Summary SQE 1 Business Law & Practice Cheat Sheet

Business – cheat sheet issue areas
Partnerships

Partnerships – dissolution

 Occurs automatically when one partner leaves, dies, expires or becomes bankrupt under the PA 1980.
 Partners can agree for partial dissolution – to continue the partnership and buy the outgoing partners’
share.

Test for apparent authority

 Transaction relates to business of the kind usually carried out by the firm (Objective)
 Partner would usually be expected to have authority to act (Objective)
 Other party did not know they did not have authority (Subjective)
 Other party deals with someone they know or believe to be a partner (Subjective)

Incorporation and filing requirements

 LLP: LLIN01 + Fee
 Private/Ltd: LLIN01 + Fee + memorandum + articles
 Public/Plc: LLIN01 + Fee + memorandum + articles + £50,000 share capital

Filing for changes

 Appointment of new member: AP01/AP02 (LL AP01 for LLP) SH01 for new shares
 Removal: TM02 (LL TM02 for LLP)
 Appointment of secretary: AP03/AP04
 PSCs: PSC01/2 form (PSC04 for change of details)
 Share Certificates: within two months of the allotted shares
 Appointment of a new director: AP01/AP02
 Change in paticulars: CH01/CH02

Filing requirements

 Internal admin to be kept for 10 years
 Private: Reports need to be filed in 9 months
 Public: 6 months
 CS01 form filed within 14 days from the confirmation date

Requiring special resolution

 Change of name
 Change of articles
 Disapplication of pre-emption rights
 Reduction of share capital

Minority shareholders

Unfair Prejudice

 Company’s affairs conducted in a manner unfairly prejudicial
 Shareholding jeopardized
 Objective test – would a hypothetical bystander believe the act/omission to be unfair
 Remedy – such order as the court thinks fit

Derivative Claims

 Brought by shareholder for a wrong done to the company

,  Applies to court
o Two-stages: prima facie case then directions
 Must be refused where breach has been ratified

Directors

Shadow Director – A person with whose directions the directors are accustomed to acting

De facto – a person who acts as a director, though has not been validly appointed

Removal of directors requires special notice: 28 days  BM  2 days’ notice  14 days  GM

Bushell v Faith clause: Gives weighted voting rights in the event of a vote to remove them as director occurs

Service Contracts

 Term of 2 or more years must be approved by ordinary resolution
 Look at the notice, not the period
 Service element will be void, termination could occur on reasonable notice
 Shareholders have a right to inspect without charge within 7 days of requesting

Directors Duties (S171-172)

 S171 Act within powers
 S172 Promote the success of the company
 S173 Exercise independent judgement
 S174 Reasonable care, skill and diligence
o General
o Specific to that director
 S175 Duty to avoid conflicts of interest
 S176 Duty to not accept benefits from third parties – can have reasonable gifts declared to the company
 S177 Duty to declare interest in a proposed transaction or arrangement
o Where any directors are unaware

S182  duty to declare interest in an existing transaction – as soon as practicable

Claims against directors

 Wrongful trading
o Company insolvent – brought by liquidator/administrator
o Director ought to have concluded there was no prospect that the company would avoid this
(Both subjective and objective)
o Defence: took every step to minimise the loss
 Fraudulent Trading
o Company insolvent – brought by liquidator/administrator
o In the course of trading, the company defrauded creditors
 Misfeasance

Important transactions requiring shareholder approval

 Substantial property transactions (ordinary res)
o Someone connected to the director/ a company in which the director has more than 20%
voting power
o Non-cash asset
o Over £100,000 or over £50,000 and more than 10% of the Net Asset Value of the company.
o Breach = transaction voidable
 Loan to directors (ordinary res)