BLP Guide 1 - Notes for the first portion of the BLP module (Company Structures to Joint Ventures) PDF

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Download BLP Guide 1 - Notes for the first portion of the BLP module (Company Structures to Joint Ventures) PDF

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2021/22

BLP Guide 1 Exam Notes – – – – – – –

Business Structures Setting up Companies Company Procedures Directors & Directors Duties Articles of Association Shareholders Joint Ventures

TABLE OF CONTENTS PROCEDURE PLANS ...................................................................................................................... 5 PROCEDURE PLAN: CHANGES TO A SHELF COMPANY............................................................................ 5 PROCEDURE PLAN: CHANGES TO ARTICLES (WRITTEN RESOLUTION) ..................................................... 9

PROCEDURE PLAN: APT OF DIRECTOR, TRANSACTION WITH DIRECTOR & SHARE ISSUE ....................... 11 INCORPORATION AND CONSTITUTION ..................................................................................... 14 BUSINESS STRUCTURES – COMPARISON TABLE .................................................................................. 14

SETTING UP A COMPANY COMPARISON TABLE .................................................................................... 17 CHANGES TO A COMPANY PROCEDURES TABLE ................................................................................. 18 SETTING UP COMPANIES .................................................................................................................... 20 WHEN DOES A COMPANY BECOME A SEPARATE LEGAL PERSONALITY? ......................................................... 20 CONTRACTING BEFORE INCORPORATION ........................................................................................... 20 CONSIDERATIONS IN CHOOSING A STRUCTURE ................................................................................... 20 PUBLIC VS PRIVATE COMPANIES ................................................................................................................ 20 PUBLIC COMPANIES .................................................................................................................................. 21 ACCOUNTS ............................................................................................................................................... 22 PERSONS WITH SIGNIFICANT CONTROL ...................................................................................................... 22 CHANGE OF COMPANY NAMES ................................................................................................................... 23 EXTRA INFORMATION ON INCORPORATION .................................................................................................. 23 COMPANY PROCEDURES ............................................................................................................ 24 MEEETING PROCEDURES.................................................................................................................... 24 AGENCY

& CORPORATE REPRESENTATIVES ................................................................................................ 24

DIRECTORS ................................................................................................................................... 25 DIRECTORS’ POWERS........................................................................................................................ 25 WHO GRANTS DIRECTORS THEIR POWER? .................................................................................................. 25 LIMITATIONS ON DIRECTOR POWERS .......................................................................................................... 25 DIRECTORS’ DUTIES .......................................................................................................................... 25 TO WHOM DO DIRECTORS OWE THEIR DUTIES TO? ...................................................................................... 25 THE DUTIES .............................................................................................................................................. 25 Relationship between general duties, common law rules and equitable principles ............................................................27

BREACHES OF DIRECTORS DUTIES ..................................................................................................... 27 AUTHORISATIONS FOR POTENTIAL BREACHES ............................................................................................. 27 Member authorisation .........................................................................................................................................................27 Director authorisation ..........................................................................................................................................................27 Other steps to take for potential breaches ..........................................................................................................................28

WHAT HAPPENS IN THE EVENT OF A BREACH? ............................................................................................ 28 Ratification by directors.......................................................................................................................................................28 Ratification by shareholders – s.239...................................................................................................................................28 Relief from liability ...............................................................................................................................................................29 Remedies for breach:..........................................................................................................................................................29 Remedial options for breach of fiduciary duty .....................................................................................................................29 SERVICE CONTRACTS ........................................................................................................................ 30

NON-LONG TERM SERVICE CONTRACTS S.177............................................................................................ 30 LONG TERM SERVICE CONTRACTS S. 188 ................................................................................................... 30 Breach.................................................................................................................................................................................30 If approval is not granted ....................................................................................................................................................30 CONNECTED PERSONS – S.252.......................................................................................................... 31

TABLE FOR ASSESSING WHETHER SOMEONE IS A CONNECTED PERSON ........................................................ 31

Key: Act; Case

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SUBSTANTIAL PROPERTY TRANSACTIONS – S.190.............................................................................. 31 WHAT IS A SUBSTANTIAL PROPERTY TRANSACTION ?.................................................................................... 31

MEMBER APPROVAL REQUIREMENT ............................................................................................................ 32 HOLDING COMPANY – ADDITIONAL APPROVAL..................................................................................... 32 WHOLLY OWNED SUBSIDIARY – EXCEPTION TO APPROVAL ........................................................................... 32 EXCEPTIONS............................................................................................................................................. 32 CONSEQUENCES OF NON-COMPLIANCE ..................................................................................................... 33 AFFIRMING THE TRANSACTION ................................................................................................................... 33 DEFENCES ............................................................................................................................................... 33 COMPLIANCE WITH STATUTORY DUTIES ..................................................................................................... 33 EXAM: THINGS TO WATCH OUT FOR ............................................................................................................ 34 LOANS TO DIRECTORS AND CONNECTED PERSONS (SS. 197,198, 200, 201) ....................................... 34 WHAT IS AN ASSOCIATED COMPANY? ......................................................................................................... 34 WHAT IS A QUASI LOAN AND CREDIT TRANSACTION? ................................................................................... 34 REQUIREMENT FOR APPROVAL .................................................................................................................. 34 PROCEDURE FOR OBTAINING APPROVAL ................................................................................................... 35 HOLDING COMPANY – ADDITIONAL APPROVAL..................................................................................... 35 WHOLLY OWNED SUBSIDIARY – EXCEPTION TO APPROVAL ........................................................................... 35 EXEMPTIONS ............................................................................................................................................ 36 CONSEQUENCES FOR NON-COMPLIANCE ................................................................................................... 36 DEFENCES ............................................................................................................................................... 37 COMPLIANCE WITH STATUTORY DUTIES ..................................................................................................... 37 EXAM: THINGS TO WATCH OUT FOR ............................................................................................................ 37 LOANS FLOWCHART AND SUMMARY ................................................................................................... 38 LOAN APPROVAL SUMMARY ....................................................................................................................... 39 REMOVING A DIRECTOR – S.168 ........................................................................................................ 40 REQUIRES ORDINARY RESOLUTION ............................................................................................................ 40 SPECIAL NOTICE ....................................................................................................................................... 40 COUNTING TIME WITH CLEAR DAYS ............................................................................................................ 40 COMPLYING WITH S.312 MAX DELAY ........................................................................................................... 41 DOES S.312 (4) NOT EFFECTIVELY INVALIDATE THE 28 CLEAR DAYS? .......................................................... 41 SHAREHOLDER’S POWER TO CALL GM....................................................................................................... 41 COMPLYING WITH S.303 AND S.304 ........................................................................................................... 41 NOT COMPLYING WITH S.303 AND REQUIRING SHAREHOLDERS TO CALL S. 305 ........................................... 41 NOTE ON COMPLYING WITH STATUTE: ........................................................................................................ 42 DIRECTORS RIGHTS .................................................................................................................................. 42 VOTING FOR THE REMOVAL ....................................................................................................................... 42 RECALCULATING SHAREHOLDING PERCENTAGES WHERE SHAREHOLDERS ABSTAIN FROM VOTE .................... 43 EMPLOYMENT CONTRACTS AND COMPENSATION ........................................................................................ 43

ARTICLES OF ASSOCIATION....................................................................................................... 44 ARTICLES – LEGAL AND COMMERCIAL CLAUSE COMPATABILITY ......................................................... 44 ARTICLES COMPATIBILITY TABLE ................................................................................................................ 44 SHAREHOLDERS .......................................................................................................................... 47 VOTING ............................................................................................................................................. 47 SPECIAL RESOLUTIONS: ............................................................................................................................ 47 ORDINARY RESOLUTIONS: .......................................................................................................................... 47 WRITTEN RESOLUTIONS ............................................................................................................................ 47 MINORITY SHAREHOLDERS ................................................................................................................ 47 S.33 ACTIONS TO ENFORCE ...................................................................................................................... 48

Key: Act; Case

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S.260 DERIVATIVE

ACTIONS ...................................................................................................................... 48

Grounds ..............................................................................................................................................................................48 Application for permission to continue a derivative claim: the two-stage process ..............................................................48 Bars to a derivative claim at the second stage: ..................................................................................................................48

UNFAIR PREJUDICE – S.994 ...................................................................................................................... 49 Who can bring a claim? ......................................................................................................................................................50 core elements to bring a claim ............................................................................................................................................50 Remedies available to successful .......................................................................................................................................50 S. 122 WINDING UP

.................................................................................................................................. 51 SHAREHOLDER AGREEMENTS ................................................................................................................... 51

JOINT VENTURES ......................................................................................................................... 52 STRUCTURING THE JV - CONSIDERATIONS ......................................................................................... 52 THE MOU AND THE SHAREHOLDERS’ AGREEMENT ............................................................................ 54 MEMORANDUM OF UNDERSTANDING .......................................................................................................... 54 SHAREHOLDERS’ AGREEMENT ................................................................................................................... 54 COMMERCIAL CONSIDERATIONS ........................................................................................................ 54 SHAREHOLDER AGREEMENT PROVISIONS .......................................................................................... 55 DEADLOCK PROVISIONS AND TERMINATION ....................................................................................... 56 INTERNATIONAL JV CONSIDERATIONS................................................................................................ 57 DRAFTING ...................................................................................................................................... 58 KEY THINGS TO WATCH OUT FOR ....................................................................................................... 58 SPONSORSHIP AGREEMENT DRAFTING EXAMPLES .............................................................................. 58 CONTRACTUAL JV EXAMPLE ............................................................................................................. 61 TEMPLATE CLAUSES FOR JOINT VENTURE AGREEMENTS ..................................................................... 63 COMPLETION............................................................................................................................................. 63 MATTERS REQUIRING CONSENT OF SHAREHOLDERS ................................................................................... 63 FINANCE OF THE JVC ................................................................................................................................. 63 RESOLUTION OF DEADLOCK ....................................................................................................................... 64 TERMINATION AND LIQUIDATION ................................................................................................................. 64

Key: Act; Case

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Procedure plans PROCEDURE PLANS PROCEDURE PLAN: CHANGES TO A SHELF COMPANY

Introduction Always check whether the company you are advising has incorporated the Model Articles. If not, you may not be able to cite Model Articles in your answer and you will then need to refer to what the actual articles set out. Board Meeting 1 / Part 1 (SN) 1 2

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4 5 6 7 8 9 9

Who calls / Notice Meeting can be called by any director Meeting called on reasonable notice, according to what is usual for the company (notice must include date, time, location) Quorum Minimum quorum is 2 (will be 2 unless fixed higher). Can be fixed from time to time. [If the company has 1 director, 1 is quorate] Agenda To appoint [New Director] and [New Director] as directors (Appointment to take effect immediately) [Old Chairperson] to stand down as Chairperson Directors appoint [New Chairperson] to take Chair as Chairperson To accept letters of resignation from [Old Director] and [Old Director] as directors (all resignations to take effect immediately) To accept letter of resignation from [Old Secretary] as Company Secretary (resignation to take effect immediately) To appoint [New Secretary] as Company Secretary (Appointment to take effect immediately) To receive and approve the transfers of subscriber shares and enter the new shareholder, [Shareholder] in the register of members immediately (s.112(2)).

Authority Article 9(1) MA Browne v La Trinidad Article 11(2) MA

Article 17(1)(b) MA Article 12(3) MA Article 12(1) MA Article 18(f) MA

Article 3 (general power) Article 26(1) MA

IF APPLICABLE Include a statement that [Company Name as it is before change] now has only one member (s.123(2)(a)). Amend the PSC register (s.790M). 10

IF ON SHORT NOTICE: Call a GM on short notice to move a special resolution to change the company name 10B IF GM IS CALLED ON SHORT NOTICE (if it’s not called on short notice, deal with this in BM1 PMMs): • Register the transfer • Make an entry in Register of Members immediately so that the transfer is effective, and [X] can vote in the GM [via corporate representative authorised by a boar...