Flashcards

Question	Answer
Where do you register the name of a partnership?	The Register of Business Names under the Business Names Act 1985
What are a few examples of restricted words which cannot be contained in the company or partnership name?	- Bank - Pharmaceutical - Royal - Insurance
Are there any real formation requirements when forming a partnership?	No, other than the agreement between the parties
What is the definition of a partnership and where is this found?	"The relation which subsists between persons carrying on a business in common with a view to profit" Found in Section 1 of the Partnership Act 1890
What do the default provisions in the Act state? There are 3	1. Each partner shall contribute equally to the partnership capital 2. Each partner will share equally the profits and losses of the partnership 3. Each partner is an agent for the partnership (and of the other partners) for contracts in the ordinary course of business
What is the relevant legislation regarding Limited Liability Partnerships?	Limited Liability Partnership Act 2000
In order to become incorporated as an LLP you must do what?	Deliver to the Registrar of Companies, along with the relevant fee, an incorporation document which needs to be signed by a minimum of 2 of the first members
What 5 things must the incorporation document state?	1. Name of the LLP 2. Location and address of the registered office 3. Names and addresses of members 4. Who the "designated members" are 5. A certificate of compliance
What must the name of the LLP end in?	Limited Liability Partnership, LLP or llp
What is the minimum number of members or "designated members" that are required in an LLP?	A minimum of 2
What are the responsibilities of the "designated members"?	Administrative and filing duties for the LLP
Who must sign the certificate of compliance?	Signed by either one of the proposed members or a solicitor acting in the formation of the LLP
What does the certificate of compliance state?	That the LLP complies with the law
What must the Registrar be satisfied with?	The proposed name is not too similar to any other business, nor does it contain any prohibited words
What happens once the Registrar is satisfied?	A certificate of incorporation is issued
What is the certificate of incorporation evidence of and what can the LLP do?	It is conclusive evidence of the existence of the LLP and the LLP can now commence trading from the date shown on the certificate
What are the members advised to have in addition to the certificate and what does this set out?	A membership agreement between them (a contract) which sets out the rights and duties of the various members and how much capital each have agreed to contribute
If a membership agreement is not drawn up, what happens?	The default provisions apply
Where are the default provisions contained?	Limited Liability Partnerships Regulations 2001
What 4 things do the 2001 regulations state?	1. Each member has to contribute equally to the capital of the LLP 2. The liability of a member of an LLP to contribute to the debts is limited to their capital contribution 3. Each member has an equal say in the running of the LLP 4. Each member is an agent of the LLP in the ordinary course of the business of the LLP
What are the 3 advantages of a partnership?	1. It has private business affairs - their accounts do not need to be lodged in any central register 2. Inexpensive and quick to set up and run - there is little by way of specialist law to comply with 3. Partners are treated as being self-employed by way of taxation purposes and can result in certain advantages to them for tax and national insurance purposes
What are the 3 disadvantages of a partnership?	1. Partners each have joint and several liability for debts - when partnership cannot meet debts, members have unlimited liability for debts and can lose personal assets and become bankrupt 2. Floating charges cannot be created over assets limiting security it can offer in exchange for loans to security over heritable assets which can restrict the amount of loan capital it can have and thus reduce capital and liquidity 3. Does not have true perpetual succession as it is based on a contract between the members thus creating tax and accounting problems
What are the 3 advantages of an LLP?	1. Members have limited liability to the amount they have agreed to invest 2. Has true perpetual succession because the LLP has full separate legal personality and is not affected by changes in members 3. Floating charges can be granted thus increasing loan capital and improving liquidity
What are the 3 disadvantages of an LLP?	1. Expensive and time-consuming to set up and run as a considerable amount of law to be complied with 2. Does not have private business affairs as documentation and accounts have to be lodged with the Register of Companies and anyone can gain access to these 3. In a large LLP a member may have little say in ongoing activities of the LLP
When a company or LLP is correctly incorporated in accordance with the law, which is now mainly contained in which Act? what does the law recognise that the company has?	Companies Act 2006 and that the company has a separate existence or personality to its members and directors
As a separate legal person, the company does what 3 things?	1. Enters into contracts 2. Owns its own assets 3. Is liable for its own debts
What exists between the company and its members/directors and its creditors?	The coporate veil
What does the corporate veil do?	Acts as a barrier provided that the company has been set up and operates within the law the creditors can only look to the company for debts due to them and not to the members/directors
In which case was separate legal personality first established?	Salomon v Salomon & Co. Ltd.
Mr Salomon operated as a what for a number of years?	A sole trader of a boot and shoe manufacturing business
Mr S formed a company to take over his business and sold the assets of the business to the company for how much?	£32,000
How many shares did Mr S receive and how many more shares were given?	20,000 shares for £1 each to Mr S and 7 other shares were given to his family members as a minimum of 7 shareholders were required at that time
Mr S was granted a debenture in security of his loan to the company. How much was the loan?	£12,000
Mr S was what of the company?	The main director and majority shareholder
Approximately how long after did the company go into liquidation with assets of approximately how much?	18 months and £6,000
In addition to Mr S's secured loan, what other debts were there?	Unsecured debts to trade creditors amounting to £7,000
What did the trade creditors argue?	Mr S's security, as it was a contract, was void in that there needed to be 2 people to have a contract and that Mr S and the company was the same person
What did the courts say?	Where a company is formed and operated in accordance with the law, it is a separate legal person to its members and directors and enters into contracts in its own name and therefore Mr S was one person and the company was another and the security was a valid and binding contract
Which 3 cases has the corporate veil and separate legal personality been confirmed in?	1. Henry Brown v Smith 2. Macaura v Northern Assurance Co Ltd 3. Lee v Lee's Airfarming Ltd
What are the 3 consequences of the corporate veil and SLP?	1. Company owns its own assets 2. Company contracts in its own name 3. Company is responsible for its own debts
How many situations are there where the corporate veil can be lifted and SLP ignored?	7 situations
What is the first situation?	Reduction in number of members and is below the legal minimum in a PLC - if there is less than 2 members

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	Created by Blanka Bartova over 8 years ago