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SETTING UP IN BUSINESS
Must cover the following matters with new clients:
1
...
Conflict of interest check
3
...

4
...
Open a matter

•

Legislation:
1
...
LLPs Regulations 2001 Default provisions on capital and profit
share between members
...
LLPs (Accounts & Audit) (Application of Companies Act 2006)
Regulations 2008 Set out accounting requirements
...
LLPs (Application of CA 2006) Regulations 2009 apply the CA 2006
to LLPs, e
...
must have a register of charges and file an annual
confirmation statement
...
Similar disclosure to companies:
1
...
Details of members
LLPs can, for a fee, keep registers of members, directors,
secretaries and charges at Comp
...

3
...
LLPs need to keep a PSC Register disclosing all persons of
significant control
...
Disclosing details of certain invoices and payment practices

•

May trade immediately? No, as LLPs must be registered
...
1 person but cannot form
sole trader business for more than 1
...
Flexibility but pressure if sole trader has no
support
...

Expenses when setting up: No formalities so no setting up costs
On-going expenses after the business is set up: None necessary,
although usually accountants will be involved in keeping accounts
Methods of financing: No quick options
...

Profits: All profits go to the owner
...

May trade immediately? Yes
...
The company
may therefore own property, enter into contracts, sue and be sued in its own
name
...

•
•
•

•

Partnership

s
...
– May form a partnership irrespective of contrary intention
...
The partnership is unable to own property or enter
into contracts
...
If partnership goes insolvent, creditors
can enforce debt against the partners personally
...
2 persons
Expenses when setting up: None necessary, although it beneficial to
have a Partnership Agreement drawn up by lawyers (more expensive)
...

Methods of financing: Partners can borrow but cannot create floating
charges
...

Liability: Not limited - Partners have unlimited personal liability
...
No disclosure required
May trade immediately? Yes
...
– Common for Law firms
...
But for tax purposes, it
is treated as a partnership and the members will be taxed as partners, each
being liable to pay tax on his share of the income of the LLP
...

Expenses when setting up: Low costs, but must pay legal fees for
Partnership Agreement
...

Registration fee + Incorporation document
2
...

Printing of LLP stationery

•

On-going expenses after the business is set up:
2008 Regs Accounts must be prepared by accountants annually
...

SBEEA 2015 File a Confirmation Statement min
...

Higher costs due to regulation and disclosure rules
...
There is therefore nothing about
calling of (or procedure at) meetings
...

Methods of financing: LLP can borrow and create floating charges
...
Cannot raise finance by issuing shares
...
7(1) CA 2006 Min
...
, as well as incorporation fees due to Companies House
...
High on-going administrative costs
(More than LLPs) because of the greater regulation and disclosure
rules
...
Companies can adopt their own tailor made
articles instead of the model articles
...

Again, of members give personal guarantees, limited liability is lost
...
e
...


•

Liability to third parties: s
...

Legislation: CA 2006 + all other relevant legislation and common law
...

s86 CA 2006 Registered office
2
...

Information on directors (and secretary if the company has
one) and members
...
House as an alternative to internal registers
...

need to keep a PSC Register disclosing all persons of significant
control
...

Disclosing details of certain invoices and payment practices

•
•

PARTNERSHIPS:
Key characteristics of a partnership:
tax transparent
allows for a high degree of confidentiality
min 2 people
PA 1890 does not distinguish between actual and legal persons,
so a company could be a partner
...
Default provisions are
disadvantageous and must set up a Partnership Agreement
...
5 PA 1890 Each partner is an agent of the firm, and will bind
the firm and other partners by contracting with third parties
...
6 PA 1890 The firm will be bound by the actions of anyone
authorised to act on the firm’s behalf
...
30 PA 1890 All partners share a fiduciary relationship and have
a duty not to compete with the firm by carrying out a similar
business without the permission of the other partners
Advantages:
× it costs nothing to create a partnership
...

× Cheaper administrative costs as no need to file profits
× Tax transparency – taxes flow through to the partners
BLP – All chapters – Revision notes | Page 1 of 28

Existence of partnerships:
s
...

s
...


• 1 person or more? No, min
...


Min number of
shareholders
Min amount of
share capital

ss
...
24(1) Profit-sharing Ratio: partners are to share equally to the
profits even if the partners have not contributed equally
...
Maybe they will want a unanimous decision
for expenditure
•
s25 Cannot expel a partner without a Part
...


Min number of
directors
Company
secretary

s
...

Personal liability for partnership debts:
Each partner is personally bound under the firm’s contracts
...
In some circumstances, non-partners can also become
personally liable
...
9 Contractual Liability: Every partner in a firm is liable jointly with the
other partners for all the debts and obligations of the firm incurred
whilst he is a partner
...
10 and 12 Tortious Liability: joint and several
...
17(1) a new partner will not automatically be liable in relation to any
debts incurred by the partnership before he joined
...
17(2) a partner will still be liable after he retires in respect of debts
incurred by the partnership whilst he was a partner
...
17(3) unless:
1) The creditor agrees
2) You specifically absolve them
3) You novate the contract
Dissolution of partnership:
If no Partnership Agreement, use default provisions in PA 1890:
s
...

expiry of fixed term
2
...
33 death or bankruptcy of partner or
3
...
34 if the partnership business becomes unlawful
-

ss
...
e
...

Dominic might not want this to happen
...

Make an agreement so that the remaining partners can get their money
back and the partnership stays as it is (Buy-out)
...
44(b)(3) Subject to a partnership agreement, where a partnership is
wound up, once all debts and liabilities have been paid, any
money/assets left will be distributed so that each partner is paid back
his/her original capital first
...
This is called the asset surplus ratio (ASR)
...
44(b)(4) If there is no agreed ASR then surplus assets are shared in
accordance with the agreed profit sharing ratio (PSR)
...
24(1) If there is no PSR then they are shared equally
...
755 CA 2006 Only public companies can offer shares to public
...
756 Offer to the public is defined
...
e
...

Public company:
• Limited Liability? Yes
...

• Privacy? No privacy due to filing requirements

Public company

ss
...
7(1) and 8(1) 1

No minimum share capital,
so it could be incorporated
with just 1 share of 1p
...
8(1)(b) Must have at least
1 share
s
...
586 and s
...

£50,000, of which at least
1/4 must be paid up
...
154(2) 2

s
...


s
...


s
...
270(3)(b) There is no
company secretary, the
directors (or any person the
directors authorise) may do
anything that the secretary
is authorised to do
...
19 PA 1890 The partners’ mutual rights and obligations can be varied
at any time by their unanimous consent
...

Partnership Property:
Each partner owns a share in the partnership property
...


Private company

s
...


s
...


Certificate
required
before start of
trading

s
...


s
...


Can commence business as
soon as incorporated
...

s
...

Shares can be issued
without immediate
payment
...
761(1)(2) Cannot
commence business until a
trading certificate is issued
by Registrar showing that
the company allotted
share capital is not less
than the minimum
...
336 Must have min 1
annual general meeting
each year
...
593(1) Payments in cash
only or where
consideration has been
independently valued
...
586(1) 25% of nominal
value must be paid on
allotment plus the whole
of any premium
Public companies are able
to offer their shares to the
public so they are subject
to a higher level of
regulation than private
companies
...
755(1) Prohibited

FSMA imposes
considerable other
restrictions

CONFIRMATION STATEMENT:
Min
...
H
...

ss112A and Part 2A CA 2006 (ss
...
167A-E, 274A, ss
...
H
...


PEOPLE WITH SIGNIFICANT CONTROL:
Part 21A CA 2006 PSC regime: applies to all companies except listed
companies
...

Part 1, Sched 1A CA 2006 A PSC over a company is an individual who
meets at least one of the following:
1
...
The person holds the right, directly or indirectly, to appoint or
remove a majority of the board of directors of the company;
3
...

s
...
Failure to do so is a criminal offence
...

BLP – All chapters – Revision notes | Page 2 of 28

REGULATION OF FINANCIAL SERVICES:
General prohibition:
s
...
23 FSMA 2000 The maximum penalty for breaching this prohibition is
2 years in prison and/or an unlimited fine
...
21 FSMA 2000 Criminal offence to communicate an invitation or
inducement to engage in investment activity in the course of business
...
This
provision aims to ensure that investors, particularly vulnerable and
inexperienced investors, are not exposed to misleading sales pitches
...
21 FSMA 2000 Criteria to avoid criminal offence:
1
...
an investment bank which is authorised and
regulated by the FCA
...

2
...
21 FSMA 2000
...
, covers promotions which are made only to
investment professionals, who are less likely to be deceived by a
clever but misleading promotion
...
89-90 FSA 2012 Further criminal offences:
1
...
recklessly making a misleading statement;
3
...
engaging in a course of conduct which creates a false or
misleading impression
...

Insider dealing:
s
...
It is a criminal offence
to deal in price-affected securities based on inside information
...

incorporation online and/or using hard-copy documents can
only take place during Companies House opening hours
...

traditionally been regarded as the cheaper way to form a
company (Companies House fees + legal fees) however, once
legal fees are factored in, the costs of the two methods are
not materially different
...


NEW NAME FOR THE COMPANY:
Choosing a company name:
s
...
53 name cannot be offensive
s
...
55 name cannot use sensitive words
...

s
...
59 A private company’s name must end with limited or ltd
...
16(2)-(3) The company becomes a legal entity when registered at CH
s
...

Post-registration:
s
...
392 The directors may change the accounting reference date

APPOINTING OFFICERS OF A COMPANY:
s
...
270(3)(b) If no cosec, the directors act as a cosec
s
...

s
...

s
...

s
...

MA 5 Directors may delegate powers
...
H
...
238, 239 or 423, but no
consent is required to bring an action under s
...

Definitions:
s
...

s
...

ss
...
Administration
2
...
129 Liquidation
ss
...

s
...

Transactions by a company at an undervalue:

Preferences by a company:
PAYING UNSECURED CREDITORS IN PRIORITY TO OTHER CREDITORS
s
...

s
...

The preference is voidable if:
1
...
239(2) and s
...

3
...
239(3) make an order as it thinks fit
s
...

Transactions defrauding creditors:
s
...
423(3) where the intention was to put assets beyond the reach of
creditors or to prejudice their interests – harder to prove
s
...
However, the more recent the
transaction, the more likely it is that intent can be shown
...
423(2) The court may make such order as it thinks fit
...
425(1) Non-exhaustive list of orders
...
245 IA 1986 A liquidator or administrator can simply avoid a floating
charge – where an unsecured creditor has obtained a floating charge to
secure an already existing charge for no new consideration
...
245 only applies in a liquidation or administration
...

s
...
240(1) the charge was created within the
×
1 year (if granted to unconnected persons) or
×
s
...

s
...

s
...

Re MC Bacon The granting of security couldn’t be challenged
...
s
...
240(1)(a) 2 years prior to the insolvency
2
...
240(2) must have been insolvent at the time of the transaction
or have become insolvent as a result
...
This will be presumed if the transaction is with a connected
person – otherwise it has to be proven
...
241(2A) rebuttable presumption that an acquisition by a subsequent
purchaser was not in good faith
s
...


s
...

s
...
test)
...
239(6) This desire to prefer is which is presumed if the
transaction is with a connected person
...


s
...


s
...

Re Yeovil Glove Co
...

s
...

s
...
H within 21 days
...
238 and 239
...
238(3) such order as it thinks fit
...
241(1) Non-exhaustive list of orders
...
239 These will also be a voidable preference
s
...
*
CHANGE OF NAME
Whose authority needed to make the change?
s
...
77(1)(b) by following the procedure set out in latter – often immediate
and handed over at a board meeting)
What type of resolution (board, ordinary or special) if any?
Special resolution or otherwise as provided in the articles
...

Post meeting matters?
s
...

What type of meeting?
Board Meeting
Post meeting matters?
None
APPOINTMENT OF SECRETARY
Whose authority needed to make the change?
MA 3 and MA 5 The directors – identity depends on when the new
directors are appointed
...
270(1) Private company not required to have a secretary
What type of resolution (board, ordinary or special) if any?
Generally by Board Resolution
What type of meeting?
Board Meeting if appointed by Board Resolution
Post meeting matters?
ss
...
167 The company must inform the registrar of the appointment
within 14 days on form AP01
...
162(2) Must update the register of directors
s
...


APPOINTMENT OF NEW CHAIRPERSON
Whose authority needed to make the change?
MA 12(1) Outgoing director who was chairperson would automatically
cease being chairperson on his resignation
...

What type of resolution (board, ordinary or special) if any?
Board Resolution
...

Post meeting matters?
None
TRANSFER OF SUBSCRIBER SHARES
Whose authority needed to make the change? Section?
s
...
544(1) MA 26 Stock Transfer Form (STF) (change is only
effective once the new members have been entered into the Register
of Members)
What type of resolution (board, ordinary or special) if any?
Transferor shareholders executed STF
s
...

Usual to have a Board Resolution approving the share transfer, the entry
of the new member into the Register of members and instructing the
secretary to issue new share certificate
...

What type of meeting?
Board Meeting
...
86 A company must always have a registered office
s
...

What type of resolution (board, ordinary or special) if any?
Board Resolution to instruct secretary to complete the required form
...

Post meeting matters?
None
CHANGE OF ACCOUNTING REFERENCE DATE
Whose authority needed to make the change?
s
...

What type of resolution (board, ordinary or special) if any?
Board Resolution to instruct secretary to complete the required form
...

Post meeting matters?
None
APPOINT AUDITORS
Whose authority needed to make the change?
s
...

s
...

What type of resolution (board, ordinary or special) if any?
Board Resolution
...

Post meeting matters?
None

What type of meeting?
Board Meeting
...
Who calls?
MA 9(1) Called by any director
2
...
Quorum
MA 11(2) The quorum is 2
...


Agenda:
× Propose board resolutions to (possible resolutions):
s
...

4
...

6
...

8
...
248(1) Minutes of the board meeting (x2) and GM
s
...

s
...
357 Keep copy of all meetings and resolutions

*

Other
s
...
82 Disclose the company name in specified locations
s
...
162 Update register of directors
s
...
790E Update the PSC Register

× Board resolution to approve the form of notice of GM
...
311(1) date, time and place of meeting;
s
...
325(1) a statement that a member may appoint a proxy
× s
...
307(1) and s
...
1147 Post: deemed received 48 hours after it was posted
s
...

× s
...
310(1)(a) every member and
* s
...
502(2) If there are auditors – send to them too
...
ADJOURN BM
2
...
RECONVENE BM
BM I:
9
...

4
...


Quorum?
Practically, it makes sense for all the directors to attend if
possible, since the consent of all directors is needed to call
the GM on short notice
...
Agenda?

Threshold:
MA 7(1) Board agrees by majority decision on the agenda items
...

MA 13 A chairman’s casting vote for use when there is deadlock

×

Voting methods show of hands – each director has one vote
...


Close BM
...
318(1) where only 1 member, quorum is 1
...
318(2) The quorum is 2
...
323(1) Need to see a copy of the board minutes authorising
authorised representative to act at the GM
s
...


2
...


Voting
s282(1) Ordinary resolution - 50% < X of those voting
s
...
75% of those voting
s282(3) Decisions are made on a show of hands (1 vote each)
MA 42 Must vote on a show of hands unless a poll is demanded
...


4
...


BM II:
1
...

2
...
to remove
...

3
...
Adjourn BM
GM
BM II (Reconvened)
Could take place as near as convenient afterwards
...
307(4) Consent to short notice document is required

WRITTEN RESOLUTION PROCEDURE
Structure:
4
...
GM
6
...
281 Only private companies may pass a shareholders’ resolution by
way of a written resolution
...
Agenda?
×

Propose board resolutions to:
* s
...

s
...


Post meeting matters (PMM):
* Cosec to file the following with the Registrar of Companies:
1
...
17(b), 29(1)(a) and s
...
s
...

s
...
There
are two elements to the consent required for short
notice and these are that approval must given by:
× the majority in number of the members of the
company (so that, out of six shareholders, a
minimum of four must consent); who
× together hold at least 90% in nominal value of
the issued shares of the company
...


If a director abstains from voting on a decision, he/she does not
count towards the number of people voting
...
To get a majority,
you would need 3 out of 4 directors voting in favour of the
resolution
...


s
...
issue
s
...
392 AA01 change of Accounting Reference Date
s
...
790VA(2) PSC07 ceasing significant control x2
Stock Transfer Forms

BLP – All chapters – Revision notes | Page 25 of 28

s
...

s
...
87(1) change the registered office
×
s
...
485(3) appoint Deloitte LLP as company auditors
×
s
...
Transferee only needs to sign in limited
circumstances
...


s
...
283(2)-(3) Written SR – min
...
All votes on WRS are on a poll
...


The board meeting will then adjourn for the written
resolution to be signed, this could be signed straightaway
...
Agenda:
×
s
...

PMM:
WRS additional documentation:
Board meeting minutes only x1
s
...

Board Meeting I:
1
...

Short notice
Written resolution

×
GM:

2
...
Agenda?
× Report on the formation of the company
...
87(1) Change the registered office
× s
...
113(2) s
...

× s
...

× s
...
771 and MA 26 receive and approve the transfers of
subscriber shares and to instruct the cosec to enter the
new shareholder in the register of members ASAP
...

Cosec to file the following with the Registrar of Companies:
× s
...
167(1) TM01 resignation of directors x2 within 14 days
× s
...
276(1) TM02 resignation of secretary within 14 days
× s
...
s
...
s
...
s
...
s
...

5
...
776 issue a new share certificate to RHP and cancel the
old share certificates;
6
...
790M update the register of people with significant
control to reflect RHP’s shareholding (within 14 days);

GM:

11
...
77(1) change the name of the company

BM II:
4
...


Propose board resolutions to:
1
...
288(3)(a) to propose a written resolution to
adopt new articles
...
21(1) Adopt new articles of association by special resolution
Eg:
amend the articles to remove the chairperson’s casting
vote set out in MA 13
amend the articles so that MA 14(1) does not prevent a
director with an interest in a transaction from
participating in the decision-making process
×

Propose board resolutions to:
1
...
MA 5 to impose a £50,000 limit on directors
acting independently; and

Cosec to file the following with the Registrar of Companies:
1
...
26(1) Copy of new articles of association to Comp
...

Written resolution
Cannot use short notice procedure for service contracts
...
188(1) Service contract provides for a guaranteed term of 2 years
s
...

BM I:
14
...

Disclosures of interest:
(a) Karen Watts to disclose her interest in the new service
contract
...
177(6)(c) Karen Watts is not obliged to disclose her
interest in her service contract but it is likely to remain
the practice that she will do so as it will stop her from
voting in the resolution and this is standard procedure
to be followed
...
188(5)(b) Here, however, the notice could not be less
than 15 days as the service contract to be entered into
with Karen Watts must be displayed at the Company’s
registered office for at least 15 days
...

GM:

12
...
188(2)(a) To propose an ordinary resolution to
approve the duration of the service contract to be
entered into with Karen Watts

BM II:
14
...
approve entry into the service contract
2
...
Voting?
MA 14(1) Karen Watts cannot count in the quorum for or vote
on the board resolutions to approve entry into and authorise
a signatory for the contract in which she is interested (the
service contract)
...
228(2)(a) Retain a copy of the service contract at the registered office
for inspection
s
...


REMOVAL OF DIRECTOR

FULL NOTICE – SHORT NOTICE – WRITTEN RES

TIMINGS OF REMOVAL:
Board agrees to removal of a director:
Day 1:
s
...

MA 7(1) Directors need to pass a majority decision at the BM and a board
resolution to call a GM to pass an OR to remove a director
s
...
312(1) and s
...
312(2), s
...
360(2) 14 clear days notice to GM
DAY 30 EARLIEST FOR GM
Decide whether we have:
×
a cooperative board (directors complying with s
...
304)
Cooperative board:
Day 1:
s
...
168(1) and propose OR to remove director
Directors need to pass a majority decision at the BM and a board
resolution to call a GM to pass an OR to remove a director
s
...

Cannot use written res or short notice procedure for removing
directors

Day 22:
Directors serve notice of GM and OR on other SH
s
...

Not clear days as 360(1) doesn’t apply to s
...
Quorum
MA 14(1) The interested director will not count in the quorum
MA 14(3)(a) unless the company previously disapplied MA 14
...


Agenda
× Propose board resolutions to:
1
...

2
...
302 call a GM to pass the ordinary resolution
3
...
312(1) and s
...
312(3) Where that is not practicable, 14 days’ notice
and an advertisement in a newspaper
s
...
169(3) The director has the right to make written
representations to the company and to have the
company distribute these to the members in advance
of the meeting
...
288(2)(a) Written resolution cannot be used
...
303 The directors can be required to call a GM by the
shareholders
s
...


Agenda:
s
...
168(1) The shareholders must pass an ordinary resolution
approving the removal of the director
...
Agenda:
× pass a board Resolution terminating the director’s service
contract
...

PMM:
2
...
s
...
H
...

3
...
s
...
s
...
303(1) Notice submitted by disgruntled shareholders to call GM
s
...
304(1)(a) Within 21 days directors must call GM
Day 23:
Disgruntled shareholders serve notice of GM and OR on other SH
s
...
303 notice or
those holding more than 50% of voting rights represented by them
...
305(4) In the same way as GMs are called by directors
...
307(1) and s
...

Short notice
Written resolution
BM 1:
1
...


Quorum:
Agenda:
Disclosures of interest:
(b) s
...

Propose board resolutions to:
(a) s
...
s
...


BM II:
1
...


3
...


LOAN TO DIRECTOR

FULL NOTICE – SHORT NOTICE – WRITTEN RES
For this question you may use:
Full notice procedure – this example is using full notice
procedure, which is common for these type of qs
...

BM I:
1
...

s
...
198(4), s
...
201(4) Alternatively, if the
written resolution procedure is used, this memorandum
should be sent out with the written resolution
...

GM:

–

BM II:
2
...


Agenda
×
To propose an ordinary resolution to approve loan
to the director/SPT
Quorum:
MA 14(1) prevent directors from counting in the quorum and
voting on board resolutions in respect of transactions in which
they are interested – unless the company disapplied this MA
...
177 Unless an exception applies, the director involved in the
proposed SPT or loan must declare it by making a written
declaration under s
...
185)
MA 3 The board can now enter into the SPT contract or
executed the loan instrument/enter into the loan agreement
under the general power of the board
...
190(1) For an SPT, the director could have entered the
contract at the first BM, but to have done so the contract
would have had to have been conditional upon subsequently
gaining the members’ approval

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