Notes on Business Law & Practice for the LPC at BPP University. These revision notes summarise key SGS course content in a way that is easy to understand and helped me achieve 95% on the BLP exam.
Assessment: Look at a basic business problem and advise whether the problem can be solved within
the relevant legal framework; if so, advise how the business objective may be achieved. Opine on
whether the manner of achieving the objective is practical and commercially cost- and time-effective.
Advantages & Disadvantages of Different Business Media
Sole Trader Partnership LLP Limited Company
Governing None Partnership Act 1890 Limited Liability Companies Act 2006
statute Partnerships Act 2000
Liability of Unlimited personal Partners have Liability is limited: Liability is limited:
investors liability. unlimited personal Individual members Members are only
liability on either a are not personally liable to pay any
joint (contract), or a liable over and above amount unpaid on
joint and several (tort) their capital share in their shares – s3(2) CA
basis, determined by the LLP. 2006.
the nature of the
liability.
Legal status Not a separate legal Not a separate legal Separate legal entity. Separate legal entity.
of business entity. The sole trader entity. The partners Liable for its own
medium is the business and is are the partnership. debts and can
individually Tax transparent. contract with third
responsible. parties.
No. persons 1 2 2 1 – s7(1) CA 2006.
needed to
set up
Expenses of None necessary. None necessary. Incorporation Incorporation
setting up No formalities. document. documents incl.
Advisable to have a Registration fee. memorandum and
partnership Advisable to have a articles of association.
agreement drawn up Members’ Agreement Advisable to have
by lawyers. drawn up by lawyers. lawyers involved in
Printing of LLP drafting.
stationery. Registration fee.
Printing of company
stationery.
Publicity & No disclosure No disclosure Members’ Agreement Disclosure to
disclosure required. required. private. Registrar of:
High degree of Similar disclosure to Registered office –
confidentiality. companies incl.: s86 CA 2006.
Financial privacy. Registered office. Accounts – s441 CA
Partnership Details of members. 2006.
agreement private. Accounts. Resolutions.
PSCs. Info on directors and
members.
PSC Register.
Ongoing None necessary. None necessary. Accounts must be Accounts must be
expenses prepared annually. prepared annually.
Confirmation Annual Confirmation
Statement. Statement.
Management As sole trader wishes In accordance with Some default Directors and
structure & – no legal the partnership provisions in LLPA, shareholders.
internal requirements. agreement. Default partnership Governed by CA 2006
regulation provisions in PA 1890 agreement. and articles.
where silent. Flexibility.
Available Sole trader can Partners can borrow. LLP can borrow. Company can borrow.
methods of borrow. Cannot create floating Can create floating Can create floating
financing Cannot create floating charges. charges. charges.
charges. Borrowing may be Cannot raise finance NB if members give
Cannot raise finance more difficult. by issuing shares. personal guarantee,
by issuing shares. Cannot raise finance NB if any financing is limited liability lost.
by issuing shares. underwritten by a Can raise finance by
member’s personal issuing shares – i.e.
guarantee, removes easier to obtain
safety of limited financing.
liability.
Private Company vs Public Company
Private Company Public Company
Name must end with Limited or Ltd – s59(1) plc – s58(1)
Minimum no. 1 – ss7(1) and 8(1) 1 – ss7(1) and 8(1)
shareholders
Minimum no. directors 1 – s154(1) 2 – s154(2)
Company secretary No – s270(1) Yes – s271
required?
Certificates required Certificate of incorporation – s15(4). Certificate of incorporation – s15(4).
before commencing Can commence business as soon as Cannot commence business until a
trading incorporated. trading certificate is issued by the
Registrar – s761(1).
Minimum share capital Must have at least 1 share – s8(1)(b) Minimum of £50,000 – s763(1)(a)
to be issued
CA 2006 allows offer of Prohibited – s755(1) Permitted.
shares to the public?
Can pass written Yes – s281(1) No – s281(2)
resolutions?
Method of payment No restriction on method of payment – Payment in cash only or where
and minimum amount s582(1). consideration independently valued –
payable for share Shares can be issued without s593(1).
capital immediate payment. 25% of nominal value must be paid on
allotment plus whole of any premium –
s586(1).
- Board meetings are called by any director giving reasonable notice – Browne v La Trinidad.
- MA 11(2) states that the quorum at a board meeting may be fixed from time to time by a
decision of the directors but must never be less than 2, and unless otherwise fixed is 2.
- Decisions at board level are made by board resolutions passed on a simple majority of those
present and voting at a board meeting (MA 7(1)), or alternatively, without calling a board
meeting, by unanimity e.g. by written resolution (MA 7(1) and MA 8).
- A chairman may have a casting vote which they may use in the event of deadlock. Articles
need to be checked on this point as this casting vote may be removed.
- If a director abstains from voting on a decision, they do not count towards the number of
people voting on that issue. e.g. on a board of 5 directors, if one abstains, instead of counting
the votes out of 5, you would count them out of 4. To get a majority, you would therefore
need 3 out of 4 directors voting in favour of a resolution.
Shareholder Meetings
- The difference between a shareholder and a director is that the shareholders own the
company and the directors manage it on a day-to-day basis.
- The quorum required for a shareholders’ meeting under s318(2) CA 2006 is 2. Under s318(1),
where a company has only 1 member, only 1 qualifying person present is sufficient.
- Decisions are made at shareholder level on a show of hands, unless a poll is demanded under
MA 42.
- Under s284(2) CA 2006, when the shareholders vote on a show of hands, each shareholder
who is present at the meeting will be entitled to 1 vote, regardless of the number of shares
held by that shareholder. Under s284(3) CA 2006, when the shareholders are voting on a poll,
every shareholder has 1 vote in respect of each share held. Under s284(4), a company can
change the above position by provisions in its articles.
- MA 44(1) provides that a poll can be demanded before the meeting, or at the meeting either
before or immediately after a show of hands has taken place.
- MA 44(2) provides that the chairman of the meeting, the directors, two or more shareholders,
or any member with not less than 10% of the voting rights of those entitled to vote on the
resolution can demand a poll.
NB: In EXAM consider whether:
1) Resolution of directors or shareholders?
2) Type of resolution – ordinary or special?
3) What combination need to vote in favour for it to pass? When considering shareholder
decisions, consider position on both a show of hands and a poll vote.
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