Business Law An Introduction OUCOME3 题+答案文档格式.docx
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Business Law An Introduction OUCOME3 题+答案文档格式.docx
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publiccompanies
Question2
GiventhefactthatLisaisrunningaverysmallbusiness,itwillalmostbecertainlyrunasasole
traderenterprise.Thereistheveryremotepossibility—anditisveryremote—thatasmall
businesscouldberunasasinglememberprivatecompanyintermsoftheCompanies(Single
MemberPrivateLimitedCompanies)Regulations1992.Suchaprivatecompanyislimitedby
sharesorbyguaranteeandneedonlyhaveonemember.Nowhere,however,doesitmention
thatthebusinessislimitedbysharesorbyguaranteeandwewould,therefore,assumethatithas
thecharacterofasoletrader.
Question3
Theadvantagesofasoletraderbusinessare:
1
ItisthesimplestformofbusinessorganisationrecognisedbyScotsLaw.
2
Asoletraderistoallintentsandpurposestoberegardedasaself-employedperson.In
otherwords,nodifferenceismadebetweenthesoletraderandhisorherbusiness;
they
arelegallyindistinguishable.
3Verybasiclegalrequirementstocomplywithiesubmissionofincometaxreturnstothe
InlandRevenueandthedisclosurerequirementsoftheBusinessNamesAct1985.
4Totalcontroloverhisorherbusinessanddoesnothavetotakeintoaccounttheopinions
ofanyshareholders,membersorpartners.
Thedisadvantagesofasoletraderbusinessare:
1Ifthebusinessfails,thesoletraderissaidtohaveunlimitedliabilityforanydebtsor
obligationsowedtothirdparties.
2Asoletradermayfinditdifficulttofundanexpansionofthebusinessbecauseshe/he
cannotoffersharestootherpartiesinordertoraisefunds.
3
Inanycase,abusinessexpansionrequiringamajorinjectionofcapitalmightentailaloss
ofcontroloverthebusinessbecausenewpartners,shareholdersormemberswhoarea
sourceofnewfinancewillalmostcertainlydemandasayintherunningofthebusiness.
4
Theinclusionofnewpartners,membersorshareholderswouldforceachangeinthe
natureofthebusinessoperationbyconvertingitintoapartnershiporsomeotherformof
corporatebody(public/privatecompaniesoralimitedliabilitypartnership).
CaseStudy2
【】
Therearemanydifferencesbetweenatraditionalpartnershipandalimitedliabilitypartnership
(LLP),butcandidatesshouldbeabletopinpointthefollowingcharacteristicsofbothtypesof
businessorganisationfromthetablebelow:
PartnershipLimitedliabilitypartnership
UnincorporatedbusinessCorporatebody
NoneedtoberegisteredwithRegistrarof
Companiesandnoneedtosupplyformal
documents
MustberegisteredwiththeRegistrarof
Companiesandcertaindocumentsmustbe
supplied
RegulatedbyPartnershipAct1890(unlessthe
partnersagreeotherwise)
RegulatedbytheLimitedLiability
PartnershipsAct2000
Partnershaveunlimitedliabilityinrespectof
partnershipdebts/liabilitiesietheyarejointly
andseverallyliableandcanbepursuedtotheir
lastpenny
Membersenjoylimitedliabilityinrespectof
LLPdebts/liabilitiesietheywillonlybe
liabletotheextentoftheirstakeinthe
business
PracticeNote
Itwouldbehighlyadvisabletoconcentrateonthedifferencesbetweenatraditionalpartnership
andanLLPwhenintroducingcandidatestothisareaofthecourse.
Currently,manytraditionalpartnershipshavesoughtLLPstatusbecauseoftheperceived
benefitsoflimitedliabilityforthemembersofanLLP—evenifthisdoesrepresentalossof
privacyandgreaterexternalregulationforthemembersieregistrationwiththeRegistrarof
Companiesandtougherauditingrequirements.
Thelegalrelationshipbetweenpartnersinafirmisclassifiedasafiduciaryrelationshipiea
relationshipoftrust.Partnersareagentsoftheirfellowpartnersandalsoofthefirmitself.
Candidatesshouldcitethefollowingcasewhichexemplifiesthenatureofthefiduciary
relationshipbetweenpartners:
PillansBrothersvPillans[1908]
Thelegalrelationshipbetweenamemberandalimitedliabilitypartnershipwillalsobe
classifiedasafiduciaryrelationship.Section6oftheLimitedLiabilityPartnershipsAct2000
statesthatthemembersofanLLParetoberegardedastheagentsofthebusinessanditisa
generalruleofthelawofagencythatanagent(themember)mustalwaysactinthebest
interestsofhisprincipal(theLLP).Itisimportanttobearinmindthatamemberisnotanagent
ofhisfellowmembers.
CaseStudy3
Acompany’sobjectsclauseisfoundinitsMemorandumofAssociation.Theobjectsclausesets
outthepurposeofthecompanyusuallyintheformofalist(sometimesaverylonglist)ofthe
variouscommercialandbusinessactivitiesthatitislikelytoundertake.Beforethereforms
introducedbytheCompaniesAct1989,companiescouldnotenterintocertaincontractswith
thirdpartiesunlesssuchacommercialtransactionwaslistedintheobjectsclause.Suchan
unauthorisedcontractwasvoidbyreasonofthecompany’slackofcapacitytoentersuchan
agreementinthefirstplaceandignoranceofthecontentsoftheobjectsclauseonthepartofthe
thirdpartywasnodefence.Nowadays,manycompanieswillhavestraightforwardobjects
clauseswhichallowthemtoenterintoanytypeofbusinessorcommercialtransaction
whatsoever.
Noisthesimpleanswer.MacGregordoesnothavelegaljustificationforitswithdrawalfrom
thecontractwithConstructit.MacGregorisattemptingtorelyontheoldultraviresrule.Asa
resultofreformsintroducedbytheCompaniesAct1989,Section35oftheCompaniesAct1985
nowstatesthateverycontractisenforceableagainstthecompany.Noactdonebyacompany
maybequestionedbythefactthatitwasbeyonditslegalcapacityasstatedinitsobjectsclause
intheMemorandumofAssociation.Section35Bofthe1985Actgoesontosaythatthereisno
necessityforathirdpartytocheckthataproposedcontractiswithinthepowersofthecompany
aspertheMemorandumofAssociation.Furthermore,Section3AoftheCompaniesAct1985
nowpermitsacompanytohaveasimplifiedobjectsclausewhichmeansacompanycanenter
intopracticallyanycontractwhatsoeverwiththirdparties.
Insituationswherethirdpartiesdealingwiththecompanyhavefailedtoactingoodfaithand
wheretheDirectorshaveexceededtheirauthority,Section35A:
CompaniesAct1985raisesthe
possibilitythatsuchanultravirescontractmaybedeclaredvoidablebythecompany.Inother
words,theultraviresrulecomesbacktohauntthirdpartiesdealingwiththecompanywhen
theyactinbadfaith—butnotinthiscasestudy.
Candidatesshouldcitethefollowingcasewhichemphasisestheharshnessoftheoldultravires
rule:
AshburyRailwayCarriage&
IronCovRiche[1875]
CandidatesmustreferencetheiranswertoSection14oftheCompaniesAct1985iethebinding
contractualnatureoftheMemorandumofAssociationandtheArticlesofAssociation.The
shareholderswillhavetoestablishwhethertheyareentitledtoreceivebonusesintermsofthe
company’sArticlesofAssociation.Ifso,theycanraiseanactionagainstthecompanyinterms
ofSection14toforcepaymentofdividends.Ifthepaymentofbonusesispurelydiscretionary,
thecompanymaywellhavetherighttosuspendpaymentthisyear.
Candidatesshouldbeabletociteatleastoneofthefollowingexamplesfromcaselawin
supportoftheiranswerwhichdemonstratethattherelationshipbetweenacompanyandits
membersandbetweenthemembersthemselvesiscontractualinnatureasperSection14ofthe
CompaniesAct1985:
EleyvPositiveLifeAssuranceCoLtd[1876]
HickmanvKentorRomneyMarshSheepBreeders’Association[1915]
RayfieldvHands[1960]
WoodvOdessaWaterworksCo[1889]
CaseStudy4
Therearenumerousdifferencesbetweenprivateandpubliccompanies.Itisoftenusefultogive
candidatesalistofthedifferentcharacteristicsofbothorganisationswherebytheyareableto
compareandcontrast.Candidatesareonlybeingaskedtolistthreedifferencesbetweena
privatecompanyandapubliccompanyfromthetwolistssetoutbelowandthereisplentyto
choosefrom.
Themaincharacteristicsofaprivatelimitedcompanyare:
Companynamemustendin“limited”or“ltd”.
TheArticlesofAssociationofaprivatelimitedcompanymayprovideforarightofpreemption
sothatwhenamemberwishestosellortotransferownershipofhisshareshe
mustfirstofferthemtoexistingmembers.
3Thereisnominimumcapitalrequirement.
4Thesharesinaprivatelimitedcompanycannotbetradedorlistedonthestockexchange.
5Onlyonedirectorisrequired.
6IntermsoftheCompanies(SingleMemberPrivateLimitedCompanies)Regulations
1992,aprivatecompanylimitedbysharesorbyguaranteeneedonlyhaveonemember.
7Thereisnoupperagelimitfordirectors.
8Auditedaccountsmustbeproducedwithin10monthsoftheendofthefinancialyear.
9TradingcanstartassoonasaCertificateofIncorporationisobtained.
Themaincharacteristicsofapubliclimitedcompanyare:
1Thecompanynamemustendin“publiclimitedcompany”or“plc”.
2Membersmustbefreetotransfertheirsharesastheyplease.
3Apubliccompanymusthaveminimumissuedsharecapitalofatleast£50,000.
4Sharescanbe
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