Chapter 2

Question 1

Where are companies required to submit their financial documents?

Answer 1

The companies house

Question 2

Why are companies expected to upload there documents to companies house

Answer 2

Interested parties can inspect them

Question 3

What other documents may companies have to upload to companies house?

Answer 3

Register of shareholders or register of directors

Question 4

What are companies as well as individuals accountable to?

Answer 4

The tas authorities in the countries in which they are based

Question 5

What do companies have to prepare each year?

Answer 5

Tax returns showing the amount of taxable profits they have earned in the period

Question 6

In other countries business is also have to submit what?

Answer 6

Return showing the amount of tax sales, value added tax or VAT that they owed to the tax authorities

Question 7

Other than the tax authorities, companies and organisations may be accountable to what

Answer 7

To other regulatory authorities 

Question 8

What are example examples of other regulatory authorities in the UK?

Answer 8

FCA and PRA, charity commission, OFGEM 

Question 9

What is FCA and PRA?

Answer 9

Most businesses in the financial services industry handle clients money, these are public bodies that monitor and control the activities of organisations within the industry to protect client against failure or poor advice

Question 10

What is charity commission?

Answer 10

Charities have access to public money so the charity commission is a public body that registers all charities and monitors that activities

Question 11

What is OFGEM?

Answer 11

Elation such as gas and electric providers need to be a reliable fit and safe service across the country. Off gem is a public body in the UK that regulates the activities of these.

Question 12

What do most organisations have to do to satisfy the regular authorities?

Answer 12

Most organisations have to retain their accounting records and information for minimum period usually seven years in case the authorities wish to verify information as a future date

Question 13

The companies what does legislation cover?

Answer 13

Not only the need to prepare financial statements, but also how they should be prepared including issues such as frequency and format

Question 14

What do legislations help?

Answer 14

To ensure the interested parties are able to access the financial statements of a company as well as making sure they have been prepared in an understandable way

Question 15

What is the legislation known as in the UK?

Answer 15

Companies act 2006

Question 16

What does the companies act 2006 in the UK require?

Answer 16

That financial statements are produced to give a true and fair view of the position and performance of the company

Question 17

What does the term true and fair mean?

Answer 17

Apply all appropriate accounting standards, contain information of sufficient quantity to satisfy the reasonable expectations of the users, follow generally accepted practice, should not contain any material statement 

Question 18

What are companies require required to maintain regarding transactions?

Answer 18

Maintain proper accounting records which are sufficient to show and explain the transactions, the content of these records are not defined but a record of transactions assets and liabilities would be required as a minimum

Question 19

Financial statements must be approved by 

Answer 19

The board of directors in accordance with the companies act

Question 20

What are directors responsible for under company legislation?

Answer 20

Producing financial statements that give a true and fair view

Question 21

What are the different types of director?

Answer 21

Managing director/chief executive officer
Executive director
Non-executive director
Chairman of board

Question 22

What are the general duties of a director?

Answer 22

Duty to act within powers
Duty to promote the success of the company
Duty to exercise independent judgement
Duty to exercise reasonable care skill and diligence
Duty to avoid conflict of interest
Duty not to accept benefits from third parties
Duty to declare interest in proposed transaction or arrangement 

Question 23

What is duty to declare interest in proposed transaction or arrangement?

Answer 23

This ensures that the director does not secretly benefit at the company’s expense and that other directors and shareholders are aware of potential conflicts.

Question 24

What does duty not to accept benefits from third parties mean?

Answer 24

A directive must not accept any benefit from a third-party which arises by reason of him/her being a director or performing/not performing an act as a director unless acceptance cannot reason be regarded as likely to give rise to a conflict of interest

Question 25

What is duty to avoid conflict of interest?

Answer 25

A directive must avoid any situation which places him/her indirect conflict with the interest of the company or the performance of any other duty

Question 26

What is duty to exercise reasonable care skill and diligence?

Answer 26

Directors should act with the knowledge skill and experience that could reasonably be expected of a director

Question 27

What is duty to excise independent judgement?

Answer 27

A director of a company must exercise independent judgement and cannot delegate their powers to others

Question 28

What is duty to promote the success of the company?

Answer 28

The director is acting in good faith in a way which promotes a excessive a company and for the benefit of the members as a whole

Question 29

What is duty to act within powers

Answer 29

Director must act in accordance with the companies constitution and only use his/her powers for the purpose for which they were given

Question 30

Identify three ways in which the authority may be given regarding directors

Answer 30

Express, implied, apparent

Question 31

What is express authority?

Answer 31

Authorities expressly given, or decisions taken are binding

Question 32

What is implied authority?

Answer 32

Authority flows from a persons position the person appointed as a managing director has been employed authority to bind the company in the same way as the board

Question 33

What is apparent authority?

Answer 33

Such authority arises when a director is believed by the other board members as having the authority to bind the company in contract. This is normal when there is a managing director.

Question 34

Organisations might choose to incorporate themselves as

Answer 34

A company

Question 35

What are the consequences of being a separate legal entity

Answer 35

Limited liability, a company enters into contracts in its own name and can sue and be sued, the company owns its own property, a company has perpetual succession, the management is separate from the ownership, a company is subject to the requirements of the companies act 2006 and the small business price and employment act 2015 

Question 36

What is memorandum of association?

Answer 36

used to be a more important document into previous company legislation Signed by all subscribers and stating that they wish to form a company and subscribed to become members of the company The memorandum provides evidence of the members agreements take at least one share each in the company It is not possible to amend or update the memorandum of a company 

Question 37

What is application for registration?

Answer 37

Companies at 2006 set out information that must be delivered to the registrar when an application for registration is made

Question 38

Application form for registration must include what?

Answer 38

The proposed name of the company Whether the members will have limited liability Whether the companies to be private or public Detail of the registered office

Question 39

What must be submitted to register of companies house in order to form a company?

Answer 39

Memorandum of association and application for registration

Question 40

What is the articles of association?

Answer 40

They set up the manner in which the company is to be governed and regulate the relationship between the company it shareholders and its directors

Question 41

What is accounting records in regards to company formation?

Answer 41

The company must keep accounting records containing sufficient information to show and explain the companies transactions and its financial position 

Question 42

What should be possible any time regarding accounting records?

Answer 42

To disclose with reasonable accuracy, the companies financial position at intervals of no more than six months To the directors to ensure that the accounts that needs to be prepared to comply with companies acting international accounting standards

Question 43

What are resolutions?

Answer 43

The way in which companies take decisions, they are voted on by the members in person or by proxy

Question 44

How long must accounting records be kept for?

Answer 44

Three years in case for private company and six years in that of a public one. They should be kept at the companies registered office or some other place for fit by the directors.

Question 45

Companies who hold regulate typical annual general meetings during which shareholders can vote for what?

Answer 45

Resolutions

Question 46

What do typical annual general meetings give shareholders the right to do?

Answer 46

Change company name, wind up the company, remove directors

Question 47

What do shareholders have the right to do?

Answer 47

To be sent copy of annual accounting report, to require the directors to call a general meeting to attend your meetings, to appoint a proxy to exercise their rights, to inspect company information, to bring a dervative claim, to vote on certain company affairs, to be issued with a share certificate, to inspect directors service contracts, petition the courts on the basis of unfair prejudice

Question 48

What does it mean to appoint a proxy to exercise their rights?

Answer 48

Shareholders are entitled to appoint another person as their proxy to exercise any relevant rights to attend be voted a meeting of the company

Question 49

What does it mean to inspect company information?

Answer 49

Including the registration of members and a record of resolutions and minutes without any charge

Question 50

What does it mean to bring a derivative claim?

Answer 50

This is essentially a claim on behalf of the company in relation to breach of duty trustnegligence or default by a director.

Question 51

What is a vote on certain company affairs?

Answer 51

Subject to the cost of shares and the articles of association, members have a right to vote on certain company resolutions

Question 52

What does it mean to be issued with a share certificate?

Answer 52

Within two months of their shares been allocated. This does not necessarily constitute a paper certificate.

Question 53

What does it mean to inspect director service contracts?

Answer 53

Untitled to inspect a copy of every directors service contract with the company or with the subsidiary of the company or written memorandum setting out of the terms of their contract

Question 54

What does it mean regarding petition the courts on the basis of unfair prejudice?

Answer 54

Accompany shareholder may apply for the court position for order on the ground that the companies affair are being or have been conducted in a matter that is unfairly prejudicial to the interest of members or of some parts of its members

Question 55

What is required regarding a decision with shareholders?

Answer 55

Most decisions require a majority of over 50% although some require 75%

Question 56

What is a partnership?

Answer 56

Two or more individuals Business arrangement

Question 57

What is a business arrangement partnership?

Answer 57

The partnership exist to carry on a business as it is a business the partners seek to generate a profit

Question 58

What is a partnership agreement?

Answer 58

Setting out terms agreed by the partners in a partnership agreement it can reduce the possibility of expensive and acrimonious dispute in the future

Question 59

What should the key elements of a partnership agreement include?

Answer 59

Share of residual profit, partners salaries, partners authority, implied authority, trading partnerships

Question 60

What does share of residual profit mean?

Answer 60

The profit available to be shared between the partners and the profit and loss sharing ratio after all appropriations have been made

Question 61

What is partners salaries?

Answer 61

The salary of employees are business expenses that are written off to the statement of profit and loss therefore reduce the profit for the year. However as partners are the owners of the business and that I paid to them under the partnership agreement part of the proportion or share of profit

Question 62

What is partners authority?

Answer 62

This will set out the express authority that each partner has

Question 63

What is implied authority?

Answer 63

Every part is presumed to have the implied authority to sell the firms goods, by goods necessary for the business, receive payments of debt due, engaged employees, employer a solicitor

Question 64

What is trading partnership?

Answer 64

The above implied powers applied by trading a non-trading partnerships partners in trading partnerships have additional powers such as to borrow money

Question 65

What ways can a partnership come to an end and be dissolved?

Answer 65

Without a court order, by court order, distribution of assets, effect of a change in partner

Question 66

How does a partnership end without a court order?

Answer 66

The partnership would automatically end in the following situation, the expiry of a fixed term or the completion of specific enterprise, one of the partners gives notice, death or bankruptcy, where continuation of partnership would be illegal

Question 67

How does a partner end by court order?

Answer 67

Under the PA 1890, the court can bring a partnership to an end in any of the following situations Partner has a mental disorder, partner engages in activity prejudicial To the business Partner will fully or persistently breach this agreement Business can only be carried on a lot

Question 68

How does a partnership end regarding distribution of assets?

Answer 68

The proceeds from the sale of assets will be applied to the following: paying debts to outsiders, paying the partners in advance they made to the firm beyond the capital contribution, paying the capital contribution of the partners 

Question 69

How does an effect of a change in partner end a partnership?

Answer 69

When a new partner is admitted to the partnership of the old partnership is dissolved in a new partnership is created, the new partner effectively buys the assets of the old partnership from the old partners

Question 70

What is Goodwill?

Answer 70

Define this email by which the fair value of the assets of the business exceeds carrying out of the assets in simple terms fair value can be thought of as being the same as market value

Question 71

What is an unlimited liability partnership?

Answer 71

Describes the relationship that sub between persons carrying on a business in common with a due to profit. A partnership is not a separate legal entity and each partner has a full personal liability for the partnership debts

Question 72

What is the difference between unlimited liability and limited liability in a business?

Answer 72

Limited by definition means restriction and therefore owners are restricted how much they can lose. Unlimited on the other hand essential means they are infinite ways in which a business owner might incur a loss unlimited liability means that the business owners are personally liable for any loss of the business makes. So traders and partnerships often have a limited liability 

Question 73

When would owners choose set up an unlimited company?

Answer 73

If they do not want to publicly file financial reports and an annual account. A limited liability suite to a business where the risk of insolvency is extremely low.