Contents Table of Statutes Table of Secondary Legislation Table of Cases Glossary Chapter 1: Overview of the Subject and the Nature of Partnership 1.1 Introduction 1.2 The partnership and the company contrasted 1.2.1 Types of partnership 1.2.2 Partnership law 1.2.3 Summary 1.3 Definition of partnership 1.3.1 A business in common 1.3.2 Carried on with a view of profit 1.3.3 By or on behalf of the partners 1.4 Profits as a key determinant of the partnership 1.4.1 s2(3) Partnership Act 1890 1.4.2 The receipt by a person of a debt or other liquidated amount by instalments or otherwise out of profits 1.4.3 A contract for the remuneration of a servant or agent by a share of profits 1.4.4 The receipt of an annuity by the widow or child of a deceased partner as a portion of profits 1.4.5 The advance of money by way of a loan to a person engaged or about to engage in business 1.4.6 The receipt by a person of a portion of the profits of a business in consideration of the sale by them of the goodwill of that business 1.4.7 Summary 1.5 Lender as postponed creditor 1.6 Summary Chapter 2: Formation of a Partnership 2.1 Introduction 2.2 The form of the agreement 2.3 Capacity 2.4 Illegal partnerships and discrimination 2.5 The partnership name 2.6 Legal status 2.7 Proceedings by or against partnerships 2.8 Duration of the partnership 2.9 Application of the Partnership Act 1890 2.10 The partnership articles: the substance of the relationship 2.11 Summary Chapter 3: Relations Between the Partners 3.1 Introduction 3.2 The management of the partnership i
3.3 The legal relationship 3.4 Partnership property 3.4.1 Why does it matter? 3.4.2 How does the law decide whether property is partnership property? 3.4.3 Devolution of partnership property 3.4.4 Charging orders 3.5 The working relationship 3.5.1 Share of profits and losses 3.5.2 Right of indemnity 3.5.3 Interest on advances 3.5.4 Interest on capital 3.5.5 Management and remuneration 3.5.6 Introduction of new partners 3.5.7 Settlement of differences 3.5.8 The partnership books 3.5.9 Expulsion of a partner 3.6 Retirement from a partnership at will 3.7 Duties of the parties between themselves 3.7.1 Duty of partners to render true accounts and full information (s28) 3.7.2 Duty of partners to account for secret profits (s29) 3.7.3 Duty of a partner not to compete with the firm (s30) 3.7.4 Partner s duty of care and skill 3.8 Assignment of partnership share 3.9 Summary Chapter 4: Liability and Rights in Respect of Outsiders 4.1 Introduction 4.2 The authority of agents: introduction 4.3 The power of a partner to bind the firm 4.3.1 Business of the kind carried on by the firm 4.3.2 Carrying on in the usual way 4.3.3 Acts always outside the usual authority of a partner in both trading and non-trading firms 4.4 Where a partner acts on their own account 4.5 Liability of partners in respect of contracts 4.6 Liability of partners for wrongful acts or omissions 4.7 Misapplication of money or property of a third party 4.8 Improper employment of trust property 4.9 Liability of apparent partners (s14) 4.10 Liability of incoming and outgoing partners 4.11 Effect of a change in the firm s constitution on a continuing guarantee 4.12 Summary Chapter 5: Dissolution of Partnership 5.1 Introduction 5.2 Methods of dissolution 5.2.1 Dissolution by mutual agreement 5.2.2 Dissolution by an express clause in the agreement 5.2.3 Dissolution by expiration or notice (s32) ii
5.2.4 Dissolution by death, bankruptcy or charge (s33) 5.2.5 Dissolution by illegality (s34) 5.2.6 Dissolution by the court (s35) 5.2.7 Dissolution by an arbitrator 5.3 The consequences of dissolution 5.3.1 Notice of dissolution (s37) 5.3.2 Continuing authority of partners for the purposes of windingup (s38) 5.3.3 Return of premium on dissolution 5.3.4 Rights where partnership dissolved for fraud or misrepresentation (s41) 5.3.5 Duty to assist in getting in assets of firm 5.3.6 Rights as to application of assets 5.3.7 Goodwill 5.3.8 Disposal of goodwill 5.3.9 Personal appointments 5.3.10 Final accounts 5.3.11 Right of outgoing partner to share in profits made after dissolution (s42) 5.3.12 Retiring or deceased partner s share as debt (s43) 5.4 Rules for the distribution of assets (s44) 5.5 Deferred creditors 5.6 Bankruptcy 5.7 The insolvent partnership 5.8 Application of assets 5.9 Summary Chapter 6: Limited Liability Partnerships 6.1 Introduction 6.2 The benefit of the limited liability partnership 6.3 The nature of the limited liability partnership 6.3.1 A separate legal entity 6.3.2 Capacity of the limited liability partnership 6.4 Incorporation 6.5 Name of the limited liability partnership 6.6 Registered office 6.7 Membership and members relationship with one another 6.7.1 The rights and duties of members 6.7.2 Former members 6.7.3 Designated members 6.7.4 Membership changes 6.8 Authority of members 6.9 Disclosure obligations 6.9.1 Accounts 6.9.2 Changes in membership 6.9.3 Annual return 6.9.4 Name 6.9.5 Registration of charges 6.10 Winding-up 6.10.1 Liability of members in an insolvent winding-up 6.10.2 Liability of member for withdrawals before winding-up 6.11 Disqualification 6.12 Summary iii
Chapter 7: Introducing the Company 7.1 Introduction 7.2 The corporate relationships 7.2.1 The company and its members 7.2.2 The company and its directors 7.2.3 The company and those who lend to it 7.2.4 The company and contractors 7.2.5 The company and the Registrar of Companies 7.2.6 The company s other legal relationships 7.3 Sources of company law 7.4 Companies and (ordinary) partnerships compared 7.5 Company formation 7.6 The concept of a company s separate legal personality 7.7 Lifting or piercing the corporate veil 7.7.1 Adams v Cape Industries plc [1990] 7.7.2 Other situations that have similar consequences to veil piercing 7.7.2.1 Statutory or contractual provisions requiring a group of companies to be treated as a single economic unit 7.7.2.2 Treating a company as the agent of its shareholders 7.7.2.3 Overcoming concealment 7.7.2.4 Identifying the character of a company 7.7.3 Actions in tort 7.7.4 Liability under the Insolvency Act 1986 7.8 The classification of companies 7.9 Types of registered company 7.9.1 Re-classification of the registered company 7.9.2 Holding and subsidiary companies 7.10 Model Articles of Association 7.11 Summary Chapter 8: Company Formation 8.1 Introduction 8.2 Company promotion 8.3 The legitimate transactions of promotion 8.3.1 Pre-incorporation contracts 8.3.2 Transfer of liability from the promoter to the newly formed company 8.3.3 Recovery of legitimate expenses by the promoter 8.4 Registration 8.4.1 The prescribed documents 8.4.2 The role of the Registrar of Companies 8.4.3 Commencement of business 8.5 Shelf companies 8.6 The company s name 8.6.1 Regulating the company s name 8.6.2 Changing the company s name 8.6.3 Using a business name 8.6.4 Re-use of company names 8.6.5 Publicity of company name and other trading disclosures 8.7 The registered office iv
8.8 The company seal (or common seal) 8.9 Summary Chapter 9: Memorandum of Association 9.1 Introduction 9.2 Contents of the memorandum 9.3 Summary Chapter 10: Articles of Association 10.1 Introduction 10.2 The nature of the articles 10.3 The s33 contract 10.4 Alteration of the articles 10.5 The objects of the company 10.5.1 The ultra vires doctrine 10.5.2 Reforming the ultra vires doctrine 10.5.3 Powers of directors to bind the company 10.5.4 Constructive notice 10.6 Summary Chapter 11: Share Capital 11.1 Introduction 11.2 The terminology 11.3 The raising of capital 11.3.1 The authority to allot shares 11.3.2 Pre-emption rights on allotment 11.3.3 Altering the company s capital 11.3.4 Other regulations 11.3.5 Filing and summary 11.4 Public offers and associated procedures and listing 11.4.1 The markets for the issue, buying and selling of shares 11.4.2 Methods of raising capital on the markets 11.4.3 Regulation of offers to the public 11.5 Advertising public offers 11.6 Civil liability in the preparation of listing particulars and prospectuses 11.6.1 Potential defendants 11.6.2 Misrepresentation 11.6.3 Breach of contract 11.6.4 Statutory claims 11.7 Criminal liability in the preparation of prospectuses 11.8 Miscellaneous 11.9 Summary Chapter 12: Maintenance of Capital 12.1 Introduction 12.2 Reduction of capital under s641 12.2.1 To extinguish or reduce liability on partly paid shares v
12.2.2 To cancel paid-up share capital which has been lost or is not represented by available assets 12.2.3 To pay off part of the paid-up share capital out of surplus assets 12.2.4 How to effect a reduction 12.2.4.1 Reduction by private company 12.2.4.2 Reduction by any company 12.3 Incidental reduction of capital 12.4 Serious loss of capital by a public company (s656) 12.5 Redemption and buy-back of shares 12.5.1 Redemption of shares 12.5.1.1 How is redemption effected? 12.5.1.2 Consequences of redemption 12.5.2 Purchase by a company of its own shares (buy-back) 12.5.2.1 Methods of purchase 12.5.2.2 Consequences of buy-back 12.5.3 Paying for the shares out of capital 12.5.3.1 Procedure to be followed for payment out of capital 12.6 Financial assistance for purchase of its own shares (ss677 683) 12.6.1 General prohibition on public companies giving financial assistance 12.6.2 Breach of the prohibition 12.6.3 Exceptions 12.6.4 The principal or larger purpose exception 12.6.5 Territorial effect 12.7 Regulating the adequacy of the consideration obtained for shares on allotment 12.7.1 Non-cash consideration 12.8 The share premium account 12.9 The distributable profits rule 12.10 Bonus (capitalisation) issues 12.11 Summary Chapter 13: Shares and Membership of a Company 13.1 Introduction 13.2 Membership and its formalities 13.3 The register of members 13.4 The substance of the membership agreement 13.5 Classes of share 13.5.1 The right to vote 13.5.2 The right to a dividend 13.5.3 The right to a return of capital 13.5.4 The right to participate in the distribution of surplus assets 13.6 Variation of class rights 13.6.1 What constitutes a variation of class rights 13.6.2 The procedure for variation 13.6.3 Minority protection 13.7 The transfer of shares 13.7.1 The transfer procedure 13.7.2 Restrictions on transfer 13.7.3 The share certificate 13.7.4 Transfers and fraud vi
13.7.5 Interests in shares of public companies 13.8 Terminating company membership 13.9 Mortgages of shares 13.10 Summary Chapter 14: Borrowing and Charges 14.1 Introduction 14.2 The power to borrow 14.3 Debentures 14.4 Comparison between shares and debenture stock 14.5 Security for borrowing company charges 14.5.1 Types of charge over company properties 14.5.2 Priority of charges 14.5.3 Registration of charges 14.5.4 Register of charges 14.5.5 Other forms of registration 14.5.6 Discharge of charges 14.5.7 Steps for the prudent lender who requires security 14.6 Enforcement of security 14.6.1 Recovery of borrowing from a company 14.6.2 Receivership 14.7 Guarantees 14.8 Retention of title clauses 14.9 Summary Chapter 15: Insider Dealing and Market Abuse 15.1 Introduction 15.2 Insider dealing 15.2.1 Offence of insider dealing 15.2.2 Defences 15.2.3 Terms used in ss52 53 Criminal Justice Act 1993 15.2.4 Penalties for insider dealing 15.2.5 Territorial scope of the Criminal Justice Act 1993 15.2.6 Summary of ss52 64 Criminal Justice Act 1993 and examples 15.2.7 Prosecuting insider dealing 15.2.8 Disqualification for misconduct 15.3 Market abuse 15.3.1 What is market abuse? 15.3.2 Investments and markets 15.3.3 Other issues 15.3.4 Penalties and remedies for market abuse 15.4 Summary Chapter 16: Company Meetings 16.1 Introduction 16.2 Board meetings and general meetings compared 16.3 Types of meeting 16.4 Frequency of meetings 16.5 Who convenes general meetings? 16.6 Notice of meetings 16.7 Resolutions vii
Chapter 17: Directors 16.8 The tabling of resolutions 16.9 Special notice 16.10 Quorum 16.11 The chairman 16.12 Voting 16.13 Proxies 16.14 Additional requirements for quoted companies 16.15 Alternative forms of decision-making 16.16 Minutes 16.17 Filing with the Registrar 16.18 The shareholder s freedom to vote 16.19 Summary 17.1 Introduction 17.2 Definition of director 17.3 Formalities of directorship 17.3.1 How many directors? 17.3.2 How are directors appointed? 17.3.3 Are there any age restrictions? 17.3.4 For how long do directors hold office? 17.3.5 How may a directorship be terminated? 17.3.6 What are the notification requirements relating to directors? 17.3.7 Register of directors 17.3.8 Disclosure of transactions with directors 17.4 Directors powers 17.4.1 The board of directors 17.4.2 The managing director 17.4.3 The ordinary director 17.4.4 Executive directors 17.4.5 Non-executive directors 17.4.6 Other categories of directors 17.5 Corporate (criminal) liability for directors actions 17.5.1 The board of directors 17.5.2 Individual directors 17.5.3 Corporate manslaughter 17.6 Directors as agents 17.6.1 The authority of the board of directors 17.6.2 The managing director 17.6.3 Other directors 17.7 s161 Companies Act 2006 17.8 The rule in Turquand s case 17.9 Directors duties: introduction 17.9.1 The codification of directors duties in the Companies Act 2006 17.9.2 To whom are the duties owed? 17.10 The fiduciary duties of directors 17.10.1 Duty to promote the success of the company 17.10.2 Duty to act within powers 17.10.3 Duty to exercise independent judgment 17.10.4 Duty to avoid conflicts of interest 17.10.5 Competing directorships and post-resignation conflicts of interest viii
17.10.6 Authorisation by the board 17.11 Directors duty of care, skill and diligence 17.12 Directors interests in company contracts 17.12.1 Substantial and material property transactions 17.12.2 Contracts of employment 17.12.3 Loans to directors 17.12.4 Compensation for loss of office 17.13 Relief from liability 17.14 Corporate governance for listed companies 17.14.1 The UK Corporate Governance Code 17.14.2 Gender diversity 17.14.3 The Stewardship Code 17.14.4 Executive remuneration 17.15 The separation of powers between the directors and the general meeting 17.16 Summary Chapter 18: The Officers of the Company 18.1 Introduction 18.2 The manager 18.3 The company secretary 18.4 Auditors 18.5 Summary Chapter 19: Minority Protection and Investigation 19.1 Introduction 19.2 Majority rule and the rule in Foss v Harbottle 19.3 Minority protection 19.3.1 Wrongs which cannot be waived by ordinary resolution 19.3.2 Infringement of the member s personal rights 19.3.2.1 Personal rights based on the articles 19.3.2.2 Other personal actions by members against directors 19.3.2.3 The problem of reflective loss 19.3.2.4 Personal actions and representative actions 19.3.3 Derivative claims 19.3.4 The statutory remedies 19.3.4.1 s994 Companies Act 2006: unfair prejudice 19.3.4.2 s122(1)(g) Insolvency Act 1986: just and equitable winding-up 19.4 BEIS investigations 19.5 Summary Chapter 20: Winding-up by the Court 20.1 Introduction 20.2 The grounds for compulsory winding-up 20.3 Jurisdiction 20.4 The petitioners 20.5 The court s powers 20.6 The commencement of winding-up 20.7 The role of the Official Receiver 20.8 The liquidation committee ix
20.9 The liquidator 20.10 The liquidator s powers 20.11 The liquidator s duties 20.12 Contributories 20.13 Other aspects of the liquidator s role 20.14 The court s general powers 20.15 The end of the road 20.16 Summary Chapter 21: Voluntary Winding-up 21.1 Introduction 21.2 Procedures 21.3 Members voluntary winding-up 21.4 Creditors voluntary winding-up 21.5 The powers and duties of the liquidator 21.6 Conclusion 21.7 Summary Chapter 22: Elements Common to all Liquidations 22.1 Introduction 22.2 Payment of the company s debts 22.2.1 Proving the company s debts 22.2.2 Order of repayment of debts 22.2.3 Preferential creditors (ss175, 386 and Sch 6) 22.2.4 Unsecured creditors 22.2.5 The rights of the shareholders 22.3 Transactions at an undervalue (s238) 22.4 Preferences (s239) 22.5 Relevant time 22.6 Extortionate credit transactions 22.7 Invalid floating charges (s245) 22.8 Fraudulent trading (s213) 22.9 Wrongful trading by directors (s214) 22.10 Disclaimer of onerous property (s178) 22.11 Misfeasance proceedings 22.12 Restriction on re-use of company names 22.13 Offences by officers 22.14 The effect of winding-up on execution and attachment (s183) 22.15 The liquidator s qualification and conduct 22.16 Issues relating to the conduct of the liquidation 22.17 Striking defunct companies off the register 22.18 Revival of a dissolved company 22.19 Summary Chapter 23: Company Reconstructions 23.1 Introduction 23.2 Financial restructuring 23.2.1 Voluntary arrangements under ss1 7 Insolvency Act 1986 23.2.2 Administration 23.2.2.1 Initiation of administration x
23.2.2.2 Effect of administration 23.2.2.3 Process of administration 23.2.2.4 Functions of the administrator 23.2.2.5 Ending administration 23.2.3 Small company moratorium 23.2.3.1 Eligible companies 23.2.3.2 The effect of the moratorium 23.2.3.3 Procedure for securing a moratorium 23.2.3.4 Approval of a voluntary arrangement 23.2.3.5 Responsibility of the nominee 23.2.3.6 Directors responsibilities 23.3 Sale under the articles 23.4 Part 26 Companies Act 2006 23.5 Reconstruction under s110 Insolvency Act 1986 23.6 The Insolvency Act 1986 and the Companies Act 2006 procedures compared and contrasted 23.7 Takeovers 23.7.1 The City Code on Takeovers and Mergers 23.7.2 Compulsory acquisition 23.8 Summary Answers to Self-assessment Questions Appendix Index xi
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