Diploma in Professional Legal Practice (DPLP) Business, Financial and Commercial Practice Syllabus

Business, Financial and Commercial Practice syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Business, Financial and Commercial Practice in Diploma in Professional Legal Practice (DPLP), not a summary of it.

1. 1

   Business Vehicles and Formation

   3 topics

   • Choice of Business Medium
     • Sole trader, partnership and company compared
     • Limited liability partnerships
     • Tax and liability considerations
   • Company Incorporation
     • Memorandum, articles and Companies House filings
     • Shareholders' agreements
   • Partnership Agreements
2. 2

   Corporate Governance and Directors

   3 topics

   • Directors' Duties under the Companies Act 2006
     • Duty to promote success and exercise care
     • Conflicts of interest and disclosure
   • Shareholders' Rights and Remedies
     • Unfair prejudice petitions
     • Derivative proceedings
   • Company Decision-Making
     • Board and general meetings
     • Ordinary and special resolutions
3. 3

   Commercial Transactions and Drafting

   3 topics

   • Commercial Contract Drafting
     • Boilerplate clauses and risk allocation
     • Warranties, indemnities and limitation of liability
   • Sale and Supply of Goods and Services
   • Intellectual Property in Commerce
     • Licensing and assignation of IP
4. 4

   Insolvency and Corporate Recovery

   3 topics

   • Corporate Insolvency
     • Administration and receivership
     • Liquidation and winding up
   • Personal Insolvency
     • Sequestration under the Bankruptcy (Scotland) Act 2016
     • Protected trust deeds and the debt arrangement scheme
   • Diligence and Ranking of Creditors

Business, Financial and Commercial Practice flashcards for Diploma in Professional Legal Practice (DPLP)

22 of 56 cards from the Business, Financial and Commercial Practice deck — real questions with worked answers.

1. What are the four main forms of business medium available to a person carrying on business in Scotland/UK?

   (1) Sole trader (sole proprietor); (2) Partnership (ordinary/general partnership under the Partnership Act 1890); (3) Limited Liability Partnership (LLP); and (4) Limited company (most commonly a private company limited by shares).

2. When choosing a business medium, what are the key factors a solicitor advises a client to weigh?

   Limited vs unlimited liability, tax treatment (income tax/NICs vs corporation tax), set-up and administrative cost, formality and public disclosure, ability to raise finance, continuity/perpetual succession, and privacy of accounts.

3. What is the defining liability feature of a sole trader compared with a limited company?

   A sole trader has unlimited personal liability for all business debts (no separation between the individual and the business), whereas a limited company is a separate legal person and the members' liability is limited to any amount unpaid on their shares.

4. Which case established the principle of separate legal personality of a company, and what does it mean?

   Salomon v A Salomon & Co Ltd [1897] AC 22. On incorporation a company becomes a legal person distinct from its members and directors; it owns its own property, contracts in its own name, and its debts are its own, not the shareholders'.

5. What documents must be delivered to the Registrar of Companies to incorporate a company under the Companies Act 2006?

   A memorandum of association, an application for registration (Form IN01) stating the proposed name, registered office, members and capital, a statement of capital and initial shareholdings (or guarantee), a statement of proposed officers, a statement of compliance, and the registration fee; articles of association may also be filed.

6. What is the legal effect of the certificate of incorporation issued by the Registrar?

   It is conclusive evidence that the requirements of the Companies Act 2006 as to registration have been complied with and that the company is duly registered; from the date stated the company exists as a body corporate (s 15 CA 2006).

7. What are the 'articles of association' and what role do the model articles play?

   The articles are the company's internal constitution governing its management and the relationship between the company and its members. If a company does not register its own articles, the relevant Model Articles (prescribed by regulations) apply by default (s 20 CA 2006).

8. Under s 33 of the Companies Act 2006, what is the contractual effect of the company's constitution?

   The provisions of the company's constitution bind the company and its members as if there were covenants on the part of the company and each member to observe them, creating a statutory contract between the company and members and between the members themselves.

9. How is an ordinary partnership defined under s 1 of the Partnership Act 1890?

   Partnership is the relation which subsists between persons carrying on a business in common with a view of profit. It can arise without any written agreement, from the parties' conduct.

10. In the absence of a partnership agreement, how are profits and losses shared under the Partnership Act 1890?

    Under s 24(1), all partners share equally in the capital and profits and must contribute equally towards losses, regardless of unequal capital contributions or workload.

11. List four key default provisions a well-drafted partnership agreement typically varies from the Partnership Act 1890.

    Profit/loss sharing ratios (vs equal sharing), entitlement to interest on capital or salary, decision-making and management rights, and dissolution/continuity on a partner leaving or dying (the Act otherwise dissolves the firm). Others: expulsion clauses and restrictive covenants.

12. What is the nature of a partner's liability for the firm's debts in an ordinary partnership?

    In Scots law each partner is liable jointly and severally with the firm; the firm is a separate legal person but partners are liable in a secondary capacity for the whole of the firm's debts (in English law liability is joint, with several liability for wrongs).

13. What is the rule on a partner's authority to bind the firm under s 5 of the Partnership Act 1890?

    Every partner is an agent of the firm and of the other partners. Acts done in the usual course of the firm's business bind the firm, unless the partner had no authority and the third party knew this or did not believe him to be a partner.

14. Name the seven general duties of directors codified in the Companies Act 2006 (ss 171–177).

    s171 act within powers; s172 promote the success of the company; s173 exercise independent judgment; s174 exercise reasonable care, skill and diligence; s175 avoid conflicts of interest; s176 not accept benefits from third parties; s177 declare interest in a proposed transaction or arrangement.

15. What does the s 172 duty to 'promote the success of the company' require a director to consider?

    To act in good faith in the way most likely to promote the success of the company for the benefit of members as a whole, having regard to factors including: long-term consequences, employees' interests, business relationships with suppliers/customers, community and environment, the company's reputation, and fairness between members.

16. What is the standard of care, skill and diligence required of a director under s 174 CA 2006?

    A dual objective/subjective standard: the care, skill and diligence that would be exercised by a reasonably diligent person with (a) the general knowledge, skill and experience reasonably expected of a person carrying out that director's functions (objective), and (b) the general knowledge, skill and experience that the particular director actually has (subjective).

17. How can a director's breach of the duty to avoid conflicts of interest (s 175) be authorised?

    By authorisation given by the directors (the non-conflicted directors). For a private company this is allowed unless the constitution invalidates it; for a public company the constitution must positively enable directors to authorise the conflict. Member ratification is also possible.

18. What is the consequence of a director failing to declare an interest in a proposed transaction under s 177?

    Breach of the statutory duty; the transaction may be voidable at the company's instance, the director may have to account for any profit and indemnify the company for loss, and the director may face liability. (Failure to declare an interest in an existing transaction is a criminal offence under s 182/s 183.)

19. What is a derivative claim and on what statutory grounds may it be brought (CA 2006)?

    A claim brought by a member on behalf of the company to enforce a right belonging to the company, in respect of a cause of action arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director. The court's permission is required to continue it (ss 260–264).

20. What is the 'unfair prejudice' remedy and where is it found in the Companies Act 2006?

    Under s 994, a member may petition the court on the ground that the company's affairs are being or have been conducted in a manner unfairly prejudicial to the interests of members generally or some part of them. The court has wide powers under s 996, most commonly ordering the purchase of the petitioner's shares.

21. On what ground may a member petition to wind up a company under the 'just and equitable' provision, and what is the leading case?

    Under s 122(1)(g) Insolvency Act 1986, a member may petition for winding up where it is just and equitable to do so (e.g. breakdown of a quasi-partnership, loss of substratum, deadlock). The leading authority is Ebrahimi v Westbourne Galleries Ltd [1973] AC 360.

22. Distinguish an ordinary resolution from a special resolution under the Companies Act 2006.

    An ordinary resolution is passed by a simple majority (over 50%) of votes cast. A special resolution requires a majority of not less than 75%. Certain matters (e.g. altering the articles, changing the company name, reducing capital) require a special resolution.

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