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

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.

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.

What is a written resolution and which type of company may use it?

A private company (not a public company) may pass members' resolutions as written resolutions without holding a meeting (ss 288–300 CA 2006). The required majority is the same proportion of total voting rights as for a meeting (over 50% for ordinary, 75% for special).

What notice period is required to call a general meeting of a company under the Companies Act 2006?

At least 14 days' notice (clear days) for both general meetings of private companies and most general meetings; an AGM of a public company requires 21 days' notice. Shorter notice is possible with the requisite member consent (90% for private companies' general meetings, 95% for public).

How may a private company's directors validly take decisions under the Model Articles?

By a majority decision at a board meeting (quorum normally two directors, each with one vote, chair having a casting vote) or by a unanimous decision evidenced in writing where every eligible director indicates a shared view (Model Articles arts 7–13).

What is the quorum for a general meeting of members under the Model Articles / CA 2006?

Two qualifying persons present (members or proxies) constitute a quorum, unless the company has only one member (then one). 'Qualifying person' includes an individual member, a corporate representative, or a proxy.

What are the essential elements required to form a valid commercial contract?

Agreement (offer and acceptance/consensus in idem), intention to create legal relations, capacity of the parties, and (in English law) consideration; the agreement must also be legal and certain in its terms. In Scots law, no consideration is required—a serious intention to be bound suffices.

In commercial contract drafting, what is the function of a 'boilerplate' clause? Give examples.

Boilerplate clauses are standard provisions governing the operation and interpretation of the contract rather than its commercial subject matter. Examples: entire agreement, governing law and jurisdiction, force majeure, assignation, severability, notices, and no-waiver clauses.

What is the purpose of an 'entire agreement' clause in a commercial contract?

To provide that the written contract constitutes the whole agreement between the parties and supersedes all prior negotiations, representations and statements, thereby excluding reliance on terms or representations not set out in the document (subject to controls on excluding liability for misrepresentation).

Distinguish a condition, a warranty and an innominate (intermediate) term in a contract.

A condition is a major term whose breach entitles the innocent party to terminate (rescind) and claim damages. A warranty is a minor term whose breach gives a right to damages only. An innominate term's remedy depends on the seriousness of the consequences of the breach (Hong Kong Fir approach).

What is the difference between a liquidated damages clause and a penalty clause?

A liquidated damages clause sets a genuine pre-estimate of loss (or, post-Cavendish v Makdessi, a sum protecting a legitimate interest and not extravagant), and is enforceable. A penalty clause imposes a sum out of proportion to any legitimate interest, designed to deter breach, and is unenforceable.

Under the Sale of Goods Act 1979, what is the statutory implied term as to title?

Section 12 implies a condition that the seller has the right to sell the goods (and warranties as to quiet possession and freedom from undisclosed charges/encumbrances). This term cannot be excluded in any sale.

What are the implied terms as to quality and fitness under ss 13–15 of the Sale of Goods Act 1979 (business sales)?

s13 goods must correspond with their description; s14(2) goods must be of satisfactory quality; s14(3) goods must be reasonably fit for any particular purpose made known to the seller; s15 in sales by sample, the bulk must correspond with the sample and be free from defects rendering quality unsatisfactory.

What statutory regime governs consumer contracts for goods, digital content and services, and which Act?

The Consumer Rights Act 2015 governs business-to-consumer contracts, implying that goods be of satisfactory quality, fit for purpose and as described (Part 1), that digital content meet equivalent standards, and that services be performed with reasonable care and skill. It also controls unfair terms.

What test does the Unfair Contract Terms Act 1977 apply to clauses excluding or limiting liability for breach in business-to-business contracts?

Many exclusion/limitation clauses are subject to the requirement of reasonableness—whether the term was a fair and reasonable one to include having regard to the circumstances known to the parties at the time of contracting. Liability for death or personal injury caused by negligence cannot be excluded at all.

When does property (ownership) in specific goods pass under the Sale of Goods Act 1979?

Property passes when the parties intend it to pass (s 17). In the absence of contrary intention, under Rule 1 of s 18, property in specific goods in a deliverable state passes when the contract is made, irrespective of postponement of payment or delivery.

What is a retention of title (Romalpa) clause and its commercial purpose?

A clause providing that ownership of goods remains with the seller until the buyer has paid in full (and sometimes until all debts are paid). Its purpose is to give the unpaid seller priority over other creditors if the buyer becomes insolvent by allowing recovery of the goods (Aluminium Industrie Vaassen v Romalpa).

Name the principal categories of intellectual property rights relevant to commerce.

Patents (inventions), trade marks (brand identifiers), copyright (original works), registered and unregistered design rights, database rights, and confidential information/trade secrets. Passing off protects unregistered goodwill.

What are the requirements for a valid patent, and how long does protection last?

The invention must be new (novel), involve an inventive step (non-obvious), be capable of industrial application, and not be excluded subject matter. A granted UK patent lasts up to 20 years from filing, subject to payment of renewal fees.

How does copyright arise and how long does it generally last for literary, dramatic, musical and artistic works?

Copyright arises automatically on creation of an original work fixed in a tangible/recorded form—no registration is required (Copyright, Designs and Patents Act 1988). For literary, dramatic, musical and artistic works it lasts the life of the author plus 70 years.

What must a claimant prove to succeed in a passing off action?

The classic 'trinity' (Reckitt & Colman v Borden): (1) goodwill or reputation attached to the claimant's goods/services; (2) a misrepresentation by the defendant leading or likely to lead the public to believe goods/services are the claimant's; and (3) damage (or likelihood of damage) to the claimant's goodwill.

In commercial IP transactions, distinguish an assignation of IP from a licence.

An assignation transfers ownership of the IP right to the assignee (a sale/transfer of the asset). A licence grants permission to use the IP while ownership remains with the licensor; licences may be exclusive, non-exclusive or sole, and limited by territory, field of use or time.

What are the principal corporate insolvency procedures under UK insolvency law?

Administration, company voluntary arrangement (CVA), receivership/administrative receivership, and liquidation (winding up), which may be members' voluntary, creditors' voluntary, or compulsory (by court order). A moratorium and restructuring plan are also available under the Corporate Insolvency and Governance Act 2020.

What is the statutory test for whether a company is unable to pay its debts (insolvency) under the Insolvency Act 1986?

Under s 123 IA 1986: the cash-flow test (unable to pay debts as they fall due) or the balance-sheet test (the value of assets is less than liabilities, including contingent and prospective liabilities). A statutory demand left unsatisfied (over the threshold) is deemed evidence of inability to pay.

What is the primary statutory purpose and effect of administration?

Administration places the company under an administrator who acts to: (1) rescue the company as a going concern; failing that (2) achieve a better result for creditors than winding up; failing that (3) realise property to pay secured/preferential creditors. It imposes a statutory moratorium preventing creditor enforcement without consent/court leave.

What is a company voluntary arrangement (CVA)?

A binding agreement between a company and its creditors (supervised by an insolvency practitioner) to compromise or reschedule its debts. It is approved if 75% or more by value of creditors voting agree (and not opposed by more than 50% of unconnected creditors), and then binds all unsecured creditors entitled to vote.

Explain the difference between fixed and floating charges and the concept of crystallisation.

A fixed charge attaches to specific identifiable assets, restricting the company's dealing with them. A floating charge hovers over a class of changing assets (e.g. stock) allowing the company to deal with them until crystallisation—the event (e.g. liquidation, default, appointment of receiver) converting it into a fixed charge over the assets then held.

State the statutory order of priority for distribution of assets in a corporate liquidation (broad ranking).

(1) Fixed charge holders (from the charged asset); (2) expenses of the liquidation; (3) preferential creditors; (4) the prescribed part set aside for unsecured creditors; (5) floating charge holders; (6) ordinary unsecured creditors; (7) interest; (8) shareholders (return of capital, then surplus).

What is the 'prescribed part' in a corporate insolvency?

A portion of the company's net property subject to a floating charge that is ring-fenced and set aside for unsecured creditors before the floating charge holder is paid. It is calculated on a sliding percentage scale of net floating-charge property, subject to a statutory cap.

What is wrongful trading under s 214 of the Insolvency Act 1986?

Where, before insolvent liquidation, a director knew or ought to have concluded there was no reasonable prospect of avoiding insolvent liquidation and failed to take every step to minimise loss to creditors. The court may order the director to contribute to the company's assets. There is a defence of taking every reasonable step.

What are the main personal insolvency remedies/processes available to an individual?

Sequestration (bankruptcy)—court or trustee administered; a Protected Trust Deed (Scotland) or Individual Voluntary Arrangement (England)—a binding agreement with creditors; and the Debt Arrangement Scheme (DAS) in Scotland or a Debt Relief Order (England) for lower-value debts.

In Scotland, what is sequestration and what are the main routes into it?

Sequestration is the formal process of personal bankruptcy whereby a debtor's estate vests in a trustee for distribution to creditors. Routes: debtor application (where apparent insolvency or qualifying conditions met) and creditor petition (where the creditor is owed a qualifying sum and the debtor is apparently insolvent).

What is diligence in Scots law, and name the principal forms used to enforce a debt?

Diligence is the legal process by which a creditor enforces payment of a debt or secures a claim against a debtor's assets. Principal forms: arrestment (and action of furthcoming) of moveables/funds held by a third party; attachment of corporeal moveables; earnings arrestment against wages; and inhibition over heritable property.

Explain inhibition as a form of diligence and its effect on the debtor's heritable property.

Inhibition is a personal diligence registered against the debtor that prohibits the debtor from selling, transferring or granting security over heritable (land/buildings) property to the prejudice of the inhibiting creditor. It does not transfer ownership but renders subsequent voluntary deeds challengeable (reducible) by the inhibitor.

What is an earnings arrestment and how is the protected (exempt) sum determined?

An earnings arrestment is a continuous diligence served on an employer requiring deduction from a debtor's net earnings each pay day until the debt is paid. The amount deducted is calculated under statutory tables that exempt a protected minimum so the debtor retains a basic level of income; only the excess over the protected amount is deducted.

How does ranking of creditors operate where multiple diligences and securities compete over a debtor's assets?

Ranking determines the order of payment by reference to the nature and date of each creditor's right: secured creditors (e.g. standard security holders) rank by date of registration; diligences generally rank by date of execution (subject to equalisation rules in insolvency); preferential and then ordinary unsecured creditors follow, with secured/diligence rights generally taking priority over unsecured claims.