Law and Contract: Difference between a Private Limited Company and a Partnership - Essay Example

Case a) Difference between a Private Limited Company and a Partnership - A Private limited company is a corporation for which the liability is limited by law. The Limited Company is a separate legal entity. The liability of the shareholders and the directors is limited. When such a company is created, it has an Authorized shareholding which defines the limit of the shareholder liability. This is the most viable options if the capital is being invested into the business by anyone who does not wish to be involved in running it. A partnership business is one which is run by two or more people together. An agreement in writing is required that clearly states the terms and conditions on how to run the business without harming the interest of either of the parties. The sharing of the company profits would be either equal distribution or according to the terms that are given in the written legal agreement. Also the liabilities are also shared in the same manner as the profits. With the Limited Liability Partnerships Act, partners can profit from limited liability and reap tax advantages. b) Advantages of Limited Liability The liability protection of the corporation is the major advantage of the owners of a Limited Liability company. A limited liability company is a separate entity which is similar to a corporation. The members cannot be in any way held responsible for any sort of liabilities unless they agree upon by signing a personal guarantee. Unlike corporations, limited liability companies do not have to keep formal minutes and resolutions. This kind of operation is far easier when compared to the operations of a corporation. Companies having a limited liability have varied options for distribution of profits. The profit distribution need not be 50-50 like partnership firms. Flexibility in the distribution of profits is higher for limited liability companies. c) Documentation required for the formation of a Private limited company In the United Kingdom, the Companies House is the one that is responsible for the registration of a company. Prior to the formation of a company as a private limited entity, it is compulsory that the firm registers with the Companies House. The following is the list of documents that are to be filled in and submitted to the Companies House in order to complete the process of Incorporation. Memorandum of Association (MOA) - MOA includes the name of the Company, location of the company and the type of business. Articles of Association - This document gives a clear picture about the powers of the Directors and shareholders' rights etc. Form 10 - This form gives the details of the Name & Addresses of the Directors' and Company Secretaries' along with the Registered Company Address. Form 12 - This is a form which states that the company complies with the terms of the Companies Act. A) Merits of Purchasing Freehold or Leasehold Property - Leasehold property purchase is believed to be a smart real estate. Leasehold property means the property is owned by the buyer for a set number of years, as specified in the lease agreement. There is always a chance of earning substantial profit in a leasehold deal. In a long-term lease option, there are three profit centers for the investor. They are option money, monthly cash flow and back end profit. The buyer would pay only the ground rent and will enjoy by owning the property and the land on which the property stands outright. B) Usual repair Covenant for Leasehold property - The terms of a lease agreement are generally treated as covenants even where the agreement is not made by deed. Indeed, a lease of duration less than three years need not even be made in writing, and certain covenants will be held to exist. The basic principle is that when a covenant for repair exists and when the same is breached, the offended party has the right to recover damages for their loss, provided it is an actual loss but not a hypothetical one. The following covenants are required by the landlord for any lease, even a weekly tenancy granted orally: A covenant to allow the tenant Quiet Enjoyment of the property A covenant not to derogate from his grant. A covenant that it is fit for habitation at the start of the lease term is required in case where a domestic property is let furnished. Where a domestic property is let for less than seven years, a covenant to keep the structure and facilities in good repair (s11-14 LandlordAndTenantAct1985). The following are the 'usual' covenants for any kind of contract: A covenant by the tenant to pay rent A covenant by the tenant to keep the interior in good repair If the landlord has covenanted to repair, a covenant by the tenant to allow reasonable access for this purpose That the landlord has a Right To Reenter if the tenant defaults on the rent C) Meaning of 'Surrender' with respect to Leasehold property - In terms of the Leasehold property 'surrender' means termination of the leasehold agreement and hence the buyer needs to surrender the property to the owner of the property. Meaning of "Assign" with respect to Leasehold property - 'Assign' for a leasehold property means person who can enjoy the property. Meaning of "Sub-let" with respect to Leasehold property - 'Sub-let' means that the existing tenant either lets another tenant to co-enjoy the property or transfers the rights of enjoying the property to a third-party. Case 2 Potential Statutory and Common Law Liability the Company Has To Face Regarding Accidents to Persons on Site The liability of a company for injuries or accidents of workers on site is based on the following arguments: Breached a term of the employment contract - that is, the requirement to ensure the safety of the worker when at work; Breached legislative requirements (e.g. Workplace Health & Safety Act 1995; or Was negligent. If a worker is injured in any of the above circumstances, common law damages (monetary compensation) will be payable. Employer Negligence It is the duty of the management of the company to take reasonable care to avoid workers getting exposed to any kind of risk of injury. This reasonable responsibility of the employer can be further explained as follows: To provide a safe system of work - the employer must establish safe work practices, provide appropriate equipment, adequate staff instruction and supervision and enforce safe practices by workers; To provide adequate plant and equipment - appropriate protective clothing, safety equipment and lifting/moving devices must be provided, and equipment must be well maintained; To provide a safe place of work - workplaces must be safe from inherent industry dangers e.g. non-slip flooring where slippery substances may be dropped, ventilation for dusty environments. Proper warning of any unusual or unexpected risks or hazards in the workplace is to be given by the employer to the workers and must provide workers with adequate instructions and supervision. Liability will be established if the employer's system of work or workplace falls short of the standard required. When considering the potential liability of an employer, the courts impose a very high standard of care. Employers are responsible for the actions of their staff (provided the staffs are acting within the requirements of their work) and have a "non-delegable" duty of care. This means that the employer can be liable in circumstances where another party is responsible for the worker's safety e.g. the owner of premises where the worker was injured or other contractors on a work site. In some cases it may be possible to apportion blame for the worker's injury. In that occurs, "contribution" for damages may be apportioned according to each party's degree of responsibility. Situations where blame may be apportioned to other parties include: The accident was caused by faulty equipment manufactured, provided or serviced by someone else; The worker was working on a site where the employer had no control over the worker's safety; or The worker took unnecessary risks (e.g. failing to use safety equipment provided, or being intoxicated at work). The ability to claim contribution from the worker varies with different versions of the legislation applicable at different times. Case 3 Legal and Administrative Requirements under French Law According to the ordinance that was passed on the 8th of December, 2005, the complications in the legal and administrative requirements that are to be met by companies with respect to renovation or conversions have changed. Prior to the passing of this ordinance, there were almost eleven different types of authorizations and five different kinds of declarations in the 'planning code.' This lengthy process of complication has become easier now. Currently only three planning permissions and one declaration are required. The following are the present day options or requirements: - Planning permission - Authorization for development - Authorization to demolish - Pre-condition statement Any new construction requires a planning permission. Work done on an existing building does not need any planning application. But the new rules list precisely what type of building work will still require planning permission or at least a pre-condition statement. An authorization to develop is required each time there is a plan to divide a plot of land and build on it at a later stage, where there are to be several different constructions whose details are not specified when the application is made. The planning consent can authorize both the demolishment and new construction if a single applicant wishes to carry out several constructions. The British Law The French legal system is known as the 'civil law' system. This system of French law is totally different from the 'common law' which is otherwise known as the British law. For example, in the UK a person can proceed with a purchase 'subject to contract' - meaning that you make various legal and other searches or enquiries before signing a legally binding preliminary contract. Yet the French transportation system usually expects you to make these searches and enquiries after you have signed a legally binding preliminary contract. According to the Planning Act of 1990, any building work either renovation or any sort of repair work would require a 'listed building consent' that is issued by the local planning authority. According to the common law, it is necessary that the company should obtain a signature from owner or tenant on an acknowledgement form, confirming receipt or obtain a certificate of mailing from the post office, of the EPA pamphlet. British people should take at least as much care when buying a property in France as they would in the UK. People should at least get expert advice before they buy on any likely repair or renovation costs. There was an instance in one case where a woman bought the huge house and barns and called for an advice after the purchase to give her an idea on how much the renovation work would cost. The legal advisor told her it would be around 600,000 - but she only had 150,000 available.' The independence of the French judiciary is guaranteed by statute, but judges gain no advantage for ignoring the wishes of those in power. In any case, decisions of a French court in interpreting the law are not binding on subsequent courts of the same or junior rank - as they would be in a common law country such as the UK. There is also an important point in relation to the work of the notaries, the legal official who handles property transactions. Most notaries - who represent the Administration in property transactions - do not give advice on the legal/tax consequences of cross-border issues. If they give advice they may suggest a French solution that impacts badly on the clients' position in their home country. It should be noted, of course, that an English solution proposed by an inexperienced English lawyer to a French legal problem is not usually appropriate either - and can also be damaging to the client. References: 1. http://www.blurtit.com/q565429.html 2. http://www.answers.com/topic/limited-companycat=biz-fin 3. http://sbinformation.about.com/cs/ownership1/a/LLC.htm 4. http://www.bytestart.co.uk/content/19/19_1/forming-a-limited-liabili.shtml 5. http://goliath.ecnext.com/coms2/gi_0199-6586907/Director-s-Liability-Workplace-Injuries.html 6. http://www.frenchentree.com/french-law/DisplayArticle.aspID=28932 7. http://www.bbc.co.uk/homes/property/moneyandlegal_renovatingrulesandregs.shtml 8. http://www.channel4.com/money/homebuying/first-timers/decide2buy/freehold.html 9. http://www.kevinboone.com/lawglos_LeaseholdCovenant.html 10. http://www.workcover.qld.gov.au/Formsa362sheets/Common700loyers.pdf Read More