Summarises everything you need to know for Business Law and Practice, including the core knowledge of Company Law.
Carefully curated summary notes, aligned precisely with SRA guidelines, comprehensive and also tailored to the specifics of the SQE exam. Organised meticulously by sections and secti...
Business Law and Practice
Table of Contents
Business and organisational characteristics..............................................................................................1
Legal personality and limited liability.......................................................................................................4
Procedures and documentation required to incorporate a company/form a partnership/LLP....................5
Finance.....................................................................................................................................................7
Corporate governance and compliance:....................................................................................................9
Company Decision-Making and Meetings:..............................................................................................11
Partnership decision-making and authority of partners:.........................................................................14
Corporate Insolvency..............................................................................................................................15
Personal Insolvency................................................................................................................................17
Income Tax:............................................................................................................................................19
Capital Gains Tax:...................................................................................................................................21
Corporation Tax:.....................................................................................................................................23
Value Added Tax:....................................................................................................................................26
Inheritance Tax:......................................................................................................................................27
Business and organisational characteristics
Traditional Partnership
Preliminaries
1. Two or more persons
2. Carrying on a business in common
3. With the intention to make profit
- Persons can mean companies as well as individuals
- If there is no intention to make a profit, there is no partnership, however a partnership exists if there is
intention to make a profit and there has in fact been a loss
- No requirement for a written partnership agreement, however it is good practice to have one
- No filing requirements at Companies’ House
- If the requirements are met, there is prima facie evidence of a partnership even if the partners did not
expressly intend to form a partnership; however, this presumption does not apply if the ‘profits’
intended are:
o Repayment of a debt
o Payment to an employee or agent
o Annuity to a survivor of a partner on account of a share of profits or sale of the business
- Agreement to share losses is not prima facie evidence of a partnership, nor is two people owning
property even if they agree to share profits
- Partners are not required to make financial contributions to the partnership
- No limit to the amount of partners
Partners’ Liability
- Partners are jointly but not severally liable for partnership debts and torts
o Creditors can pursue any combination of the partners for partnership debts
- Incoming partners will not be liable to creditors for anything done before they became a partner
,- Outgoing partners will remain liable for any debts or obligations incurred before they leave the
partnership
- Third parties can treat all members as partners until they receive notice of the change of partnership
o Actual notice should be given to existing creditors and a notice should be published in the London
Gazette
- Anyone stating they are a partner (even if they are not) may be held liable to creditors as if they were a
partner
Partnership Property
- Property belonging to a partner individually will remain their property after dissolution of the
partnership
- Property given to the partnership by the partner becomes partnership property and constitutes a
capital contribution
o Each partner can keep track of their contributions, profits and losses
- Determining if property belongs to the partner or firm will depend on intention
- Partnership property can only be used for the purposes of the partnership
- Creditors pursuing an individual partner cannot seize partnership assets for the separate debt, but can
require the court to make an order charging the partners’ interest in the firm
o Creditor can then seize any distributions which are due to the partner
Partners’ Management Power and Duties
- Every partner has an equal right to manage the firm, in the absence of contrary agreement
- Most decisions are made by simple majority, but unanimous vote is required for:
o Admission of a new partner
o Change in the nature of the partnership business
o Alteration to the partnership agreement
- Partners have a fiduciary duty to one another and a duty to disclose all information on all things
affecting the partnership
- Partners must account for any profit obtained without consent of the other partners
- Partners carrying on business in competition with the partnership must account for profits made in that
business
Termination of a Partnership
- Termination of a partnership can happen:
o If the partnership agreement provides for termination, on the date laid out
o If a partner gives notice of their intention to dissolve the partnership
o Upon death or bankruptcy of any single partner
o If something makes is unlawful for the partnership to continue
o Where the court decides a partner no longer has mental capacity to continue in the partnership
- Partners can apply for the court to dissolve a partnership if:
o A partner becomes permanently incapable of performing their obligations in the partnership
o A partner is guilty of conduct that would prejudicially affect carrying on the business
o A partner wilfully or persistently breaches the partnership agreement
o The partnership is carried on only at a loss
o It is just and equitable to do so
- After dissolution, authority and other rights and obligations continue in order to permit winding up and
complete unfinished transactions
- Partnership assets will pay off partnership debts after dissolution
o If the amount remaining is insufficient, the partners will personally pay the creditors
, Limited Liability Partnership
Membership and Companies House
- Without a partnership agreement, LLPA will govern the LLP
- Has a separate legal personality from its members
o Can contract and own property on its own behalf
o Has perpetual succession
- If there are less than 2 partners for a period of 6 months, any business carried out after the 6 month
period will leave the remaining member fully liable for all debts incurred after the initial 6 months
- Admitting a new partner will require unanimous consent
- Designated members must:
o Appoint auditors
o Submit annual confirmation statement
o Sign and file accounts
o Comply with statutory filing requirements
- If an LLP has no designated members, all members will be treated as designated
- Companies House must be notified of any changes to membership within 14 days
- All members are agents of the LLP and owe a duty of care to the LLP
o All members can bind the LLP in a contract and make it liable
- LLPS are not bound by a member if they act without authority and the person dealing with the member
knows they have no authority
- Members can retire by giving reasonable notice to the other members and to Companies House within
14 days of retirement
- PSC is defined as a person or entity who holds rights to:
o More than 25% of surplus assets on a winding up
o More than 25% of the voting rights
o Appointment or removal of the majority of those entitled to take part in management
o Exercise of significant influence or control
- Members have the right to share equally in capital and profits but are not entitled to remuneration for
acting in the business or management
- The LLP must indemnify each member for payments and personal liabilities incurred in connection with
the business of the LLP
- Members can access and inspect the books and records at any time
- Every member can manage the LLP and decide ordinary matters, but changes to the nature of the
business of the LLP must be made with consent of all members
- If a member carries on business in competition with the LLP without consent, they must account for all
profits and personal benefits
- Members are not liable for wrongful acts or omission of other members, but the LLP is liable to the
extent of such members
Liability of Members
- Members are not liable for LLP debts owed to creditors and are only liable to the extent of their capital
contribution
- Members who act wrongfully or trade fraudulently can be held personally liable for LLP debts upon
insolvency
- Clawback provisions exist for LLPs
Termination of LLPs
- If members decide the LLP is no longer needed or is dormant, a majority can apply to Companies House
for the LLP to be struck off the register and dissolved
- Companies House can strike of an LLP if it believes it is not carrying on business
- LLPs cannot be struck off if:
o It carried on business in the last 3 months
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