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Business law and practice. Lecture 1. Partnerships. Assessments. -

Two separate examinations for business law and practice. One closed book MCQ exam. Open book written paper which consists of four questions.

Trading vehicles. Sole traders. -

Usually start off as a sole trader. Self-employed builder for example would be a sole trader, as would a consultant.

General partnership. -

As the business begins to take off, would certainly need help. One of the common ways of getting help is to go into partnership with someone else. Legal definition of partnership – Section 1 of the Partnership Act 1890 Sole trader will never be a partnership as you need a minimum of TWO people to constitute a partnership. It is important to ascertain whether there is a partnership meeting that particular definition. If it does meet the definition, then the partnership act implies a certain agreement between the partners automatically. May choose to enter into a partnership agreement to determine the terms of their partnerships, both rights and obligations. In the absence of such an agreement, it is the terms of the partnership act that shall imply the terms of their agreement. The Smiths (band) case study example. The partnership act confirms, that in regards to third parties (creditors), ALL partners are liable without limit, for the debts of the partnership.

Limited partnership. -

Came into being at the beginning of the 20th century. Able to have one general partner who would manage the business, and that general partner would be liable without limit for the debts of the partnership. Could have some other limited partners, who would be investors. Who are liable but limited to the amount they agreed to contribute. Limited partners have to really trust the general partner. Lots of hedge funds recently have begun using limited partnerships. It is good for tax purposes. Important to not confuse a limited partnership with a LLP.

Limited liability partnership. -

Hybrid between a company and a partnership for tax purposes, which is generally a good thing.

Companies. Different types of companies: - Public companies limited by shares - Private companies limited by shares - Other less common types (company limited by guarantee, as some universities are / can also have unlimited companies / community interest companies / charitable interest organisations / charitable companies as charitable trusts). Companies limited by shares: Key features. Separate legal personality. -

Key case: Solomon v Solomon – established that a company has its own separate legal personality. Advantage of a company limited by shares: if the company starts to do badly, I can wind the company up. Whilst I will lose my initial investment, but I won’t lose my flat, car etc.

Limited liability. -

Cannot be pursued personally by investors. Investors in such a company tend to be shareholders in the company limited by shares.

Participators (shareholders / members). -

The companies act tends to talk about shareholders as members. The members, if the company is limited by shares, are the shareholders.

Separation of management and ownership. -

The investors who own the shares in the company, who essentially own the company. Those shareholders may also be directors of the company, but equally may be separate people. - The directors of the company will essentially manage the day to day business of the company. - Of the decisions which the company decides to make, especially the more significant decisions, will be reserved for the shareholders of the company. Share capital.

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The money that has been invested into the company by the shareholders when they purchased their shares. Very important that the company maintains that share capital.

Statutory formation requirements. -

Registering key information with the registrar of companies at companies house. Price you pay for limited liability is a certain amount of transparency. You have to open up your affairs to public scrutiny.

Constitutional documents. -

HAVE to register your articles of association (how you agree between yourselves to run the company). If you are a modern company setting up now you will get the model articles under the CA 2006. Companies pre 1 October 2009, you will have a different default format.

Ongoing administration and filing requirements. -

Every 12 months there is a requirement for companies to file a conformation statement. This statement confirms the information to companies household about companies. Must be filed at least once a year. In particular, it will advise companies house if there has been any change to the shareholder information, have any shares changed hands etc? also include a statement of capital (if share capital has increased), will also require companies to indicate if the persons with significant control have changed.

Company limited by shares: decision making. -

Decisions can be made by: 1. Directors; and or 2. Shareholders

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Directors are the management of the company, they pull the strings. Decisions that can be made by directors are day to day decisions. Directors will make decisions at board meetings. Any one director can call a board meeting by giving notice to all of the others. The notice that they give for the meeting must be reasonable. Reasonable – determined by looking at the size of the company and the number of directors. Decisions at director level will be made by simple majority by show of hands. However, some decisions are reserved for the shareholders.

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Setting up a shareholders meeting.

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Necessary to give 14 days clear notice of a shareholders meeting. Possibility of agreeing short notice. Possible to obtain shareholder resolutions in writing. An alternative to holding a general meeting is to circulate a written resolution. Directors agree to write to the shareholders, allowing them to vote for or against the proposed resolution. Convenient way. Introduced by 2006 companies act.

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ABOVE – common procedure followed by a company when making a decision. Any constitutional element that requires approval by the shareholders, it is necessary to carry out the above procedure known as a board meeting sandwich.

Private company limited by shares. -

Company name: choice is very important, think carefully about the name. Must end with the word Limited/Ltd. No minimum issue share capital, commonly 100 shares with nominal value of £1 each. No statutory restriction on the amount paid up on shares on issue. Shares in a private limited company cannot be offered to the public in general. Maintenance of share capital is less onerous than for PLC’s....