During the BLP module, you will build on your knowledge of Company
law if you studied it during your LLB. You will learn a lot of procedural Partnership
rules, how companies operate and how to achieve certain things
throughout the lifecycle of a company. s.1 Partnership Act 1890 Partnership = persons carrying on business with a
view of profit. May form a partnership irrespective of contrary intention. Care
It is important to get ahead in your prep and get up to speed before the needed as clients may be operating under a partnership unintentionally/
course starts, as this module is not only the most complicated module without knowing. Common types of partnerships: informal family businesses or
large law firms
you will likely have on the LPC, the material is also the longest and the Eg. Dave Moseley and Jack Moseley working in a partnership under the trading
most information dense. name, Daily News.
This Pre-LPC quick foundation will provide you a quick walk-through of Pros: No expenses necessary when setting up, although it beneficial to have a
basic company law and what you can expect during BLP. Partnership Agreement drawn up by lawyers (more expensive). Also, fewer
publicity requirements than for other options, easier to maintain privacy. No
disclosure required.
CHAPTER 1 Cons: No separate legal identity. The partnership is unable to own property or
CONSIDERATIONS FOR FORMING A BUSINESS enter into contracts. Instead, it is the individual partners who will sue, own
property jointly, and enter into contracts jointly. If partnership goes insolvent,
creditors can enforce debt against the partners personally. Also, no limited
INTRODUCTION: liability, therefore exposing the partners to unlimited personal liability.
Governing law: Partnership Act 1890, any other relevant legislation and
common law.
Limited Partnership
A partnership whereby some of the partners are not liable for the debts and
liabilities of the partnership. Some partners will be limited partners and
Businesses are set up to make a profit (except for non-profit others will be general partners whose liabilities are unlimited. In a limited
partnership there needs to be at least one of each of these categories. Limited
organisations but you will not be looking at those on the BLP). A business partners cannot be generally involved in management of the partnership,
generates income by selling products and/or services. otherwise they lose their limited liability.
Eg. Dave Moseley and Jack Moseley working in a partnership under the trading
Considerations to bear in mind when setting up a business: name, Daily News. Dave is a limited partner with limited liability and Jack is a
These considerations determine which business structure is the most general partner with unlimited liability.
appropriate.
Since 6 Apr 2017: New subcategory: private fund limited partnership (this
partnership has a list of permitted activities in which limited partners can be
1. Cost considerations: involved without being involved in management)
• To be able to sell products/services, the business must
incur expenses. If the income exceeds the costs of the Pros: Can provide limited liability to at least one partner. Also, fewer publicity
business, the business makes profit. requirements than for other options, easier to maintain privacy. No disclosure
• It is likely that a proportion of that profit is given to the required.
business owners. The rest is retained by that business to Cons: No separate legal identity. The partnership is unable to own property or
help it grow. enter into contracts. Instead, it is the individual partners who will sue, own
property jointly, and enter into contracts jointly. If partnership goes insolvent,
• A business is also likely to employ staff and may use creditors can enforce debt against the partners personally. Also, no limited
services. liability for at least one partner and limited partners cannot be involved in
management.
• The company will need to raise finance to:
* pay for set-up costs (when setting up) – eg. Governing law: Limited Partnerships Act 1907, any other relevant legislation
purchase/rent premises, employ staff, get and common law.
professional advice
* develop and expand (once established) – These
are the ongoing costs: marketing activities,
buying stock and renting premises. Limited Liability Partnership (LLP)
An LLP is a hybrid as it has the flexibility of a partnership with the added
• Businesses raise finance in four ways: advantage of limited liability for its members. Different types of partners -
* Investment by the company’s owners General partners (unlimited liability) + Limited partners
* Investment by outside investors in return for a – Common for Law firms.
share in the company’s future profits
* Borrowing money – eg. by way of a loan An LLP has a separate legal entity from its members. But for tax purposes, it is
* Retaining a proportion of the profits instead of treated as a partnership and the members will be taxed as partners, each being
distributing it to investors/owners by way of a liable to pay tax on his share of the income of the LLP.
dividend Pros: Separate legal personality. Low costs but must pay legal fees for
Partnership Agreement.
2. Mitigating or minimising risk: Cons: There are a number of on-going expenses after the business is set up:
Does the owner have personal liabilities for all debt? Accounts must be prepared by accountants annually. LLPs must also file a
Confirmation Statement min. once a year. Higher costs due to regulation and
3. Structural considerations: disclosure rules. Also, no limited liability for at least one partner. No privacy.
Does the business vehicle provide a clear organisational High disclosure requirements.
structure?
Governing law: Limited Liability Partnerships Act 2000, any other relevant
legislation and common law.
CHOICE OF BUSINESS MEDIA:
When choosing business media, consider the pros and cons of the
different types of business media to see which type is best suited for Companies Limited by shares
your client’s business.
A company has a separate legal identity from that of its owners. The company
Sole trader may therefore own property, enter into contracts, sue and be sued in its own
name. The owners of shares in the company are known as shareholders or
A sole trader business is formed when an individual registers as a self- members.
employed person. In this case, the sole trader and the business are essentially Eg. Dave Moseley formed a company called Daily News. Dave Moseley is both
the same entity. a director and a shareholder and Daily News has a separate legal entity.
Eg. A newsagents’ working under the name, Daily News, ran by Dave Moseley.
Pros: Separate legal personality. The shareholders’ liability to third parties is
Pros: Sole trader has complete control over the running of the business. Also, limited to the amount, if any, unpaid on their shares.
there are no setting up costs involved apart from the costs of the business. Cons: Higher set up costs as there will be legal costs incurred in dealing with the
Cons: No limited liability, therefore exposing the sole trader to unlimited company’s constitutional documents, etc., as well as incorporation fees due to
personal liability – eg. if the business loses a lawsuit for £30,000, the sole trader Companies House. On-going expenses after the business is set up: Accounts
will be liable to pay the full amount even if the wrong was not caused by the must be prepared by accountants annually. No privacy due to the extensive
sole trader but by someone they have hired. disclosure requirements.
Governing law: No specific statute, governed by relevant commercial/tax Governing law: Companies Act 2006, any other relevant legislation and
legislation, common law and accounting rules. common law.
BLP – Pre-Module Reading – Summary | Page 1 of 9
, Three types of articles:
* Bespoke articles - articles written specifically for that company.
Other types of business media: * Model articles (private or public version) - articles drafter in a
standard form that cater for the needs of most companies. Small
Company limited by guarantee: private companies will likely adopt these articles.
* Members don’t hold shares but instead, they guarantee that if * Model articles as amended - adopting the standard articles but
the company is wound up, they will each contribute a certain amended a few sections to suit that particular company.
amount (commonly £1) to the funds belonging to the creditors.
* Liability is limited to the amount guaranteed. If non registered, model articles apply in default.
* Relatively rare so non-examinable
When advising a client, a lawyer must check the articles first.
Unlimited company:
* Relatively rare so non-examinable The internal structure of a company:
* Liability of its members is unlimited
Joint ventures (JV): THE COMPANY
* A collaborative, commercial arrangement entered into by two
or more parties in order to pursue a common business goal. Shareholders Directors Secretary (if any)
* In the UK there is no law exclusively governing JVs Role: Investors Role: Managers
* Company or partnership law will be relevant depending on the
type of vehicle chosen (company or partnership).
Limited liability company (JVC): Board of directors
* The parties to the JVC have set up a separate LLC as a vehicle to General meeting Board meeting
pursue the objects of the JV
* The parties take shares in the new company and will also likely
sign a shareholders’ agreement Employees (if any)
Partnership JV:
* Partnership agreement will likely govern the relationship
between the parties
* Governed by the Partnership Act 1890
Pros: Few publicity requirements and likely tax advantages The company will have shareholders and directors. It may also have
Cons: Lack of limited liability, however if this is a problem for client, secretaries and employees.
advise to using a limited partnership or LLP as the JV vehicle. It is difficult
to raise external finance or change participants. Shareholders:
Shareholders (members) = owners of the company. Shareholders invest
Contractual JV: a lump sum in the company and in return they receive a shareholding.
* The contract to the JV will be a co-operation agreement s.112(2) CA 2006 Membership begins when the member’s name is
* These types of business media may have tax advantages entered in the company’s register of members.
COMMERCIAL RISK: Subscribers = the first shareholders of the company who become
shareholders when the company forms.
Risk = the likelihood of things going wrong such as incurring liability. Shareholders pay for their shares and are entitled to profits on their
Liability = being legally obliged or responsible to another part, or of shares. They usually also have the right to vote.
owing another party money.
However, company properties and assets are owned by the company,
Lawyers must devise legal solutions to help clients minimise commercial not the shareholders. Change in the shareholders does not affect the
risks. property. – Eg. Tesco owns a number of retail sites and buildings, but the
shareholders are not entitled to those.
Examples of commercial risk:
* Incurring expenditure that they cannot pay as their income is Directors:
lower than the expenditure Directors = appointed managers who deal with the day-to-day
* Agreeing to onerous contracts with no way out if things go wrong operations of the company.
(no ways to terminate in case of acts of god)
* Unrealistic deadlines Directors together constitute the board of directors.
* Contractual obligations without limited liability
* Reputational risk Separate legal personality:
Companies have a separate legal personality, meaning that they form
A client will want to know: a legal person from the date of incorporation. Due to this separate
1. The elements of risk personality, the shareholders are protected from liability and their
2. Consequences/potential liablities if things go wrong liability will be limited to the amount they paid for the shares.
3. Strategies to reduce/minimise risks and potential liabilities
Suing and being sued:
BASIC CONCEPTS OF COMPANY LAW: • A company as a legal person can take action to enforce its legal
rights.
• Company can be sued for breach of its legal duties.
The focus of BLP is companies so it is essential to have a basic knowledge
of company law before you start the course. The acts/omissions of the director will ultimately be the acts/omissions
of the company and the company will be liable for such acts, not the
Articles of Association: director. However, the director can also be liable in certain situations.
The Articles of Association (Articles for short) is the 'Rulebook of the
Company', its Constitution.
The Articles, as a rulebook will set out (among others):
• the procedures of the company
• whether the company directors can make certain decisions
• the requisite majority required for making certain decisions
• the issue and transfer of shares
• how the board and shareholder meetings are to be conducted
and the powers of directors.
The articles will be filed with Companies House to ensure compliance.
BLP – Pre-Module Reading – Summary | Page 2 of 9
