Learn or revise key terms and concepts for your ACCA Corporate and Business Law (LW GLO) exam using OpenTuition interactive ACCA LW GLO Flashcards.
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Illustrated the three part steps to determine whether a charge over assets was a floating charge or a fixed charge
Deadlock on the board of directors is a just and equitable ground for the Court to grant a compulsory liquidation order
In the context of agency, an agent who exceeds his authority may nevertheless bind the principal in contracts where the agent could be held to have ostensible / apparent authority
The extent of damages is restricted to that amount which could have been reasonably foreseeable at the time of the breach
The extent of damages is restricted to damage which was reasonably foreseeable
Where a director is found to be competing against the company it is allowable to amend the constitution to enable the removal of that director
Where a director is defrauding the company it is allowable to amend the constitution to enable the removal of that director
A person who loses their position as a director automatically loses their position as chief executive – but compensation for breach of contract may then become payable
The grand-father of company law cases which confirmed the principle that a company, when properly incorporated, is a separate legal entity distinct from those who are beneficially interested in the success or failure of the company and from those who manage its affairs
Where a contract specifies that “it shall not be subject to the jurisdiction ….” then it is specifically excluding resorting to legal action to resolve a subsequent dispute
Lifting the veil to determine the person who made the decision in a situation involving corporate manslaughter
The constitution of a company acts as a contract binding the company to its members and its members to the company
Negligence on the part of the directors resulting in a personal profit for those directors is a ground for action against them to recover profits lost through their negligence
Negligence on the part of the directors is not a ground for action against them to recover profits lost through their negligence
A company secretary has the apparent / ostensible authority to bind the company in contracts of an administrative nature
The date on a certificate of incorporation is CONCLUSIVE proof that that is the date the company was incorporated
Loss suffered as a result of reliance on a negligent auditor’s statement – to be successful in a claim against the auditor it is necessary to show that the whole loss suffered was CAUSED by the reliance and was not due to any other cause
Directors should not take personal advantage of opportunities which “belong” to their company
Directors allotting shares to prevent a takeover bid, even though acting in their minds bona fide in the interests of the company, were found to be not acting in the interests of the majority and the allotment was held to be invalid
The constitution of a company acts as a contract between the company and its members. Where a constitution says that disputes are to be settled by arbitration, then the Court will refer the case to arbitration
Proposed alterations to the constitution must be for the benefit of the company as a whole
When the substratum of a company has disappeared, that is a ground for the Court to grant a compulsory liquidation order
Where a person is ( wrongly ) held out as a director of a company by the real directors, the real directors are estopped from denying the authority of the “wrong” director
An example of the Court lifting the veil of incorporation – American film company set up to take advantage of British Government’s grants to British film companies
An example of the tort of passing off – using a name for a company which is similar to an existing company name in a similar business such that confusion is likely to result in the minds of the public
Promoters must disclose profits made by them in the course of promoting a company to the first INDEPENDENT board of directors
The constitution of a company creates a contract between the company and its members, but only in their capacity as members and not in any other capacity
In a quasi-partnership company, where a director / quasi-partner is deprived of the right to take part in management, that is a just and equitable ground for the Court to order a compulsory liquidation
Directors should act with such degree of skill, care and diligence as could reasonably be expected of a person of that age, experience and qualification
An example of the Court lifting the veil of incorporation – to determine the commercial reality of a group of companies
An example of the Court lifting the veil of incorporation – husband sets up a sham company to get round a perfectly reasonable restrictive covenant not to compete
An alteration to the constitution of a company will only be allowed if the “individual hypothetical member of the future will be equally likely to benefit as be burdened by the alteration“ – an alteration allowing the majority to compulsorily buy out a minority was not allowed
A minority shareholder can sue the directors on behalf of the company to recover a profit which rightly belongs to the company but which has been diverted by the directors to themselves
Established the fiduciary duties owed by directors to their company:- 1) must act with reasonable skill and care,
2) should devote such time as is necessary to fulfil their duties, and
3) may delegate so long as there are no grounds for believing the delegate is not capable
Auditors owe their duty to the members of the client company as a whole and not to individual members
Weighted voting rights may be written into the constitution of a company effectively preventing alteration ( 2 sisters and little brother )
Directors should use their powers for a “proper purpose” – shareholders ratified the allotment of new shares to defeat a takeover is valid. Even though the allotment was itself a breach of fiduciary duty, the ratification validated the allotment
It doesn’t matter if ALL the shareholders in a company agree to a course of action; if it is prohibited by the company’s constitution then the company cannot pursue that course of action ( it is ultra vires )
The Court WILL allow an alteration to the Articles even though it may adversely affect just one individual shareholder. So long as the alteration is for the benefit of the company as a whole, the Court will allow it
In tort, auditors are not liable in negligence when someone, unknown to the auditor, relies on the audit opinion to make an investment decision. However, if they rely instead on the oral opinion of the auditor, then the auditor IS potentially liable.
Companies are separate legal entities
My answers will be disjointed and lack professionalism
Six and a half minutes to try and think of 10 correct, relevant, markable points
“Fraudulent trading” involves establishing a company with the intention of defrauding creditors
“Wrongful trading” is when directors allow the company to continue trading without there being a realistic prospect that it will be able to avoid an insolvent liquidation in the foreseeable future
Yes, the punishment for money laundering is a prison sentence of up to 14 years and / or a fine
The three offences in money laundering are:
* laundering
* failure to report
* tipping off
* Placement
* Integration
* Layering
No, to be an offence, the information needs to be specific and not just general investment advice
No, the information should be less than 6 months old
Unpublished price-sensitive information is information about a company which is not in the public domain but which, when published, is likely to have a material affect on the market price of the company’s securities
Probably not, if he can persuade the Court that the sale was for reasons other than the avoidance of a loss
It is true if the person knew (or should have known) that the informer was an insider. If they didn’t know (or suspect) , then the person is not guilty of the offence
No, the offence of insider dealing refers to deals. It does not refer to non-dealing
No, insider dealing is a criminal offence and is punishable by a term in prison and / or fine
In an FTSE 350 company, all directors must retire each year and seek re-election (if they wish to be re-elected)
The expression “comply or explain” refers to public quoted companies which must state within the financial statements that they have complied with the Code or, if not, why not.
A whistle-blower would refer their concerns over alleged breaches of regulation / internal controls to the Audit Committee
Yes, it is a requirement of the UK Corporate Governance Code that part of the directors’ remuneration should be performance related
A person who is to be appointed as administrator must be a “qualified insolvency practitioner”
A person who is to be appointed as liquidator must be a “qualified insolvency practitioner”
A way other than liquidation by which a company could be rescued is called an Administration
Special Manager is a person appointed on application to the Court by the Official Receiver to take control of the company’s property during the liquidation process
The Official Receiver will be appointed by the Court as Provisional Liquidator in the event of the Court granting a compulsory liquidation order
The case where the Court determined that the company was a “quasi-partnership” was Ebrahimi v Westbourne Galleries
The case when the Court granted a liquidation order on the grounds that there was deadlock on the board was re Yenidji Tobacco
The Court made the order on the grounds that it was just and equitable – the sub-stratum of the company no longer existed
The Court may grant a liquidation order:
* on the grounds that it would be just and equitable
* on the grounds that the company is unable to pay its debts as they fall due
A members’ voluntary liquidation requires the directors to prepare a declaration of solvency
Yes, provided a majority of 75% vote in favour, a private company can be put into liquidation by passing a written resolution
A special resolution requiring a 75% majority voting in favour
Yes, it is true. It’s one of the six grounds for which the Court may make that compulsory liquidation order
In one word, SOLVENCY
The members! It’s called a creditors’ voluntary liquidation because the creditors are not likely going to be paid their debts in full
A members’ voluntary liquidation and a creditors’ voluntary liquidation
It’s whatever it says in the Articles
No, there is no upper age limit applied to directors of private companies
No, but the director must seek re-election every year after attaining the age of 70
It is the directors’ responsibility to call / convene a general meeting of the members of a company, but they normally delegate that duty to the company secretary
A special resolution requires 14 days’ notice if it is to be validly passed
Yes, it is possible to hold an annual general meeting of a public company with only 2 days’ notice provided short notice has been approved by the holders of 100% of the votes
An annual general meeting requires a notice period of 21 days
No, a person acting in a professional capacity (auditor, legal advisor, banker) shall not be classed as a shadow director
A shadow director is defined as “a person in accordance with whose instructions the directors are accustomed to act”
No, where a private company chooses to appoint a company secretary, it is not possible for the sole director also to be the company secretary
No, a resolution to remove a director or an auditor cannot be passed as a written resolution but any other resolution may be.
Yes, but it is normal that the members will authorise the board to negotiate the level of the auditors’ remuneration
No, if a private company wishes to have an auditor, that appointee shall be appropriately qualified
No, where a private company wishes to appoint a company secretary, it is not statutorily necessary that that appointee should have any qualifications. It could be your grand-mother!
A public company MAY hold general meetings which are not annual general meetings. These are called “other general meetings”
No, full disclosure of interests in contracts and transactions of a company should be made by directors to the full board. It is not enough to disclose only to a sub-committee
No, it is a statutory duty of directors to promote the interests of the company
“Ultra vires” literally translates as “beyond the powers”
Yes, directors should act with such degree of skill, care and diligence as could reasonably be expected from a person of that age, experience and qualification
Yes, it is true that directors have a statutory duty to avoid a conflict of interest
In company law, the abbreviation CDDA stands for the Company Directors Disqualification Act
No, it is not allowable for a director who has recently declared herself to be bankrupt to continue in office as a director of a company
It is not a statutory requirement that private companies should have an annual general meeting
A public company must hold its first annual general meeting no later than 6 months after its first year end ie a maximum of 18 months after incorporation
At the first annual general meeting of a public company, all the directors must retire and (may) seek re-election
When a director is proposed to be removed from office, the director has the right to prepare “written representations of reasonable length and not defamatory in nature”
No. If a firm of auditors wishes to resign, or not seek re-election, they must deliver to the company’s registered office either a “statement of circumstances” or a “statement of no circumstances”
Yes, in every circumstance when a company wishes to change auditors the company must pass an ordinary resolution with special notice
Yes, special notice is required of an ordinary resolution to remove a director from office
An ordinary resolution sometimes requires special notice
A simple majority – ie one more vote in favour than votes against
An ordinary resolution
No, the UK Corporate Governance Code requires that the roles of Chair and Chief Executive be split between two individuals of comparably equal strength and charisma
“Corporate governance” is a system whereby companies are directed and controlled
Non-executive directors
The Share Premium Account and the Capital Redemption Reserve
A company may only make distributions out of distributable profits. Distributable profits are calculated as “accumulated realised profits” less “accumulated realised losses”
No, the statement is not true. Providing the finance for a dividend is NOT an allowable use of the share premium account
Yes, “to finance the issue of fully paid bonus shares to existing members” is one of the few allowable uses of the share premium account.
Yes, “to write off preliminary and formation expenses” is one of the few allowable uses of the share premium account.
Yes, the share capital account will be credited with the nominal value of the new issue and the share premium account with the excess proceeds over nominal value
No, it is not true! There is no cash received on the event of a bonus issue!
Yes, “face value”, “par value” and “nominal value” do have the same meaning
No! In no situation is a public company allowed to issue shares for an amount less than their face value
In order that a company may reduce its share capital it requires permission within the Articles, a special resolution and also permission of the Court
In order that a company may reduce its share capital, it requires not only permission within the Articles and permission of the Court. It also requires a special resolution to be passed
In order that a company may reduce its share capital, it requires permission within the Articles, a special resolution and permission of the Court
To be valid, a charge must be registered with the Registrar of Companies within 21 days of its creation
No, the statement is not true. The one with priority is the charge which was created first, not necessarily the one which was registered first
Yes, on a liquidation, all debenture holders are paid in priority to all the members
No, on a liquidation, the FIXED charge debenture holders are paid in priority to all others.
No, this is not true. At a general meeting of the company, the debenture holders have no votes – they are creditors, not members
A fixed charge attaches to an individual asset whereby the borrower is not able freely to deal with that asset
No, it is NOT necessary to be able to differentiate between loan stock and debentures in the F4 examination
$300 ie 6% * 10,000 * .50
In the event of a liquidation, preference shareholders shall be repaid their capital, in full, before the equity shareholders receive a single cent in repayment of their capital
No, called-up capital and paid-up capital are not the same thing
No, it is not true, no qualifications are necessary for a person to be appointed as a private company secretary
Yes, a public company must have an appropriately qualified company secretary
1 is the minimum number of directors required in a private company
1 is the minimum number of members required in a private company
1 is the minimum number of members required in a public company
No, it is not necessary that a proxy be a member of the company
A proxy is appointed by a member to represent the member at a general meeting where the member is unable to attend
The detail of quorum size is specified in a company’s Articles
A quorum is the minimum number of members necessary to be present at a general meeting of a company if resolutions are to be validly passed
No, if a person’s name appears in a Register of Members, this indicates that they are a member of the company, but not necessarily a shareholder
No, a person becomes a member of a company when their name appears in the Register of Members
Yes, a person becomes a member of a company when their name appears in the Register of Members
Within 15 days
“passing off” is where a company is established with a name similar to an existing company name and in a similar business such that confusion is likely to result.
A special resolution is required if a company wishes to change the company name
“At the time someone becomes a member of a company, it is as though they have entered a contract with the company and with all the other members individually”
Yes, as illustrated by the case Dafen Tinplate v Llanelli Steel
They may only be altered if the alteration can be shown to be for the benefit of the company as a whole
No! Just one! I didn’t say that everyone had the same number of votes!
No! Just one! I didn’t say that everyone voted!
A majority of not less than 75% of votes in favour is required to pass a special resolution
A special resolution is required to effect an alteration to the Articles of a company
The Articles of Association consist of the internal rules that relate to the management and administration of the company
The articles of association, resolutions which affect the articles and any agreements which affect the articles
Present and former names, address (ideally home address), nationality, business occupation, date of birth
No, not true. A company may keep its register of members at the offices of the company’s registrars
The date on the certificate of incorporation is conclusive proof that that was the date the company was created
Proposed name, country of domicile of registered office, liability of members, company status (plc or ltd) , postal address of registered office
The promoter is liable personally – the company doesn’t exist and therefore has no liability
The duty to act with reasonable skill and care is an example of a fiduciary duty
The duties owed by a promoter are collectively known as fiduciary duties
A promoter is one who undertakes to form a company with reference to a given project and to set it going and who takes the necessary steps to accomplish that purpose
Yes, in a number of situations including if they give their written consent.
“R” is the Monarch of the United Kingdom
Lifting the veil
Yes – but Heaven knows why!
No. One of the uses is to finance the issue of FULLY PAID bonus shares to existing members
A member’s liability in a company limited by shares is limited to the amount, if any, as yet unpaid on shares held by the member
By guarantee and by shares
By statute
By registration
“llp” is the abbreviation for “limited liability partnership”
“plc” is the abbreviation for “public limited company”
No, it is not true. An “innocent” third party can enforce the contract against the company.
No. Following incorporation, a public company must obtain a trading certificate before it may commence trading
Yes, it is always true
Yes, the date on the certificate is conclusive proof that the company exists from that date – Jubilee Cotton Mills v Lewes
No. Insanity as a ground for dissolution is a matter for the Court to decide. It’s not automatic
Yes, it’s part of the “price payable” for the benefit of limited liability
No. The acts of a partner done in the course of the firm’s business bind the firm and the partners
Yes, a joint venture is defined as “a partnership formed for a specific purpose, course of trade or voyage”
“A partnership is the relationship which subsists between two or more people carrying on business in common with a view to profit”
Yes, the Court may deem that a partnership by conduct exists where two people carry on a business in common and satisfy the definition of a partnership
Yes. Neither notice, death nor bankruptcy of the limited partner has the effect of dissolving the partnership.
Yes, it is always true.
The surviving partners can start a new partnership with immediate effect but the original partnership ceases on the death of a partner.
No!
Yes, it is true
Ostensible
Yes, it is true
“estopped”
Yes, for example where a person acts and is deemed to be an agent of necessity
The tort of negligence
It’s false – tort is NOT a breach of contract
Rectification is an equitable remedy
Rescission is an equitable remedy
Injunction is an equitable remedy
Damages is a common law remedy
Specific performance is an equitable remedy
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