Keenan and Riches’BUSINESS LAW

Guided tour

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Part 2Business organisations

144

1 Joseph David Soap wishes to set up in business on his own as a carpenter, having acquired a small

business connection from John Smith. Which of thefollowing trading names, if any, would require Joe

to comply with the provisions of the Companies Act 2006?

(a)(b)David Soap;J D Soap & Co;

(c)(d)Joe Soap;Joe Soap Carpentry (formerly John Smith’s);

(e)(f )J D Soap;Chipaway;

(g)Dave Soap.

2 Your friend, Fred, intends to go into business on his own as a timber merchant under the name of

‘County Council Supplies’. What could happen toFred if he does this?

3 Old John Brown has been in business as a furnitureremover in Barchester since 1975. Last year young

John Brown moved to Barchester and has started upa furniture removal business in his own name. Can

old John Brown stop him?

4 Adam Smith, a grocer, comes to you for advice onhis finances. What advice would you give him in

terms of each of the following questions which heasks you?

(a)‘Times have been very hard for me lately. I owe so many people so much money. I could

probably pay my creditors, say, half of what Iowe them but no more. Is there a way of doing

this, given that I understand that a builder towhom I owe £1,000 appears to have gone to

(b)court to make me bankrupt?’‘Anyway, I have tried to make my family safe.

Last week I gave my wife the family home and on the same day sold her two terraced

houses in Barchester worth £40,000 for £500.Yesterday I also paid my brother off. I owed

him £1,000 from when I started up so he shouldhave it. My creditors can’t upset these deals,

(c)I take it.’‘I have not paid John, my driver, for a month and

I doubt whether I can now. I wish I could havehelped him but I guess he will have to go down

with all the other creditors. That’s the position,isn’t it?’

(d)‘Of course, even if they make me bankrupt I shallrent another shop and go on trading. Nothing

can be done about that, can it?’

5 Joe is a solicitor employed by Bloggs & Co. Thereare two partners, Harry and Ian. Ian is intending to

retire and it has been decided that Joe shouldreplace Ian as a partner, with Harry carrying on

as a partner.Explain to each of Joe, Harry and Ian what steps

each should take to protect himself as a result of thechangeover.

6 Cliff has been asked by his friends, Don and Eric, to help them set up an antiques business. Don and

Eric want Cliff to lend them £5,000 and they say theywill give Cliff one-third of the profits instead

of interest on the loan.What are the dangers to Cliff in such an

arrangement and how can he overcome them?

7 Fred is a new partner in Gee & Co, a firm of interiordesigners. In discussion at a recent meeting of the

partners Fred was told that the office building atwhich the firm is based is not partnership property.

Explain to Fred:(a)what is meant by the expression ‘partnership

(b)property’;what effect it will have on him if the office

(c)building is not partnership property;how it can be that an asset which is used in

the firm’s business is not in fact partnershipproperty.

Self-test questions/activities

3 Tom and Harry are shop assistants and short ofcash. They decide to borrow from the till. Tom leaves

a note in the till and replaces the money thefollowing day. Harry neither leaves a note nor does

he replace the money. The employer has discoveredwhat has happened and wishes to dismiss Tom and

Harry but does not wish to incur liability.Advise the employer.

Part 4Business resources

566

http://www.berr.gov.uk/whatwedo/employment/workandfamilies/flexible-working/index.htmlFor

family-friendly developments, see Department forBusiness, Enterprise & Regulatory Reform website.

http://www.berr.gov.uk/whatwedo/employment/employment-legislation/employment-guidance/

page19310.htmlsee Department for Business, Enterprise & RegulatoryFor guidance on payments and awards,

Reform website.http://www.cipd.co.ukAlso useful in the above area, the

Chartered Institute of Personnel and Development.

http://www.direct.gov.uk/en/Employment/Employees/Pay/index.htmOn the National Minimum Wage, the BERR

interactive website on NMW.

http://www.lowpay.gov.ukhttp://www.ico.gov.ukThe Information Commissioner’sThe Low Pay Commission.

Office is an independent supervisory authority that reportsdirectly to Parliament.

http://www.ico.gov.uk/home/for_organisations/topic_specific_guide/employment.aspxFor the Employment

Practice Code.

http://www.equalityhumanrights.comequality in employment generally, the Commission forOn equal pay and

Equality and Human Rights.

Website references

Visit to access selected answers to self-test questions in thewww.mylawchamber.co.uk/riches

book to check how much you understand in this chapter.

Use referenced in this chapter:Case Navigatorto read in full some of the key cases

JohnsonPost Officev Unisys Ltd.v Foley; HSBA Bank[2001] 2 All ER 801.vMadden[2000] 1 All ER (D) 550.

FairchildAll ER 305v Glenhaven Funeral Services Ltd and others; [2002] 3

Barber v Somerset County Council[2004] 2 All ER 385

CASE

POWERED BY^

Self-test questions and activities

Located at the end of each chapter,

self-test questions allow you to test

your understanding of topics following

your reading. Answers will be available

on the companion website at

http://www.mylawchamber.co.uk/riches

Website references

Annotated web references can be

found at the end of each chapter,

directing you to useful and

relevant resources on the web

Chapter 6Companies

5 As Secretary of Ouse Ltd write a memorandum forthe Board explaining the differences between raising

finance:(a)by an issue of shares;

(b)(c)by an issue of unsecured loan stock;by an issue of debentures secured by a floating

(d)charge over the company’s asets; andby an issue of preference shares.

6 (a)How is the voluntary winding-up of a companybrought about?

(b)What decides whether a voluntary winding-up iscontrolled:

(i) by the members, or(ii) by the creditors?

7 In relation to corporate insolvency distinguishbetween an administrator and a liquidator.

199

1 (a)How may and when must a company change its name?

(b)Dodgy Computers Ltd is registered for thepurpose of acquiring the business of John

who has been trading under the name of‘Supercomputers’. The company will operate the

What statutory rules must the company complybusiness under that name.

with and what are the consequences in terms of itscontracts if it fails to comply with them?

2 Although the directors have the general power tomanage the company, power to carry out certain

functions is given to the shareholders either ingeneral meeting or by written resolution. State

and explain these shareholder powers.

3 John holds shares in Derwent Ltd and wishes toretire and dispose of his shareholding for cash. Dick

and Harry are the other two shareholders but theycannot afford to pay for the shares. John is thinking

of selling his shares to his brother and Dick andHarry do not want this.

purchase John’s shares and outline the procedure toExplain to Dick and Harry how the company might

them.

4 Corporate insolvency: a case studyTrent Ltd is a small company. John and Paul are the

shareholders and the company’s overdraft with the

Barchester Bank plc is secured by a floating chargeon the whole of the company’s

undertaking.Problems have arisen within the company. Trent

Ltd is over-borrowed and has declining margins. Thecompany has started to run short of cash. It is

struggling to pay its bills and may fail in the nearfuture.

business through the company. The bank and otherNevertheless, John and Paul intend to carry on

creditors are pressing for payment. John and Paulseek your advice on resolving the present difficulties.

(a)Matters to be addressed:The consequences for John and Paul of

continuing to trade through the company in itspresent state.

(b)The suitability of a company voluntaryarrangement or administration and the steps to

(c)be taken.The last-ditch possibility of a winding-up,

preferably without the involvement of the court.Discuss procedures.

(d)Explain to John and Paul what steps theBarchester Bank can take.

(e)Explain the steps that unsecured creditors cantake.

Specimen examination questions

Specimen examination questions

Located at the end of each chapter,

specimen examination questions

provide useful examples of the sort of

questions you could be faced with in

your exams, and can be used to assist

you in your exam preparation

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