ACHIEVED HIGH FIRST (1- Above 90%). Company Law
Comprehensive and detailed exam-ready notes
Content covers all the topics
Includes answers to exam style questions
Set out in a way that is easy to understand
Lecture 1 – Introduction, Forms of business
organisation, Separate corporate personality, Limited
liability, and Piercing the veil of incorporation
Introduction
Main parts
o Formation + features
o Operation + control
o Finance
o End
Statute (mainly statute based)
o Companies Act 2006
o Insolvency Act 1986
o Partnership Acts
Case Law
o Contract, Tort, and Trusts
Forms of Business Organisation
Business organisations include
o Sole Traders
No limited liability
o Partnerships (usually no separate personality – although do in Scotland)
General/ Simple
Every member has unlimited liability
Limited
Active partners have unlimited liability
‘sleeping’ partners liability is limited
Limited Liability
Have separate personality
Limited liability
o Registered companies
Limited/ Unlimited s.3 CA 2006
Limited
o By shares
o By guarantee (usually started without funding – for
non-profit making purposes)
Public/ Private s.4 CA 2006
Public
o Minimum share capital of £50,000
o Greater degree of regulation by the law
o At least two directors
Private
o Possible to have a single member
Comparison
o Advantages
o Disadvantages
1
,Foundations of Company Law (LAW3109) – Notes
Most appropriate
Relevant factors
o Formality involved in establishing and operating it
o Complexity of structures
o Degree of involvement
Participation in management or decision-making
o Financing
Pooling of resources or expansion
o Limitation of liability for debts
Sole traders
One-person business
No formalities involved in the form of legal filing requirements or fees
Personal savings or bank loan used as capital
No legal separation between sole trader’s personal and business capacity and assets,
therefore
o All profits and losses belong to sole trader
o Sole trader bears personal liability for all debts
Advantages
Disadvantages
Partnerships
General partnerships
A partnership involves two or more people coming together to establish a business
Governed by The Partnership Act 1890
PA 1890, s.1
o Defines a partnership as ‘the relation which subsists between persons
carrying on a business in common with a view to profit’
o Can be by accident
Partnership without agreement have to share profits equally
o But can agree on how to split the profits
Normal income tax
Khan v Miah [2001] 1 All ER 20
o ‘Parties to a joint venture became partners in a business as soon as they
performed part of the joint enterprise in which they had agreed to engage’
PA 1890, s.4 – meaning of firm
o (1) People who entered a partnership are collectively called a firm
o (2) In Scotland firm is individual
PA 1890, s.5 – every partner is an agent of the firm and has the power to bind the
firm unless they have no authority to act
PA 1890, s.6 – partners bound by acts on behalf of the firm
PA 1890, s.9 – every partner is jointly liable with other partners (in Scotland also
severally), after death the estate is severally liable (in England/ Ireland subject to the
prior payment of his separate debts)
PA 1890, s.10 – liability of the firm for wrongs for loss/ injury to a person not a
partner OR any penalty incurred
PA 1890, s.12 – every partner liable jointly (with co-partners) + severally (for
everything for which the firm while he is a partner)
2
, Foundations of Company Law (LAW3109) – Notes
PA 1890, s.32 – dissolution of partnerships
o (a) If entered into a fixed term by expiration of the term
o (b) If entered into an event by termination of the event
o (c) If entered for an undefined duration by notice by date on notice, or if no
date then by date of communication of notice
PA 1890, s.33 – dissolution of partnerships
o (1) Subject to the agreement, partnerships are dissolved either by death or
bankruptcy
o (2) If any partner is charged for his share, then the other partners have the
option to dissolved
Minimum membership of 2, no maximum
Assets (capital and profit) belong to the partners
Partners generally have the right to participate in the management of the firm and
may bind the partnership through the exercise of actual or apparent authority
Dissolution by notice, death, bankruptcy PA 1890, ss.32-33
Joint liability for all debts and obligations PA 1890, s.9
Partners’ unlimited liability for partnership debts PA 1890, s.10
o Each can be sued for total debts of partnership
Joint and several liability for all wrongs PA 1890, s.12
Ilott v Williams [2013] EWCA Civ 645
o ‘A former participant in an asset management business was not entitled to a
share of the profits as he had not been in partnership with the other parties
and he could not claim under the terms of the agreement the participants
had made with the partnership they had later joined.’
o ‘Partnerships are uniquely flexible business vehicles and one of their
advantages is the informality with which they can be created. However, this
lack of required process or any technical registration procedure means it may
not always be totally clear whether, or when, a partnership has been
established and further clarification of the Courts' approach is to be
welcomed.’
http://www.farrer.co.uk/News/Briefings/When-is-a-partnership-not-
a-partnership/
See UCB Home Loans Corp Ltd v Soni [2013] EWCA Civ 62 for an insight into the
liability issues which can arise in a general partnership
o ‘A partner in a solicitor's firm was not liable under the Partnership Act 1890
s.14 for fraudulent representations made by another partner to a mortgagee
as the misrepresentations were not made, authorised or knowingly suffered
by her.’
Advantages
Disadvantages
Limited partnerships
Governed by Limited Partnership Act 1907
o Note: Private Fund Limited Partnerships
o (Private equity and venture capital funds)
o Used as investment fund vehicles
Requires 1/more ‘general’ partners, and 1/more ‘limited’ partners
General partners liable for all debts of the partnership
3
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