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Law and Ethics

Session 1

Business Forms

Online Revision Bridging Course 

1) Define HRM2) Activities in HRM3) Teamwork4) Managing Change and Innovation

Contents

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1) Defining partnerships2) Types of partnerships3) Rights and duties of partners 4) Formation and dissolution of partnerships5) Partnerships and companies compared

Contents

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Law of Partnerships

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• A relationship that subsists between persons carrying on a business in common with a view to making a profit - S1(1) Partnership Act 1890

• Based on a contractual agreement (Deed of Partnership)

• Governed by The Partnerships Act 1890, and the Limited Partnership Act 1907

Partnerships Defined

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• General• involved in day-to-day running of the firm.• full unlimited liability

• Sleeping• not involved in day-to-day running of the firm• has invested capital• entitled to a share of the profits• full unlimited liability

• Limited• not involved in day-to-day running of the firm• has invested capital• limited liability fixed at a certain amount

Types of Partners

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• Disclosure• Full information about any transaction that impacts the

partnership• Must be true, clear and complete.

Law v Law (1905)

• Account• Must account for all benefits accrued from any transaction

carried out for the benefit of the partnership (no secret profit)Bentley v Craven (1853)

• Not to Compete • Need express permission of the other partners.• Must account for profits

Glassington v Thwaites (1823)

Duties of Partners

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• Good Faith and Mutual Confidence – between partners

• Management – active involvement

• Profits and Losses – share as per agreement

• Expulsion – only if acting in bad faith. Must be unanimous and provided for in the deed

• New Partner – right to veto

• Examine Accounts

• Indemnify – by the firm against liabilities incurred in the ordinary and proper conduct of the business of the firm

Rights of Partners

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• Either ACTUAL or IMPLIED

Mercantile Credit Co Ltd v Garrod (1962)• A garage business where the agreement excluded the

selling of cars• One partner sold a car to which he had no title• Buyer sued the partnership• Implied authority = partnership liable

Authority of Partners

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• Partners are jointly and severally (individually) liable for any contract entered into by the firm

• Also jointly and severally liable for the torts of other partners in the ordinary course of the business

Hamlyn v Houston (1903) – bribery for confidential information

Liability of Partners

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• New Partners • Not liable under contracts entered by the firm before the

new partner joined (unless specifically agreed)

• Retiring Partners • Liable under every contract entered by the firm prior to

retirement. Should seek indemnity from other partners on retirement

• Remains liable under contract entered by the firm after retirement unless he/she notifies creditors of retirement.

Liability of Partners

Company Formation

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1) The process of company registration2) Contents of the documents to be submitted3) Contents of the certificate given by the Registrar4) Rules for company names

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• Governed by Section 18 of the Companies Act 2014

• Must apply to the Companies Registration Office

Registration of a Company

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• Memorandum of Association• Company charter and regulates the external activities of the

company

• Articles of Association• Rules and regulations for the internal affairs of the company

• Statement• Name and registered office• Directors particulars• Issued capital• Statutory declaration

Registration for a Designated Activity Company

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• Constitution• Company name, Private company limited by shares• Liability of members is limited• Authorised share capital and division into shares of fixed amount or

without stating the amount, The number of shares taken by each subscriber

• Any supplemental regulations being adopted by the company• Statement

• Registered office• Names of first directors and first secretary• Place of central administration of the company

• Additional Statement • Requirements of registration complied with• Activity within the state• Statement particulars are correct

Registration for a Private Limited Company

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• Memorandum of Association• Name of company, public limited company, objects, liability of

members is limited• Authorised capital NOT less than €25000 and its division into shares

of fixed amounts• Number of shares taken by each subscriber to the constitution

• Articles of Association• Rules and regulations for internal affairs of the company cannot

conflict with M of A or the law. Appointment removal of officers, shareholder rights, dividends, borrowing, company conclusion

• Statement• Name and registered office, directors particulars, issued capital,

statutory declaration

Registration for a Public Limited Company

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• States that the company is duly registered under the Companies Acts• Notice published in CRO Gazette within 10 days• Name and registered number• Date of incorporation• Whether the company is limited by shares or guarantee• Whether the company is private or public• Signature of Registrar and official seal of company registry

Certificate of Incorporation

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• Addition requirement for Public Limited Companies

• Issued when Registrar of Companies satisfied that the company meets the minimum statutory requirements regarding share capital (€25,000)

• Must submit a declaration to CRO stating• Nominal value of allotted share capital is not below the

minimum• Amount paid –up on application• Preliminary expenses and persons paid or payable• Any intended payment/benefit to be paid to the company’s

promoters

Trading Certificate

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• Registrar of Companies can prevent registration under names deemed to be undesirable• Offensive, blasphemous or immoral• Suggest a connection with the state or a financial institution• Misleading• Identical to name already on the register

REGISTRATION OF COMPANY NAMES

1) Different types of organisations2) Limited liability in companies3) Concept of separate legal entity

Contents

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Business Organisations

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• Sole trader• Partnership• Company

Types of Business Organisations

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• One person organisation (might have employees)e.g. hairdresser, accountant, solicitor

• Capital - self funded through personal savings/borrowings

• Liability - personally liable for all debts of the business

• Ownership and Control - complete and personal

• External Accountability and Regulation – Minimal.• No annual returns/accounts to CRO. • Must file tax returns. • Must comply generally with the law and rules of professional

bodies.

Sole Trader

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• Two or more persons together in business with a common view to making a profit . E.g. accountants, solicitors. Collectively =the partnership “firm.”

• Capital - comes from each partner through personal savings/borrowings

• Liability - partners personally liable for debts of the firm (unlimited)

• Ownership and Control – personal by each partner, often on the basis of capital investment/profit share. Acts of each partner bind all the others

• External Accountability and Regulation – Minimal. • No annual returns/accounts to CRO• Must file tax returns. • Must comply generally with the law and rules of professional

bodies.

Business Partnerships

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• Reform of the law in Companies Act 2014

• Categories of companies• Model private Company Limited by Shares (Ltd)• Designated Activity Company (DAC)• Public Limited Companies

Companies

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• Consists of members (shareholders) and directors• May have between 1 and 149 shareholder and just 1 director• Must have a company secretary• Liability of shareholder limited to the amount unpaid on their

shares• Name must include “Limited” or “Ltd”• One document constitution• No objects clause (full unlimited capacity to carry out lawful

activities)• No need for authorised share capital.• May dispose of the requirement for an Annual General Meeting

Model Private Companies Limited by Shares (LTD)

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• Has main and subsidiary objectives (permitted to have an objects clause and a Memorandum of Association).

• Companies that are not Ltds will be DACs by default

• At least two directors

Designated Activity Company (DAC)

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• Registered with CRO and trades on the Stock Exchange• Minimum of 1 shareholder (no maximum)• At least 2 directors (retire by rotation)• Minimum issues share capital of €25000 on formation• Required to hold AGM every year• Must have stated objectives (M of A, and A of A)• Must apply for Trading Certificate on receipt of Certificate of

Incorporation before it can start trading• Name include PLC, P.L.C, plc or p.l.c or Irish equivalents.• May also register as a public unlimited company with share

capital (PUC) or without share capital (PULC)

Public Limited Company (PLC)

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• Liability of members is limited • by Shares,- if company liquidates each member must pay any outstanding amount owed on their shares

• by Guarantee - on formation members guarantee to contribute a certain amount in the event of liquidation. Does not have shareholders but members (CLG)

- Members are NOT personally liable for the debts of the business (separate legal entity)

- Incentive for entrepreneurship .............creditors take the hit.

Limited Liability

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• Members have no limit to their liability

• Name must end with UC or Irish equivalent

• Can be private (ULC) or public with share capital (PUC) or public without share capital (PULC)

• Can be single member companies but must have at least 2 directors

• Don’t need to file annual accounts with CRO

Unlimited Liability Companies

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Public and Private Companies - Similarities

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Public and Private Companies - Differences

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• Companies are ‘artificial persons’ with separate legal status from members

• Can enter contracts, own property, buy, sell, hire, fire, commit crimes, sue and be sued.

• Have ‘Continuity of Existence”

Salomon v Salomon & Co Ltd (1897)

Corporate Personality

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