due diligence process and options for addressing issues arising from due diligence ...........103 Process........................................................................................................................................................103 Options for addressing issues arising from DD ...........................................................................................104 d. Warranties and indemnities ................................................................................................104 Warranties ..................................................................................................................................................104 Indemnities.................................................................................................................................................108 Misrepresentation ......................................................................................................................................109 e. Disclosure.............................................................................................................................111 f. Seller protection clauses .........................................................................................................113 g. Other acquisition agreement provisions.............................................................................115 Boilerplate clauses..........................................................................................................................117 Entire agreement........................................................................................................................................117 1. What is the purpose of this clause? ................................................................. 117 2. Do you think this clause is commonly negotiated? What amendments might a party try to negotiate? ..................................................................................... 117 3. What are the commercial risks involved and how have these been allocated?........................................................................................................................... 118 Governing law and jurisdiction ...................................................................................................................118 Assignment and non-assignment................................................................................................................118 What is the purpose of this clause? ........................................................................... 118 2. Do you think this clause is commonly negotiated? What amendments might a party try to negotiate? ..................................................................................... 118 3. What are the commercial risks involved and how have these been allocated?........................................................................................................................... 119 Exclusion of third party rights .....................................................................................................................119 1. What is the purpose of this clause? ................................................................. 119 2. Do you think this clause is commonly negotiated? What amendments might a party try to negotiate? ..................................................................................... 120 If such an amendment is made, the Rights of Third Parties clause will also provide that the parties may rescind the contract or vary it in such a way as to alter or extinguish the third party’s right without the third party’s consent (which is otherwise not permitted under s. 2(1) of the Act). The Practical Law drafting note that you read as part of your preparation for this SGS covers this point. This is thought to be one of the greatest dangers under the Act as it 3 potentially subjects contracting parties to the will of third parties before they can amend, or terminate, arrangements they have agreed.................................. 120lOMoAR cPSD| 3. What are the commercial risks involved and how have these been allocated?........................................................................................................................... 120 The Act alters the doctrine of privity of contract. There is therefore a risk that a third party may be able to claim rights under a contract even if it is not itself a party to the contract and the contracting parties never contemplated the third party having those rights. This is a particularly serious commercial risk as it cannot be quantified at the time of making the agreement and this is why it is standard practice to exclude third party rights to attempt to remove the risk. 120 Notice clause...............................................................................................................................................120 Force majeure.............................................................................................................................................122 Termination clause .....................................................................................................................................123 10. Own share purchase, redemption and reduction...................................................... 125 a. Dividends..............................................................................................................................125 b. Redemption out of profits ...................................................................................................126 c. Buy back out of profits ............................................................................................................127 Procedure plan ...........................................................................................................................................128 Is there sufficient distributable profits for a buyback? ...............................................................................130 d. Reduction of share capital ...................................................................................................131 e. Effect of a buy back and a reduction of share capital on a balance sheet..........................132 Effect of a buyback using distributable profits............................................................................................132 Effect of a reduction of share capital ..........................................................................................................133 11. Insolvency ................................................................................................................... 134 a. Corporate insolvency procedures........................................................................................134 b. Order of priority on winding up...........................................................................................134 c. Directors’ personal liability in relation to insolvent companies.............................................134 d. Voidable transactions ..........................................................................................................134 Execution clauses/Signature to a deed or agreement under hand ...............................................135 12. PCR .............................................................................................................................. 137 PROFESSIONAL CONDUCT ISSUES ..................................................................................................137 1) Issues....................................................................................................................................137 2) Why is this an issue..............................................................................................................137 3) How to resolve it..................................................................................................................139 FINANCIAL SERVICES/DECISION TREE ............................................................................................142 Long form and short form answer flowchart.................................................................................142 Question 1 – what is a specified investment?................................................................................143 Question 2 – is the activity ‘specified’?..........................................................................................143 Question 3 – is the activity one of the excluded activities under RAO? [only exclusions listed in the table list; highlight these in the RAO] ......................................................................................144 4 Exclusions: The Financial Services and Markets Act 2000 (Regulated Activities) Order 2001: Articles 14-16 ..................................................................................................................................144 Question 4 - Does the activity fulfil the basic conditions in s. 327 of FSMA and SRA Scope Rule 2?lOMoAR cPSD| ..................................................................................................................................................150 Topics to be examined: ⟶ Incorporation, procedure and constitution ⟶ Directors ⟶ Shareholders ⟶ Joint Ventures ⟶ Business Accounts ⟶ Equity and Debt Finance ⟶ Taxation ⟶ Acquisitions ⟶ Own Share Purchase and Redemption ⟶ Insolvency Types of questions: ⟶ Calculation ⟶ Comparison/evaluation ⟶ Drafting ⟶ General analysis ⟶ Procedure ⟶ Statutory interpretation