company

documents required to form a company

memorandum (not important but still required)

notice of GM

held 14 clear days from service of notice. email deemed served 48 hours after it has been sent. 28 clear days special notice required when there is a resolution to remove a director

approval for loan to director

shareholder OR needed when loan to director is 10,000 or more, unless loan is needed for them to fulfill role as director where loan of 50,000 or more needs approval. don’t need to declare interest as this is obvious

approval of director service contract

GM cannot be on short notice as proposed contract term must be available for inspection for not less than 15 days before meeting. fastest way would be written res where term is attached

loan from director to company

shareholder approval not required

corporate hospitality

unlikely to give rise to conflict of interest so unlikely to amount to breach of duty not to accept benefits from third parties.p

partnership terms when there is no partnership agreement

like a contract so conduct and course of dealing can imply a term even if there was no explicit agreement. eg there is no requirement for partner to work full time but if they have for years can be implied that this was agreed

general partners shares

capital and income profit and loss shared equally. course of conduct can infer that capital profits are to be shared unequally like according to their initial contribution. but cannot depend on hours worked to argue a greater or lesser share unless agreed in a contract. income tax paid as % of their share

binding general partnership

signature of one partner in the course of business is sufficient to bind the partnership even if signed in their own name

incorporating LLP

no need to file partnership agreement

effect of death or resignation on general partnership

partnership automatically dissolved, business ends and proceeds shared between all partners (living and dead). but remaining partners can negotiate to buy deceased/resigned’s share and business will not end. beneficial for estate of deceased or resigned because will include the value of goodwill which will not be included if business is wound up. otherwise a new partner can buy outgoing share, or partnership as a whole can be sold as a going concern.

LLP tax

taxed as a general partnership. members pay income tax on their share of profits, regardless of whether these profits have been paid out to the members or not.

tax on loan to shareholder, director or connected person

if 15000+ must pay 33.75% tax which is refunded when loan ends

can directors make decisions without board meeting?

yes under model articles where there is unanimous agreement

liability of shareholders

limited liability but are still liable up to the amount they have agreed to invest in the company (I.e. stand to lose the money paid for their shares)

disqualified director

barred from being a director or having any role in setting up, promoting or managing a company. can last 2-15 years

director resignation

unless agreed otherwise director can resign with written notice with no notice period

substantial property transaction

purchase of non-cash asset from director worth £5000+ AND is over 10% of company assets, or £100,000+. shareholder approval needed via OR otherwise transaction is voidable and director may have to account to company for any loss. includes transaction with director who has not yet been appointed and part of deal is to give them shares in return for substantial property.

special resolutions (6)

constitutional changes (change name, article amendments)

change in share capital (reduction in share capital, share buybacks which are bought with share capital (if bought with distributable profits only an OR is needed), disapplying preemption rights)

voluntary winding up

must be filed with companies house and no fee required

poll vote

for a single shareholder to call for poll, they need 10%. share of the votes calculated out of those present, not overallw

what requires shareholder approval under MA

removing director or auditor (special notice needed)

final dividends recommended by the board

director service contract of 2+ years guaranteed fixed term

ratifying director breach (other than fraud)

authorise board to allot shares

90% agreement for short notice general meeting

board ability to allot shares

under MA have automatic ability to allot shares without shareholders. shareholders need to authorise when a new class of share is introduced. as soon as there are multiple classes of shares, directors lose automatic authority to allot and can only do so with shareholder approval which must be renewed every 5 years and applies only for the existing classes of shares.

loan by director on behalf of company

no restriction under model articles. shareholders are only involved if there is a borrowing cap in amended articles

personal bankruptcy

person under proceedings can still obtain loan from a willing lender if under £500

mortgage v fixed charge

mortgage has more rights as it has an automatic right of possession but a fixed charge holder must apply to the court to get possession.

fixed charge registration trouble

if not registered at companies house it will rank with unsecured, so after floating

will lose priority and be void against other creditors if registered late (21 days from day after charge was created which is the date of execution of the debenture)

negative pledge in floating charge

stops further charges over the assets subject to the floating charge. but a fixed charge after a negative pledge will still rank before floating charge but the floating charge holder will have a claim in contract against debtor

bankruptcy payment order

cre

creditor proving debtor is insolvent

serve a statutory demand for liquidated sum of £5000+ for individual debtor/£750+ for company debtor, and wait 3 weeks to see if D pays or applies to court to set aside demand. can serve demand together if they do not meet threshold individually r

ranking of fixed charges

rank in order of creation of the charge, not in order of registration. when value of asset is insufficient to cover debt, the rest ranks with unsecured creditors

income tax - capital investment allowance

allowance for plant and machinery bought up to 1 million. any value above that added to existing pool of plant and machinery. if it is brand new plant and machinery then eligible for full expensing

Director duties owed to company (7)

171 - to act within powers

172 - to promote the success of the company for the benefit of members as a whole

173 - to exercise independent judgment

174 - to exercise reasonable care, skill and diligence

175 - to avoid conflicts of interest

176 - not accept benefits from third parties

177 - declare any interest in a proposed transaction

start-up relief

company suffers loss in the first 4 tax years, they can carry back on total income for 3 years prior to loss starting with the earlier years first. if loss not used up can be carried forward with carry-forward relief

TRADING profit

minus deductible expenditure from SALES. other incomes like selling off land not included

TOTAL income (5)

employment, trading, property income (rents), savings, dividends

who must pay VAT

above supply threshold of £90,000 goods and services

what VAT is paid to HMRC

output tax (tax collected via VAT products sold) - input tax (VAT tax on products bought). if negative number (paid more tax than collected) you can reclaim the excess

VAT exempt and zero-rated

residential land is exempt. food and clothes zero-rated

is interest paid on loans deducted from income for tax purposes?

no except for qualifying loan relief. qualifying loans: loan to buy/contribute/invest in partnership or company or loan to a PR to pay IHT. these interest payments can be deducted from income.

how can surplus from NSNDI be applied?

can be applied against savings, and then against dividends of the same year. any further surplus cannot be carried forward to future years

income tax personal allowance

£12,570

duty to act within powers

act in accordance with the company’s constitution, only exercise power for their ‘proper purpose’ (I.e. may technically have powers but should only use them in the interest of the company)

duty to promote the success of the company

consider:

likely consequences in the long term

interests of employees

fostering company relationships with suppliers, customers and others

impact on the community and environment

maintaining reputation for high standards of business conduct

act fairly between members of company

duty to exercise reasonable care, skill and diligence

tested against what would be expected of a reasonably diligent person with the knowledge, skill and experience of a person in the role of director at that company AND the general knowledge, skill and experience that the director actually has

duty to avoid conflict of interest (also fiduciary)

avoid situation where they may have a direct or indirect interest that conflicts or may conflict with the interests of the company. applies to information, property or opportunity.

does not apply to transaction or arrangement with the company (subject to 177)

duty is not infringed if authorised by board, but only effective if conflicted direction did not participate in decision or the decision would have been valid even without them.

duty not to accept benefits from third parties

only an issue if would reasonably create a conflict of interest. no provision for board authorisation so would need shareholder ratification

duty to declare interest in proposed transaction

strictly applies to proposed transactions. if duty to disclose is complied with the transaction cannot be set aside (subject to company constitution)

s177 vs s182

177 deals with declaring interest in proposed transaction. 182 deals with an interest in a transaction after it has been entered into. 177 leads to civil consequences but 182 holds criminal sanctions.

directors interested in transactions that require shareholder approval

rather than just board authorisation, these transaction with directors need approval of the company members to be valid: substantial property transaction, loans, quasi-loans, credit transactions, long-term service contracts, payments for loss of office

if directors proceed without approval would be in breach of duties but also special provisions dealing with these transactions.