Formalities for the allotting of ordinary and preference shares to 3PPP in accordance with the Companies

Law

TABLE OF CONTENTS
Introduction......................................................................................................................................3
Question 3........................................................................................................................................3
Approval of transfer of partnership assets to the company.........................................................3
Liability of directors to contribute the assets of company in situation where company is not
able to make payment to the trade creditors................................................................................5
Question 4........................................................................................................................................7
Permission required to enable directors for the allotment of ordinary and preference shares to
3PPP.............................................................................................................................................7
Formalities required to be complied for the allotment of ordinary and preference shares to
3PPP in accordance with the Companies Act 2006.....................................................................8
Conclusion.....................................................................................................................................10
References......................................................................................................................................11
2

INTRODUCTION
Individuals are entitled to alter their business status for the justifiable reason. However,
for this aspect, they are required to comply legal norms described by business law of UK
(Adams, 2010). Present project report is based on conversion of partnership firm into a limited
liability company for the purpose of expansion. In this report, issues regarding conversion is
focused in order to provide justified recommendations to the Melissa Sherlock. For this aspect,
ILAC approach will be used. In accordance with this approach, initially legal aspects will be
discussed by considering the main issue. Described aspects will be applied to the given case
scenario in order to provide logical conclusion to the issue. For justifiable conclusion, legal
description will be supported by provisions of Companies Act 2006 and Partnership Act 1890.
QUESTION 3
Approval of transfer of partnership assets to the company
Issue
In the aspect main issue is entitlement of partners for providing approval for the transfer
of partnership assets to the company. For this aspect, partner is required to comply legal and
contractual requirements. Position of Melissa Sherlock for the transfer of assets can be assessed
through following legal provisions:
Legal aspect
In accordance with the partnership law of UK, partners of the firm do not have joint
ownership of the assets. Partners of the firm are entitled to share these assets equally in the
capital and profits of the business. In addition to this, they must contribute equally towards the
financial losses sustained by the firm (Broady-Preston and Williams, 2004). In situation where,
partnership assets are held in the name of partner then it is considered that it is collectively held
for the benefits of partners until and unless contrary intention appears.
For the transfer of partnership assets for conversion in limited liability company, partners
are required to sign the asset transfer agreement in order to show their consent. However,
transfer of assets is not an easy task because all partnership agreements do not include
description for power to transfer (Beatty, 2012). In some situations, it is essential for the
individual to create a bridge between existing partnership firm and proposed company by
3

forming a policy for the purpose of cross changing. Assets of the partners is generally transferred
to the company in against of shares. After this transaction, all partners will have limited liability
in respect of all business transactions. However, they will be personally liable for the previous
debts.
Separate provisions are described in case where transfer of intellectual property is
involved for conversion. In such aspect, partners are required to comply technical applications. It
is because, there is high risk of infringement in situation where ownership is not transferred in an
adequate manner. Assets of partnership firm will also require a review from the perspective of
taxation (Partnership Act 1890, 1890). Certain assets such as land and building will form
obligation for the stamp duty for transfer. In addition to this, there are various exemptions in tax
norms due to which logical advice will be required for effective tax planning. It is because,
transfer of one asset to another is considered for the computation of capital gain.
Applicability of legal aspect
According to the described case scenario, contract of transfer of assets is supported by
issue of subscriber shares by Bronston Shelf Co Limited. These shares will be immediately
transferred to the Melissa Sherlock and Michaela Watson. Further, existing parterns of the firm
will be appointed as directors. Consideration for the transferred assets will be payable in form of
fully paid equity shares. Receivable shares will be distributed in accordance with the share of
partners in partnership agreement.
Melissa Sherlock requires permission of the other partners in the firm as transfer of the
assets in only supported by unanimous decisions. For this aspect, she is required to prepare a
legal agreement which must be signed by all the partners. In this agreement, terms and
conditions related to the transfer should be properly stated inclusive of consideration (Talbot,
2014). In existing agreements of partnership there is no as such requirement thus consent of all
partners will be sufficient in order to transfer the ownership of partnership property to the
company. Additional requirement are to be complied if there is involvement of transfer of
intellectual property.
Conclusion
By considering this legal aspect Melissa is entitled for the transfer of partnership assets to
the company. It is because, she has holding of 35% in the firm. However, she requires
4