IMC Unit 1 3

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  1. Legal person
    • 1. an individual human being is a natural person
    • 2. a corporation is an artifical person
    • Both are legal persons
  2. Unincorporated Association
    Is NOT a seperate legal entity, like a limited company, therefore the members of the association are the legal persons not the unincorporated association
  3. Limited liability
    • once a corporation becomes a limited company, under law as a legal person distinct from its owners, the owners or shareholders have limited liability
    • -the company is therefore liable without limit for its own debts
  4. Company limited by shares
    • at winding up, members are responsible for any outstanding amount from when they originally purchased the shares, if they have paid for there shares in full then they do not have to contribute anything
    • -liability is usually limited by shares
  5. Company limited by guarantee
    • in the event of winding up, members must pay what they guaranteed to pay in the case of winding up
    • -mostly for non-commercial activites such as charities or a trade association, as they aim to keep income and expenditure in balance but also have the members guarantee as a form of reserve capital should it become insolvent
  6. Mens Rea
    or controlling mind, it is currently extremely difficult to prosecute a company on criminal charges, as they must prove mens rea
  7. Liabilities in tort
    a company may also have to pay damages for negligent acts and crime
  8. How else can a company legally be identified by those who control it?
    if the owners used the company to evade their legal obligations, for example for taxes
  9. General v. Specific power of attorney
    covers everything or just specific acts
  10. Trustee POA
    • may delegate his powers under the Trustee Act 1925, for up to 12 months.
    • -notice must be given within 7 days to any person who has power to appoint trustees and to other trustees
  11. LPA
    • Lasting Power of Attorney, established under the Mental Capacity Act 2005
    • -similar to EPA, except also allows attorney right to make health and welfare decisions
    • -LPA is a legal document from the OPG
    • -must be at least 18 to get an LPA
    • -single person only for LPA
  12. Decision Specific test
    Set out in the Mental Capacity Act 2005, for assessing whether a person lacks capacity to take a particular decision as a particular time
  13. Court Appointed deputies
    Mental Capacity Act 2005 provides for a system of court appointed deputies to be the designated decision maker
  14. 2 situtations of Mental Capacity Act 2005
    • 1. LPA
    • 2. Court appointed deputies
  15. OPG
    Office of the public guardian where LPA is made available
  16. If no power of attorney?
    Court of Protection may appoint a reciever with specified powers to manage persons affairs with the authority of the court
  17. 2 types of LPA?
    • 1. Personal Welfare LPA
    • 2. Property and Affairs LPA
  18. Personal Welfare LPA
    • allows person to plan ahead, approving persons to make decisions on their behalf regarding personal healthcare and welfare
    • -can only use power once registered and provided the person cannot make the required decision for himself or herself
  19. Life sustaining treatment
    This power must expressly be given
  20. Property and Affairs LPA
    • power to make decisions regarding their property and financial affairs
    • -someone can appoint while they still have the capacity to
  21. Existing EPA
    • the mental capacity act 2005 replaced the former Enduring Power of Attorney with the LPA, but it is not possible to make any changes to an existing EPA and a non registered EPA may still be registered if the person is becoming mentally incapable
    • -person can have an LPA set up alongside an EPA, for example if they want a personal welfare LPA as well
  22. Unregistered EPA
    • may be revoked at anytime if the person still has capacity. Also a registered EPA can be revoked but only by permission of the Court of Protection
    • -best way to revoke unregistered EPA is to sign formal document 'Deed of revocation'
  23. Who is responsible for establishing and maintaining a register of LPAs and EPAs?
    The public guardian
  24. 3 essential elements in a valid contract?
    • 1. agreement
    • 2. consideration
    • 3. intention
  25. Courts will determine whether or not agreement was made by checking if
    • on party has made a firm offer and other other party has accepted
    • -offer and acceptance may be made orally or in writing and may be implied by the conduct of the parties
  26. proposal form
    • in life assurance, the LA company can either accept at standard rates or on special terms or reject the proposal form altogether
    • -if accepted on special terms, it is understood that the initial proposal form was rejected with a counter offer
  27. Consideration
    the promise which a claimant seeks to enforce must be shown to be part of a bargain to which the claimaint has himself contributed
  28. Intention
    • agreement is not a binding contract unless the parties intend to create legal relations
    • what matters is the inferences that reasonable people would draw from their words or conduct
  29. standard form contract
    a document prepared by many large organizations setting out the terms in which they deal, indivudal must either take it or leave it
  30. freedom of contract
    • -although contractual terms may be regulated by staute, particularly where the parties are of unequal bargaining strength
  31. Consumer interests are served by two main areas:
    • 1consumer protection agencies: which includes FSA, govt departments including office of fair trade and independent bodies including the consumer association
    • 2.Legislation, FSMA 2000, Consumer Credit Acts 1974 and 2006, Unfair contract terms act 1977, unfair terms in cosumer contracts regulations 1999
  32. Form of a contract
    • can be in any form, written, oral of inferred by the conduct of the parties
    • -some contracts however must be in writing
  33. Capacity to Contract
    • not insane
    • over 18
  34. contracts of a criminal nature:
    are illegal and not valid
  35. Caveat emptor
    let the buyer beware
  36. utmost good faith
    uberrimae fide, for insurance company contracts it is a requirement to disclose all relevant information as the contract is voidable should peritnent information not be disclosed
  37. Agency
    • is a relationship between two legal persons, the principal and the agent, in which the function of the agent is to form a contract between his principal and third party
    • -usually created by mutual consent and does not need to have a formal written contract
    • -it is usually an express agreement even if it is created in an informal manner
  38. Examples of Agency relationship:
    • Partnerships: partners are agents of each other
    • Brokers: for example an insurance broker is the agent of the insurer
    • appointed rep of product providers: financial adviser who is appointed rep (tied adviser), he is the agent of the product provider firm
    • IFA: is the agent of his client
  39. Obligations of an agent
    • 1. performance and obedience, not being obedient would involve an illegal act
    • 2. Skill and accountability
    • 3. no conflict of interest
    • 4. Confidence: agent must keep information in confidence, even after relationship has ceased
    • 5. Any benefit must be handed over to principal
  40. Authority of the agent
    the contract made by the agent is binding on the principal and the other third party only if the agent was acting within the limits of his authority from his principal
  41. land
    includes buildings and anything else attached to the land
  42. real property
    realty, is land owned in perpetuity, in other words free hold property
  43. Freehold property
    real property owned forever
  44. leasehold property
    • the right of the lesse (tenant) ends with expiry or fixed period
    • -landlord is said to have a reversion, so he has possession after the lease is up
  45. deed
    if a lease is granted for more than 3 years it is generally known as a deed
  46. Personalty
    • personal property, anything owned that is not realty
    • 1. leasehold land
    • 2. pure personalty (including chattels and anything in action)
  47. Things in action
    banknotes and coins are things in action, included in personalty
  48. chattels
    moveable tangible property (furniture, books, jewelry)
  49. testator
    someone who gives his property away through his will
  50. joint tenants
    more that one person owning land outright, if one dies the other owns everything
  51. tenants in common
    tenants own a % of the land, so if one dies, it stays in there estate (or is given to someone in their will) while the other owners still own their %'s
  52. Can more than 4 persons hold a legal estate as joint tenants for the benefit or equitable interest of themselves and other co-owners?
    Why YES
  53. Bankruptcy
    When an individuals financial affairs are taken over by a court
  54. Where are bankruptcy assets transferred?
    Into a trust
  55. What is the current legislation dealing with bankruptcy?
    The insolvency act 1986, amended by the insolvency act 2000 and the enterprise act 2002
  56. Bankrupcty proceedings beging with the petition of a
    • bankruptcy order, must be 750 GBP of unsecured debt
    • -petioners are usually a creditor or severak creditors actng jointly
  57. creditors petition must demonstrate to the court in 1 of 2 ways that the person cannot repay their debt
    • 1. statutory demand
    • 2. judgement debt
  58. statutory demand
    in the prescribed form, has been served on the debtor, requiring him to pay, and the demand has not been met within 3 weeks
  59. judgement debt
    payment orderd by a court or judge has been returned unsatisfied in whole or in part
  60. Debtors attempt to dispose of some of his property
    Under the insolvency act 1986, any disposal of property or payment of money after a petition for a bankruptcy order will be void, unless the court approves the disposal or payment
  61. When does bankruptcy begin?
    The day the bankruptcy order is made
  62. Reciever and manager
    the day the bankruptcy order has been made, the official reciever takes control of the debtors assets as reciever and manager
  63. official reciever
    • is an official of the department of business, innovation and skills and an officer of the court
    • -duty is to protect the bankrupts property until a trustee in bankruptcy has been appointed
  64. trustee in bankruptcy
    job is to get possession of and realize the value of a bankrupts property and distribute them to the creditors
  65. What is the debtor allowed to keep?
    • 1. tools of his trade
    • 2. a vehicle, if one is needed for his/her employment
    • 3. clothing, bedding and furniture belonging to the debtor and his family
  66. income payments order
    the court, permitting the debtor to make income, may take any income in excess of what is considered reasonable
  67. if debtor owns a home?
    court will fuckin TAKE IT!
  68. matrimonial home
    if owned by the bankrupts spouce or former spouse, court wont touch it (unless it was transferred under suspicious terms)
  69. What is the limit a trustee in bankruptcy can deal with the bankrupts interest in the home?
    3 years, then interest goes back to the bankrupt as per the enterprise act 2002
  70. lenders of mortgage finance must be aware of what?
    any potential problems of buying a matrimonial home in the event the borrower goes bankrupt
  71. if lender insists on joint names on mortgage?
    then in the case of bankruptcy of one person, then the other person must make full payments on mortgage
  72. What is the priority the trustee of bankruptcy must pay out the assets?
    • 1. pay for the costs of the bankruptcy
    • 2. preferential debts including, accrued holiday pay owed to employees, wages and salaries of employees due in the last 4 months before the bankruptcy order, max amount 800 GBP per employee
    • 3. payment to ordinary unsecured creditors, who are treated equally
  73. if bankrupt undertakes certain transactions that harm the interests of the creditors (or harm some creditors at the expense of others)
    trustee of bankruptcy may void the tansactions
  74. 1 year
    after the date of the bankruptcy order, the bankruptcy is normally discharged
  75. BROs
    Bankruptcy restriction orders, protect the public from a reckless bankrupt after the bankruptcy has been discharged for 2 to 15 years
  76. 4 aims of insolvency law
    • 1. protect the creditors of the company
    • 2. balance the interests of competing groups
    • 3. control or punish the directors responsible for the companies financial collapse
    • 4. encourage rescue operations
  77. 2 tests of corporate insolvency?
    • 1. inability to pay debt when they fall due (more than 750 GBP)
    • 2. balance sheet test liabilities exceed assets
  78. voluntary liquidation restriction?
    cannot be initiated by the shareholders if the company has been deemed insolvent
  79. 3 types of insolvency officials?
    • 1. administration
    • 2. receivership
    • 3. liquidation
  80. administrators
    appointed as officer of the court to find the best way to realize the companies assets, better than liquidation or receivership
  81. recivership
    • appointed out of court by a debenture holder (normally a bank)
    • reciever is concerned primarily weith the interests of the secured creditors who appointed him
  82. administrative reciever
    • if reciever is given general floating charge over the companies assets, he will take over the management of the companies property
    • this has largely been abolished by the enterprise act 2002
  83. liquidation
    acts in the interests of unsecured creditors and members of the company
  84. when liquidators are appointed?
    • 1. under a voluntary liquidation arrangement
    • 2. following an unsecured creditors petition to the court for liquidation of the company
  85. if fraud or intent to fraud creditors comes up in bankruptcy?
    court may decide that the persons (usually the directors) who were knowingly partied to the fraud shall be held personally responsible for debts and other liabilites of the company: s213 insolvency act 1986
  86. testator
    male individual who creates a will to distribute their estate after their death
  87. testatrix
    female will creator
  88. executors
    the will appoints personal reps to distribute estate
  89. two witnesses
    will must be signed in the presence of 2 witnesses, a witness or the spouse of the witness must not benefit from the will
  90. grant of probate
    executors need to obtain this from the registry of probate to show they are entitled to administer the estate
  91. executors priority?
    • first to settle all liabilities of the estate before paying out
    • -funeral expenses
    • -IHT
    • -liabilities incurred while testator was alive
    • -expenses during period of admin
  92. when is IHT paid?
    executor must sumit an account and pay any IHT due before obtaining the Grant of probate
  93. inter vivos
    lifetime trusts
  94. assets are held on what by the executor?
  95. reason will leaves assets to trust?
    to cater for minors
  96. discretionary trusts
    to use the IHT nil rate band of the first of a married couple to die
  97. guardians
    will can indicate whom they would like as a guardian for minors
  98. it testator marries?
    will is made invalid, unless testator expressly states the will was made in contemplation of marriage
  99. if testator divorces?
    ex-spouse no longer recieves whatever will stated for them
  100. intestate
    individual who dies without a will
  101. to civil same sex partners recieve same rights in intestate matters?
    yes, under the civil partnership act 2004
  102. intestate, surviving spouse, no issue, no whole blood
    surviving spouse takes it all
  103. intestate, surviving spouse and issue
    surviving spouse take personal chattels, statutory legacy of 250,000 GBP (with interest up to payment), residue (if any) 50% on life trust for surviving spouse, and statutory trust for issuethereafter, other 50% immediately on statutory trust for issue
  104. issue
    children, grandchildren etc.
  105. survising spouse, no issue but one or more full blood (parent, brother, sister)
    sp takes personal chattels, plus remainder up to 450,000 GBP, plus 50% residue absolutely, other 50% to parents in equal shares, if none, to brothers and sisters of whole blood or there issue on statutory trusts
  106. issue but no sp?
    whole estate to issue on statutory trust
  107. no sp, no issue?
    parents in equal shares, if not, whole blood brothers and sisters on stat trusts, if not half blood bro/sis on stat trust, grandparents in equal shares, whole blood uncles/aunts on stat trusts, half blood uncles/aunts stat trusts, no relative....CROWN TAKES IT ALL
  108. law reform (succession) act 1995
    spouse must survive the deceased by 28 days to get shares, otherwise as if no surviving spouse
  109. name of will where husband and wife or an unmarried couple make wills will similar terms
    mirror or reciprocal wills
  110. mutual wills
    often husband and wife make an agreement for a certain way their property is distributed
  111. trust
    an equitable obligation in which the trustees are bound to deal with property over which they have control for the benefit of certain individuals
  112. trust property
    property which trustees have control over for the beneficiaries
  113. equity
    from the latin word meaning justice or fairness
  114. common law
    • law of england was made up of ancient customs which compiled into common law throughout england
    • -tended to look at the form of transaction (in land purchase whose appeared on the title deeds) rather than the substance (who provided the purchase money)
  115. law of equity
    would recognize the interest of the provider of purchase monies whether or not that persons name appeared on the tile deeds
  116. when did equity override common law?
    in 1873 with the judicature act
  117. how does a trust encompass interest of both common law and law of equity?
    legal ownership of trust is held by trustees while the equitable ownership is for that of the beneficiaries
  118. bare trust
    or a simple trust, a sole beneficiary has full authority over the trust
  119. interest in posession trust
    where the beneficiary, known as the income beneficiary or life interest, benefits from the trust for his life or specific period, after which the remainderman (second class beneficiary) takes over the benefits
  120. life interest
    for example beneficiary may have the right to occupy a house for his lifetime
  121. income beneficiary
    may have right to recieve income from trust property for his lifetime or a specific period of time
  122. remainderman
    or reversionary interest, obtains benefits of trust after the death of life interest/income beneficiary
  123. discretionary trust
    trustees can exercise their discretion
  124. IHT for trusts
    there is a CLT when trust is set up, a principal charge once every ten years and an exit charge when property leaves trust
  125. CLT
    chargeable lifetime transfer, an initial charge when the discretionary or interest in possession trust is set up
  126. charitable trust
    basically free from tax, gives settlor some degree of individuality to gift
  127. trusts as useful vehicles for non-tax reasons
    preserve family wealth, provide for those deemed as incapable (minors and disabled), or unsuitable (due to youth or poor business sense) to hold assets directly
  128. discretionary trust set up through a will
    rate of IHT on principal charges and exit charges within the trust will then depend on the settlors cumulative transfers in the 7 yeears before his death and the value of the trust property
  129. key benefits to family settlements of trusts
    • 1. controlling who owns and recieves benefit from the property
    • 2. potential reduction of tax liabilities
    • 3. giving someone the benefit of property while preventing them from wasting it away
  130. trusts for unincorporated associations?
    yes, since they cannot legally own property since they are not legally recognized as persons, a trust can hold the property on behalf of the association
  131. resulting trust
    trust in relation to marriage or cohabitation, for example, house is legally owned by 1 person, but another person who put money into the purchase and occupies the house jointly has interest in the house through a resulting trust
  132. secret trust
    leaving property through a trust can protect the identity of the beneficiary, only known to the trustee
Card Set
IMC Unit 1 3
Chapter 3
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