BLP Company FLOW Chart 2 PDF

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BLP Company FLOW Chart 2...

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BLP COMPANY FLOW CHART a. Professional conduct – can we act for client? i. Principles          

1. uphold the rule of law and the proper administration of justice; 2. act with integrity; 3. not allow your independence to be compromised; 4. act in the best interests of each client; 5. provide a proper standard of service to your clients 6. behave in a way that maintains the trust the public places in you and in the provision of legal services; 7. comply with your legal and regulatory obligations and deal with your regulators and ombudsmen in an open, timely and co-operative manner; 8. run your business or carry out your role in the business effectively and in accordance with proper governance and sound financial and risk management principles; 9. run your business or carry out your role in the business in a way that encourages equality of opportunity and respect for diversity; and 10. protect client money and assets.

ii. If solicitor conducts proceedings without authority, he will be personally liable for the costs

incurred – Warner v Masefield 2008 iii. if a solicitor receives instructions from someone other than the client, or by only one client on behalf of others in a joint matter, the solicitor should not proceed without checking that all clients agree with the instructions given. iv. Conflict of interest  Support principle 4 - O 3.5 – You do not act if there is a client conflict or a significant risk of a client conflict unless the circumstances set out in O3.6 and 3.7 apply.  Define conflict of interest – any situation where:  you owe separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict (a "client conflict"); or  your duty to act in the best interests of any client in relation to a matter conflicts, or there is a significant risk that it may conflict, with your own interests in relation to that or a related matter (an "own interest conflict").  Define client conflict - any situation where you owe separate duties to act in the best interests of two or more clients in relation to the same or related matters, and those duties conflict, or there is a significant risk that those duties may conflict.  O3.6 - where there is a client conflict and the clients have a substantially common interest in relation to a matter or a particular aspect of it, you only act if:  a. you have explained the relevant issues and risks to the clients and you have a reasonable belief that they understand those issues and risks;  b. all the clients have given informed consent in writing to you acting;  c. you are satisfied that it is reasonable for you to act for all the clients and that it is in their best interests; and  d. you are satisfied that the benefits to the clients of you doing so outweigh the risks.  Define substantially common interest - a situation where there is a clear common purpose in relation to any matter or a particular aspect of it between the clientsand a strong consensus on how it is to be achieved and the client conflict is peripheral to this common purpose.

 O3.7 - where there is a client conflict and the clients are competing for the same objective, you only act if:  a. you have explained the relevant issues and risks to the clients and you have a reasonable belief that they understand those issues and risks;  b. the clients have confirmed in writing that they want you to act, in the knowledge that you act, or may act, for one or more other clients who are competing for the same objective;  c. there is no other client conflict in relation to that matter;  d. unless the clients specifically agree, no individual acts for, or is responsible for the supervision of work done for, more than one of the clients in that matter; and  e. you are satisfied that it is reasonable for you to act for all the clients and that the benefits to the clients of you doing so outweigh the risks.  Define competing for the same objective - any situation in which two or more clients are competing for an "objective" which, if attained by one client, will make that "objective" unattainable to the other client or clients, and "objective" means, for the purposes of Chapter 3, an asset, contract or business opportunity which two or more clients are seeking to acquire or recover through a liquidation (or some other form of insolvency process) or by means of an auction or tender process or a bid or offer which is not public.

v. Duty of confidentiality  O4.1 - you keep the affairs of clients confidential unless disclosure is required or permitted by law or the client consents;  Define client - means:  the person for whom you act and, where the context permits, includes prospective and former clients;  in Parts 1-6 of the SRA Accounts Rules, the person for whom you act; and  in the SRA Financial Services (Scope) Rules, in relation to any regulated activitiescarried on by a firm for a trust or the estate of a deceased person (including a controlled trust), the trustees or personal representatives in their capacity as such and not any person who is a beneficiary under the trust or interested in the estate.  O4.2 - any individual who is advising a client makes that client aware of all information material to that retainer of which the individual has personal knowledge  O4.3 - you ensure that where your duty of confidentiality to one client comes into conflict with your duty of disclosure to another client, your duty of confidentiality takes precedence;  O4.4 - you do not act for A in a matter where A has an interest adverse to B, and B is a client for whom you hold confidential information which is material to A in that matter, unless the confidential information can be protected by the use of safeguards, and:  a. you reasonably believe that A is aware of, and understands, the relevant issues and gives informed consent;  b. either: i. B gives informed consent and you agree with B the safeguards to protect B's information; or ii. where this is not possible, you put in place effective safeguards including information barriers which comply with the common law; and  c. it is reasonable in all the circumstances to act for A with such safeguards in place.

vi. Money laundering  The Money Laundering Regulations 2007 place obligations on ‘relevant persons’ – defined in reg 3: 

A firm or sole practitioner who by way of business provides legal or notarial services to other persons, when participating in financial or real property transactions.

 Reg 20 - A firm must have internal procedures in place for the identification and reporting

of money laundering.  reg 20(2)(d)(i) - firms appoint person to act as a ‘nominated officer’- ‘Money Laundering

Reporting Officer’ (MLRO).  Reg 7 - firms obliged to obtain verification of the identity of each of their clients.  Reg 9 - The verification must take place before a business relationship is established and

before an occasional transaction can be carried out.  may verify the identity during the establishment of a business relationship if: i. (a) there is little risk of any money laundering or terrorist financing occurring; ii. (b) it is necessary not to interrupt the normal course of business; and iii. (c) the identity is verified as soon as possible.  However, the solicitor cannot: i. (a) carry out a transaction with or for the client through a bank account; or ii. (b) allow funds or property to be transferred or final deals signed until verification is complete.  Reg 13 – simplified due diligence - companies listed on a regulated EEA market subject to specified disclosure obligations or a public authority within the United Kingdom.  Reg 5 – standard due diligence - obliged to verify client identity using ‘documentation, data or information obtained from a reliable and independent source’.  Reg 14 – enhanced due diligence – applies where:  (a) the solicitor has not met the client face to face;  (b) higher risk factors in relation to money laundering or terrorist financing; or  (c) the client is a Politically Exposed Person (PEP).  Reg 21 – training  Reg 19 – record keeping  Proceeds of Crime Act 2002 - offence to become involved in money laundering.  S 328 – arranging – 14 yrs – requires knowledge  S 330 – failure to disclose – 5 years – objective test  S 33A – tipping off – 2 years vii. Duty as an officer of the court  O5.1 - solicitor must never deceive, or knowingly or recklessly mislead, the court.  IB 5.7, this includes not drafting a statement of case that contains either:  (a) any contention which the solicitor does not consider to be properly arguable; or  (b) any allegation of fraud, unless the solicitor is instructed to do so and he has material which he reasonably believes establishes, on the face of it, a case of fraud.  If client completes the statement of case with a material error the solicitor should advise the client to amend the statement of case.  If the client refuses to do so, the solicitor should cease to act for the client.  Outcome 4 - the solicitor should not inform the court or any other party of the reasons for ceasing to act. viii. Can you give advice without authorisation of FMSA?  Talk about conduct points first  SRA principle 4 and 5 – best interest and proper standard of service  Outcome 1.5 – competence  General prohibitions/sanctions

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S19 FSMA 200 – no person may carry out regulated activity in the UK unless authorised Criminal offence and contract unenforceable

[If the firm gives this advice, it must be given by someone with appropriate skill and expertise to be competent to act in the best interests and provide the good standard of service required by Solicitors’ Conduct Principles 4 and 5 and only where competent as required by Outcome 1.4. Under s19 Financial Services and Markets Act 2000 (‘FSMA’) the firm must not carry on a regulated activity without authorisation. If we breach s19 it is a criminal offence and the insurance contracts entered into could be rendered unenforceable. An activity is regulated if it is a specified activity which is carried on by way of a business relating to a specified investment without an exclusion applying.]  Regulated activity?

Firm in business? – always yes Specified investments? – e.g. shares  Specified business activity? SAY THIS: ‘advising on the merits of acquiring shares’  Exclusions i. Take over exclusion ii. Authorised third person a. Not available for insurance iii. Necessary exclusion (necessary to draft SHA?) a. [Whilst the arrangements and any advice may be a necessary part of our professional service and any charges would not be set out separately on the bill, we must not carry on insurance mediation “for reward” (FSMA 2000 Regulated Activities Order 2001, reg 67 and 4) if relying on the ‘necessary’ exclusion. As a result, few firms could rely on the necessary exclusion for insurance work.] iv. Professional firms exemption – s327 (part xx) – advice must be rising out of and complementary to proper legal work a. regulated activities appear to be generally incidental to the legal work that the firm carries out for clients  Conclusion – advice  [Therefore, a solicitor with the necessary competence and skill could: i. arrange and advise on the insurance or ii. introduce [client] to an independent financial advisor  without breaching s.19 FSMA 2000 provided we comply with the Scope Rules and Conduct of Business Rules. In order to rely on the ‘incidental’ exemption, the firm must be registered with the FSA and must have a compliance officer. We must not recommend or arrange any packaged products and must not keep any commission.  The solicitor who responds to his email should take details from (client) so that we can decide if we have the competence, and are allowed, to obtain the necessary insurance product, or would use the incidental exemption merely to refer him to an independent financial advisor.]  

SEPARATE LEGAL PERSOALITY  When to claim from members  If members have not paid all their share capital, only part, they must do so when required to pay off a loan. – s74 (2) (d) Insolvency Act  If members have given a guarantee to go into the loan on the company’s default, can claim the money from the members.  Forming a company  The documents which must be prepared and delivered to the Registrar for a private company limited by shares are:  (a) an application for registration as a company;  (b) a memorandum of association for the company; and  (c) possibly articles of association for the company.  The documents may be prepared and delivered to Companies House either in electronic form, or in paper form in person or by post.  issue a certificate of incorporation for the company.  The company comes into existence on the date stated on its certificate of incorporation. HOW TO SET UP A COMPANY  Company name  first step is to search the index of company names at Companies House.  s 66(1) CA 2006, company must not be registered with same name as one already in index.  Company and Business Names (Miscellaneous Provisions) Regulations 2009 (SI 2009/1085), - ‘same’ name is if name is essentially the same if simple elements disregarded.  The Regulations set out which elements are to be disregarded.  Status of the company;  certain words;  punctuation marks;  symbols; and  plurals.  S 59 CA 2006 - private limited company must use either ‘limited’ or ‘ltd’.  S 53 CA 2006 - A company may not use a name which, in the opinion of the Secretary of State for BIS, would amount to a criminal offence or is offensive.  Company and Business Names (Miscellaneous Provisions) Regulations 2009 (SI 2009/1085), certain characters may/not be used in a company’s name.  The name of the company also cannot exceed 160 characters including spaces.  Certain ‘sensitive’ words need prior approval - Some approval from Secretary of State for BIS - others both the Secretary of State and a regulatory body.  The approval process is carried out by Companies House on behalf of the Secretary of State.  Names which suggest connection between company and HM Government, other public authorities listed in the Company, Limited Liability Partnership and Business Names (Public Authorities) Regulations 2009 (SI 2009/2982) require the approval of the Secretary of State

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for BIS under s 54 of the CA 2006. – s54 need to write to the body or Secretary of State , asking whether they object to the use of the name and, if so, why. name may still be challenged by third parties.  The Secretary of State may direct a company to change its name after the company has been registered if it is the same as or too like a name already on the index of company names under s 67 of the CA 2006.  if misleading information was given for use of a particular name (s 75),  if the name gives a misleading impression of the nature of the company’s activities likely to cause harm to the public (s 76). s 69 of the CA 2006, any person may make an application to the Company Names Tribunal (CNT) to change a company’s existing name if:  that company’s name is the same as one in which the applicant has goodwill (defined as reputation of any description), or is  sufficiently similar that it would be likely to mislead by suggesting a connection. Where good faith can be shown in adopting the company name already registered, or where the applicant’s interests are not adversely affected by the use of the name, the application will fail. A company may be liable for the tort of passing off if it uses a name which suggests that the company is carrying on someone else’s business. If a claimant is successful, a court can order an injunction and damages or an account of profits. Trade mark search If a company name includes the name protected by a trade mark then the holder of a trade mark may bring a claim against the company for infringement of that trade mark. Effective:  Change of name is effective by the date on the updated certificate of incorporation – s80

 Articles of association  Every company must have a set of articles (CA 2006, s 18).  S 9(5)(b) copy of the articles included with application for registration.  When opt for unamended model articles - no need to attach a copy to the application for registration - ss 18(2) and 20(1)(a) of the CA 2006 allow for this.  It is possible to include provisions in the company’s articles which are entrenched (CA 2006, s 22). If included - more difficult to change in the future - must be notified to the Registrar on the application (CA 2006, s 23).  Memorandum of association  s 9(1)CA 2006 - submit together application for registration articles.  Must state subscribers who wish to form a company and that they agree to become be members of the company taking at least one share each (CA 2006, s 8).  It must be in the form set out in the Companies (Registration) Regulations 2008 (SI 2008/3014).  Simple document requiring name of each subscriber, his authentication (eg a signature) and the date of authentication.

 Post incorporation steps  First board meeting  Chairman  A chairman of the board of directors elected  Incorporation  Report made on the incorporation of the company – note on identities of the first director (s) and company secretary.  Bank account  Decide to open a bank account for the company - not legally necessary.  Directors sign a mandate form, giving specimen signatures and specifying who is allowed to sign cheques on the company’s behalf, and whether there is any limit on the amount for which cheques may be written.  Company seal  Have company’s name engraved on it in legible characters (CA 2006, s 45(2)).  Does not have to have a company seal (CA 2006, s 45(1)) – can rely on s 44 – Signature of two authorised signatories or one authorised signatory and a witness.  Business name  Accounting reference date  When a new company is registered, its ARD initially will be the anniversary of the last day of the month in which the company was incorporated (CA 2006, s 391(4)).  To change - must then file a Form AA01 with the Registrar of Companies at Companies House (CA 2006, s 392).  Auditor  All companies must prepare accounts (CA 2006, s 394).  accounts audited to show that they have been prepared in accordance with applicable company law and accounting standards.  Companies which do not need to have their accounts audited are ‘dormant’ companies (CA 2006, s 480), and ‘ small’ companies (CA 2006, s 477) on which the burden would be disproportionate. (Small companies are those which meet at least two out of three tests defined in s 382 of the CA 2006 (eg annual turnover not above £6.5 million and not more than 50 employees).)  

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Directors’ services (employee) contracts  unless a director is to be appointed for a guaranteed term of more than two years. Company records  S 1134 defines what these records are.  Written up on incorporation and amended from time to time to reflect any changes.  If not satisfied, any director or other officer of the company in default may be liable to a fine. Tax registrations  Companies House automatically notify HMRC of the registration of the new company - HMRC an introductory pack.  Corporation tax - pack will include a Form CT41G (new company details), which must be completed and returned to HMRC.

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PAYE and National Insurance - register the company with HMRC to arrange for deduction of income tax from salaries under the PAYE scheme and NI contributions.  VAT - must register for VAT with HMRC.  Insurance  Disclosure of company details  Companies (Trading Disclosures) Regulations 2008 (SI 2008/495) - to ensure that people know its  Name;  legal status; and  where further information about the company may be found.  The company must include  company name in characters legible to the naked eye at its registered office;  the location where the company keeps its company records; and  all places of business,  on all websites, all business let...