Qualified Lawyers Transfer Scheme (QLTS) Business Law and Practice Syllabus

Business Law and 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 Law and Practice in Qualified Lawyers Transfer Scheme (QLTS), not a summary of it.

1. 1

   Business Structures

   4 topics

   • Sole traders and partnerships
     • Partnership Act 1890
     • Liability of partners
   • Limited liability partnerships
   • Companies: incorporation and separate legal personality
     • Salomon principle
     • Lifting the corporate veil
   • Choosing the appropriate structure
2. 2

   Company Management and Constitution

   4 topics

   • Directors' duties under CA 2006
     • Sections 171 to 177 general duties
     • Conflicts and self-dealing
   • Company constitution and articles
   • Shareholders' rights and meetings
     • Ordinary and special resolutions
     • Minority protection and unfair prejudice
   • Company decision-making and board powers
3. 3

   Finance and Insolvency

   4 topics

   • Share capital and maintenance of capital
   • Debt finance and security
     • Fixed and floating charges
     • Registration of charges
   • Corporate insolvency
     • Liquidation, administration and CVAs
     • Priority of creditors
   • Personal insolvency and bankruptcy overview
4. 4

   Business Taxation

   4 topics

   • Income tax for businesses
   • Corporation tax principles
   • Capital gains tax and business reliefs
   • VAT fundamentals

Business Law and Practice flashcards for Qualified Lawyers Transfer Scheme (QLTS)

22 of 60 cards from the Business Law and Practice deck — real questions with worked answers.

1. What is a sole trader, and what is the key liability feature of this business structure?

   A sole trader is an individual carrying on business in their own name with no separate legal personality. The owner has unlimited personal liability for all business debts, and business and personal assets are treated as one.

2. Under the Partnership Act 1890, how is a partnership defined?

   A partnership is 'the relation which subsists between persons carrying on a business in common with a view of profit' (s.1 PA 1890). No formal registration or written agreement is required to create one.

3. In a general partnership, what is each partner's liability for the firm's debts?

   Partners have unlimited, joint liability for the firm's debts and obligations incurred while a partner, and joint and several liability for wrongs (torts). A new partner is not liable for debts incurred before joining unless agreed.

4. Under the Partnership Act 1890, how are profits and losses shared in the absence of a partnership agreement?

   Profits and losses are shared equally between partners, regardless of capital contribution. Partners are not entitled to a salary or to interest on capital but are entitled to interest at $5\%$ per annum on advances beyond agreed capital.

5. List four default rules in the Partnership Act 1890 that apply where the partnership agreement is silent.

   (1) Equal sharing of profits/losses; (2) all partners may take part in management; (3) no partner is entitled to a salary; (4) no new partner may be introduced and no decision on the nature of the business may be changed without unanimous consent (ordinary matters by majority).

6. What is the effect of s.5 Partnership Act 1890 on a partner's authority to bind the firm?

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

7. Under the Partnership Act 1890, what events cause automatic dissolution of a partnership (subject to contrary agreement)?

   Death or bankruptcy of any partner (s.33); expiry of a fixed term; completion of the venture; a partner giving notice in a partnership at will (s.32); or illegality of the business (s.34). The court may also order dissolution (s.35).

8. What statute governs LLPs, and how is an LLP created?

   The Limited Liability Partnerships Act 2000 governs LLPs. An LLP is created by registration at Companies House: filing form LL IN01 with at least two members carrying on a lawful business with a view to profit, and a registered office.

9. What are the two key advantages of an LLP compared to a general partnership?

   An LLP has separate legal personality (it can own property, sue and be sued in its own name) and its members have limited liability — members are generally not personally liable for the LLP's debts beyond their agreed contribution.

10. What is a 'designated member' of an LLP and what is required?

    A designated member has extra administrative/legal responsibilities (e.g. signing and filing accounts, appointing auditors, notifying Companies House of changes). An LLP must have at least two designated members; if none are designated, all members are deemed designated.

11. How is an LLP taxed compared to a limited company?

    An LLP is tax-transparent: it is not taxed itself; instead members are taxed individually on their share of profits as if partners (income tax and capital gains tax). A company pays corporation tax on its profits in its own right.

12. What is the principle established in Salomon v A Salomon & Co Ltd [1897]?

    A properly incorporated company is a separate legal person distinct from its shareholders and directors. The company's debts are its own, shareholders' liability is limited to amounts unpaid on their shares, and 'one-man' companies are valid.

13. What is required to incorporate a private company limited by shares under CA 2006?

    File form IN01 with Companies House, a memorandum of association (signed by subscribers), articles of association (or rely on Model Articles), and the registration fee. Companies House then issues a certificate of incorporation.

14. What is the legal effect of the certificate of incorporation?

    It is conclusive evidence that the company is duly registered and the requirements of CA 2006 have been complied with. The company comes into existence on the date stated and acquires separate legal personality from that moment.

15. Name three consequences of a company's separate legal personality.

    (1) The company owns its own property and the shareholders have no proprietary interest in company assets (Macaura v Northern Assurance); (2) the company can contract, sue and be sued in its own name; (3) the company has perpetual succession independent of its members.

16. In what limited circumstances will a court 'pierce the corporate veil'?

    Only in narrow cases, principally where the company is used as a sham or facade to evade an existing legal obligation (the 'evasion principle' in Prest v Petrodine / VTB v Nutritek). Mere use of a corporate structure or single-member status is not enough.

17. Compare the liability and disclosure of a sole trader/general partnership with a limited company.

    Sole traders and general partners have unlimited personal liability and minimal public disclosure (privacy of accounts). A limited company offers limited liability for members but must file accounts and information publicly at Companies House and comply with CA 2006 formalities.

18. When choosing a business structure, what are the main factors a client should weigh?

    Liability exposure, tax treatment (income tax/CGT vs corporation tax), administrative/compliance burden and cost, privacy/disclosure, ability to raise finance, credibility, and ease of transferring ownership or bringing in investors.

19. Why might a growing business prefer a limited company over a partnership for raising finance?

    A company can raise equity by issuing shares to investors and can grant floating charges over its assets as security for debt, giving it broader access to finance. Partnerships cannot issue shares and cannot grant floating charges.

20. List the seven general duties of directors codified in CA 2006 ss.171–177.

    s.171 act within powers; s.172 promote the success of the company; s.173 exercise independent judgment; s.174 exercise reasonable care, skill and diligence; s.175 avoid conflicts of interest; s.176 not accept benefits from third parties; s.177 declare interest in a proposed transaction.

21. What does the s.172 CA 2006 duty to promote the success of the company require, and what factors must directors consider?

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

22. Under s.174 CA 2006, what standard of care, skill and diligence must a director meet?

    The standard of a reasonably diligent person with both: (objective) the general knowledge, skill and experience reasonably expected of someone carrying out that director's functions, and (subjective) the actual general knowledge, skill and experience that the particular director has — whichever is higher.

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