商法outcome3 考试题目及其答案

Case Study 1
Lisa has just graduated from Kirkwall College of Art and Design. She has a particular talent for designing and producing jewellery. While at College, Lisa ran a weekly stall at the local market, but she is now anxious to start a small business on a more permanent basis. Matters have been greatly helped by the fact that she has been given a modest grant by Orkney Entrepreneurial Trust. One of the conditions of the grant is that Lisa must attend a six week course run by the local enterprise company. Part of the course deals with business organisations and gives people on the course some idea of what would be the most appropriate structure for their business. Until Lisa came on the course, she had no idea that there was such a variety of business organisations.
Questions
1. List the main business organisations recognised by Scots Law.
The main business organisations recognised by Scots Law are:
sole trader
partnerships
limited partnerships
limited liability partnerships
private companies
public companies
2. Given the fact that Lisa will be running the business herself and, for the time being, she is unlikely to be employing anyone, how would you classify her business?
Given the fact that Lisa is running a very small business, it will almost be certainly run as a sole trader enterprise. There is the very remote possibility - very remote - that a small business could be run as a single member private company in terms of the Companies (Single Member Private Limited Companies) Regulations 1992. Such a private company is limited by shares or by guarantee and need only have one member. Nowhere, however, does it mention that the business is limited by shares or by guarantee and we would, therefore, assume that it has the character of a sole trader.
3. Identify two advantages and two disadvantages of the type of business organisation run by Lisa.
The advantages of a sole trader business are:
1) It is the simplest form of business organisation recognised by Scots Law.
2) A sole trader is to all intents and purposes to be regarded as a self-employed
person. In other words, no difference is made between the sole trader and his or her business; they are legally indistinguishable.
3) Very basic legal requirements to comply with ie submission of income tax returns to the Inland Revenue and the disclosure requirements of the Business Names Act 1985.
4) Total control over his or her business and does not have to take into account the opinions of any shareholders, members or partners.
The disadvantages of a sole trader business are:
1) If the business fails, the sole trader is said to have unlimited liability for any debts or obligations owed to third parties.
2) A sole trader may find it difficult to fund an expansion of the business because she/he cannot offer shares to other parties in order to raise funds.
3) In any case, a business expansion requiring a major injection of capital might entail a loss of control over the business because new partners, shareholders or members who are a source of new finance will almost certainly demand a say in the running of the business.
4) The inclusion of new partners, members or shareholders would force a change in the nature of the business operation by converting it into a partnership or some other form of corporate body (public/private companies or a limited liability partnership).
Case Study 2
Sanjay is a qualified accountant who has been working in London for the past three years since graduating from the University of North Kelvinside. He has now returned home to Scotland in order to set up in business with three of his friends from University. All four are as yet undecided about whether they should establish a traditional partnership or a limited liability partnership (LLP). They seek your advice on the following matters:
Questions
1) What are the main differences between a traditional partnership and a limited liability partnership?
There are many differences between a traditional partnership and a limited liability partnership, of which the following characteristics are most striking:
Partnership
Unincorporated business
No need to be registered with Registrar of Companies and no need to supply formal
documents
Regulated by Partnership Act 1890 (unless the partners agree otherwise)
Partners have unlimited liability in respect of partnership debts/liabilities ie they are jointly and severally liable and can be pursued to their last penny
Limited liability partnership
Corporate body
Must be registered with the Registrar of Companies and certain documents must be supplied
Regulated by the Limited Liability Partnerships Act 2000
Members enjoy limited liability in respect of LLP debts/liabilities ie they will only be liable to the extent of their stake in the business
2) What is the main advantage for an existing partnership when it changes to a limited liability partnership?
Currently, many traditional partnerships have sought LLP status because of the perceived benefits of limited liability for the members of an LLP - even if this does represent a loss of privacy and greater external regulation for the members ie registration with the Registrar of Companies and tougher auditing requirements.
3) What is the nature of the legal relationship between partners in a firm and members of a limited liability partnership?
The legal relationship between partners in a firm is classified as a fiduciary relationship ie a relationship of trust. Partners are agents of their fellow partners and also of the firm itself.
The following case might exemplify the nature of the fiduciary relationship between partners:
Pillans Brothers v Pillans [1908]
The legal relationship between a member and a limited liability partnership will also be classified as a fiduciary relationship. Section 6 of the Limited Liability Partnerships Act 2000 states that the members of an LLP are to be regarded as the agents of the business and it is a general rule of the law of agency that an agent (the member) must always act in the best interests of his principal (the LLP). It is important to bear in mind that a member is not an agent of his fellow members.
Case Study 3
MacGregor Building Supplies Ltd is a very profitable business which is solely
concerned with the supply of building materials for use in the construction of housing estates. About six months ago, MacGregor entered into a project with two of its long-standing business associates - Buildit PLC and Constructit Ltd had approached the company with an interesting proposal. Together the three companies will build a large housing estate situated on the outskirts of Falkirk. MacGregor's Chief Executive, Rob Roy has been keen on the project from the start and he convinced a majority of his fellow directors to back the new venture. Rob Roy is only too happy to ignore the fact that the company's objects clause states that its sole business purpose is the supply of building materials. Nowhere in the objects clause does it state that the company has the power to enter into contracts which involve the construction of a housing estate. However, the project has now turned into a complete disaster with Buildit being declared insolvent and it would appear that unforeseen problems with the housing development mean that it will not be completed on time and MacGregor will make huge losses as a result.
Question 1
What is a company's objects clause?
A company's objects clause is found in its Memorandum of Association. The objects clause sets out the purpose of the company usually in the form of a list (sometimes a very long list) of the various commercial and business activities that it is likely to undertake. Before the reforms introduced by the Companies Act 1989, companies could not enter into certain contracts with third parties unless such a commercial transaction was listed in the objects clause. Such an unauthorised contract was void by reason of the company's lack of capacity to enter such an agreement in the first place and ignorance of the contents of the objects clause on the part of the third party was no defence. Nowadays, many companies will have straightforward objects clauses which allow them to enter into any type of business or commercial transaction whatsoever.
A large group of angry MacGregor shareholders has now managed to pass a special resolution at the company's annual general meeting which forces MacGregor to withdraw from the project. The Directors of Constructit have vowed to take legal action to prevent this.
Question 2
Does MacGregor have the right to withdraw from the project with Constructit?
No is the simple answer. MacGregor does not have legal justification for its withdrawal from the contract with Constructit. MacGregor is attempting to rely on the old ultra vires rule. As a result of reforms introduced by the Companies Act 1989,
Section 35 of the Companies Act 1985 now states that every contract is enforceable against the company. No act done by a company may be questioned by the fact that it was beyond its legal capacity as stated in its objects clause in the Memorandum of Association. Section 35B of the 1985 Act goes on to say that there is no necessity for a third party to check that a proposed contract is within the powers of the company as per the Memorandum of Association. Furthermore, Section 3A of the Companies Act 1985 now permits a company to have a simplified objects clause which means a company can enter into practically any contract whatsoever with third parties. In situations where third parties dealing with the company have failed to act in good faith and where the Directors have exceeded their authority, Section 35A: Companies Act 1985 raises the possibility that such an ultra vires contract may be declared voidable by the company. In other words, the ultra vires rule comes back to haunt third parties dealing with the company when they act in bad faith - but not in this case study.
The following case emphasises the harshness of the old ultra vires rule:
Ashbury Railway Carriage & Iron Co v Riche [1875]
MacGregor profits have been badly hit as a result of the failed business venture and the shareholders will not be paid any bonuses on their shares this year. The shareholders are used to the regular payment of bonuses and this news goes down very badly. Some shareholders are now taking legal action to force the company to pay out the expected dividends. According to the company's Articles of Association, the shareholders do not have an absolute right to the payment of a dividend.
Question 3
Will the legal action by MacGregor shareholders be successful so that the company will be forced to pay out the expected bonuses?
Section 14 of the Companies Act 1985 shows the binding contractual nature of the Memorandum of Association and the Articles of Association. The shareholders will have to establish whether they are entitled to receive bonuses in terms of the company's Articles of Association. If so, they can raise an action against the company in terms of Section 14 to force payment of dividends. If the payment of bonuses is purely discretionary, the company may well have the right to suspend payment this year.
Any one of the following examples from case law could demonstrate that the relationship between a company and its members and between the members themselves is contractual in nature as per Section 14 of the Companies Act 1985:
Eley v Positive Life Assurance Co Ltd [1876]
Hickman v Kent or Romney Marsh Sheep Breeders' Association [1915]
Rayfield v Hands [1960]
Wood v Odessa Waterworks Co [1889]
Case Study 4
Angus, Euan, Jaspreet, Sam and Valerie are seriously considering going into business together. A number of difficulties have arisen which are currently preventing the creation of the new business. They have not, as yet, managed to reach an agreement, as to how their prospective business should be organised. All five agree that they should form a company, but they are not sure whether the company should be private or public. They are also deeply ignorant about the need to comply with any legal requirements before they can begin trading as a company. The five are unsure about how companies are run and the personal liability of each member of a company.
Questions
1) List three differences between a private company and a public company.
There are numerous differences between private and public companies.
The main characteristics of a private limited company are:
1) Company name must end in "limited" or "ltd".
2) The Articles of Association of a private limited company may provide for a right of preemption so that when a member wishes to sell or to transfer ownership of his shares he must first offer them to existing members.
3) There is no minimum capital requirement.
4) The shares in a private limited company cannot be traded or listed on the stock exchange.
5) Only one director is required.
6) In terms of the Companies (Single Member Private Limited Companies) Regulations 1992, a private company limited by shares or by guarantee need only have one member.
7) There is no upper age limit for directors.
8) Audited accounts must be produced within 10 months of the end of the financial year.
9) Trading can start as soon as a Certificate of Incorporation is obtained.
The main characteristics of a public limited company are:
1) The company name must end in "public limited company" or "plc".
2) Members must be free to transfer their shares as they please.
3) A public company must have minimum issued share capital of at least
GPB50,000.
4) Shares can be listed on the stock exchange and can be traded.
5) There must be at least 2 directors.
6) There must be at least two members.
7) Directors must retire when they reach the age of 70.
8) Audited accounts must be produced within 7 months of the year end.
9) After incorporation, trading cannot begin until a "trading certificate" is issued by the Registrar of Companies upon satisfaction of the nominal value of share capital. This trading certificate is referred to as a Section 117 certificate after the relevant section of the Companies Act 1985 which makes possession of such a document compulsory for public limited companies. Public companies cannot begin trading without having been issued with a Section 117 certificate.
2) Can people simply decide to set up any kind of company and begin to trade immediately?
In terms of the Companies Act 1985, a new company must be registered with the Registrar of Companies. Among the two most important documents submitted to the Registrar will be the Memorandum of Association and the Articles of Association which provides important information about the nature of the company and how it will be run. Until the new business has been registered, it is not regarded as a person recognised by law and, therefore, it cannot enter into contracts with third parties. So, you cannot simply decide to set up a company and begin trading immediately. Any new company must have Certificate of Incorporation issued by the Registrar of Companies - a birth certificate if you want to make the comparison. Additionally, public limited companies, must have a Section 117 certificate (so named after the relevant provision in the Companies Act 1985) issued before they can begin to trade.
3) What kind of legal status is a company said to have?
When a company is created it is said to enjoy separate corporate personality. Fundamentally, the doctrine of separate corporate personality means that a company is to be regarded as an artificial legal person completely separate from its members. It is a person in its own right whose existence is recognised by the courts.
The case of Salomon v Salomon & Co Ltd [1897] could be of great support.
4) What management body is responsible for the day-to-day running of a company. The management body responsible for the day running of a company is Board of Directors.
5) What is the most common type of liability for company members?
The most common type of liability that company members will be subject to is that of limited liability. The term "limited" relates to the fact that the members of the company enjoy "limited liability" status, which means that a member's individual liability is confined solely to the amount unpaid, if any, on their shareholding in the company. In companies limited by guarantee, the members agree to be liable to the company's creditors for an agreed sum should the business fail. Companies limited by guarantee are run as private companies.。