This chapter discusses the obligations imposed on directors of companies to maintain proper accounting records, prepare annual financial statements and reports on the company’s business and disclose this information to members and the public. Requirements for companies to report their financial position to their members and to the public vary according to whether the company is a micro-entity, or is small, medium-sized or large. A company is subject to additional requirements if it is a quoted company. The definitions of these categories are set out and the rules applying to each category are summarised. The chapter discusses the form and contents of annual accounts and the contents of the strategic report and directors’ report.
Chapter
Accounts and reports
Chapter
19. Acting for a company: agency and attribution
This chapter deals with the legal relationship of agency that exists between the company and the agent, explaining the process involved in an agent’s authentication and the execution of documents for the company they represent. It considers two ways in which a company may become contractually bound to another person (a ‘contractor’) under the provisions of the Companies Act 2006: through a written contract to which the company’s common seal is affixed, or when someone has made a contract on behalf of the company. It also discusses the company’s capacity to enter into contracts, including the ultra vires rule, and attribution by a court so as to impose criminal liability on a company. A number of court cases relevant to the discussion are cited.
Chapter
4. Articles of association
This chapter deals with articles of association, the principal element of a company’s constitution, under the Companies Act 2006. It describes the content of the articles, model articles of association which can be adopted by limited companies (either in whole or in part) on registration, and the function of articles as a contract between the company and its members and between the members themselves. It also considers provisions of articles that may be incorporated in other contracts and the right of members of a company to amend its articles. The chapter discusses a number of particularly significant court cases, including Allen v Gold Reefs of West Africa Ltd [1900] 1 Ch 656 and Quin and Axtens Ltd v Salmon [1909] AC 442.
Chapter
2. The Board
This chapter deals with the board. It analyses the rationales, within different types of company, for the division of powers between (a) the shareholders and the board, and (b) the board and the senior management of the company. The second part of the chapter shows how the rules on the composition of the board (mainly to be found in the Corporate Governance Code) and the directors’ statutory core duty of loyalty fashion the accountability of the board. That accountability is primarily to the shareholders, but non-shareholder interests are recognised, in different ways, in both the Code and the statutory duty.
Chapter
7. Board composition—appointment and removal of directors
This chapter discusses the appointment and removal of directors, including corporate directors, and especially considers the recently enacted requirements for identity verification on appointment and addresses the consequences of appointments where the individual’s identity has not been verified. It also considers directors’ remuneration. This chapter addresses the three classes of directors: the de jure director, the de facto director, and the shadow director. The chapter considers the behaviour which will result in being classified as a de facto or a shadow director, explores the extensive case law on these issues, and identifies the duties and liabilities which attach or potentially attach to each category.
Chapter
7. Board composition—appointment and removal of directors
This chapter discusses the appointment and removal of directors. Directors are responsible for the management of the company’s business, for which purpose they may exercise all the powers of the company. This chapter considers three classes of directors: the de jure director, the de facto director, and the shadow director. It identifies the characteristics of each category and the liabilities which attach in the event that someone is classed as being a director. It also considers whether fiduciary duties are owed by shadow directors. The position of corporate directors is also considered. In addition, the remuneration of directors is addressed.
Chapter
5. The Board of Directors as an Organ of the Company
This chapter discusses: members’ rights and duties under the Companies Act 2006 and the company’s constitution; the problems in dividing power between the company’s members and directors, and the consequences of that division; the rules of interpretation that apply to constitutional documents; the practical exercise of the decision-making powers given to members, including the formalities of meetings and the possibility of informal agreements; the legal constraints on the exercise of power by shareholders; and the enforcement of the constitution by the members, and their potential use of shareholders’ agreements to achieve what they cannot achieve via the articles.
Chapter
11. Borrowing and security
This chapter considers borrowing as an important method of financing a company’s activities, and security as a right of recourse against company property if the loan is not repaid on time. It begins by discussing security for financial obligations, paying particular attention to security contracts, the redemption or discharge of security and the realisation of security. It then turns to the registration of non-possessory security contracts, the priorities of legal and equitable charges and floating charges as a form of security and their crystallisation. The extent to which the assets of a company, to which anyone is considering extending credit, are already charged as security is also explained. The chapter considers three particularly significant court cases: Evans v Rival Granite Quarries Ltd [1910] 2 KB 979; Re Spectrum Plus Ltd [2005] UKHL 41, [2005] 2 AC 680; and Re Yorkshire Woolcombers Association Ltd [1903] 2 Ch 284.
Chapter
9. Classes of shares and variation of class rights
Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter focuses on the rights and liabilities of a shareholder which are the incident of the general nature of a share, as well as his particular rights and liabilities by virtue of owning a particular type or class of share. It first considers the legal nature of a shareholding and the different types of share capital and typical class rights of a shareholder, as well as the statutory procedure required of a company before it can effect a variation of shareholders’ class rights. Examples of classes of shares are then given, and preferential rights attached to preference shares are discussed. The chapter concludes by looking at European Union initiatives on shareholders’ rights.
Chapter
7. Classifications of director
This chapter assesses what a director is and the different types of director that exist. Section 250 of the Companies Act 2006 (CA 2006) provides that a director ‘includes any person occupying the position of director, by whatever name called’. A person validly appointed as a director is known as a de jure director, whereas a person who has not been validly appointed, but who acts as a director, is known as a de facto director. A shadow director is ‘a person in accordance with whose directions or instructions the directors of a company are accustomed to act’. Other types of director include executive director, non-executive director, and alternate director. Meanwhile, certain persons such as major shareholders or creditors may have power to nominate a person to the board, and this nominated person is known as a nominee director. Many companies appoint some of their directors to specific board roles.
Chapter
2. Companies and Corporate Personality
The Concentrate Questions and Answers series offers the best preparation for tackling exam questions and coursework. Each book includes typical questions, suggested answers with commentary, illustrative diagrams, guidance on how to develop your answer, suggestions for further reading, and advice on exams and coursework. This chapter considers the main legal forms used for businesses in the UK—particularly sole traders, general partnerships, limited liability partnerships (LLPs), and companies (public and private). It then examines how registered companies limited by shares come into existence. On registration a company becomes a legal person, separate from its shareholders and directors. This chapter explores this ‘corporate personality’ and the popular topic of when the ‘veil of incorporation’ can be lifted or pierced by statute or the courts.
Chapter
1. The Company and its Incorporation
This chapter discusses rescue and insolvency procedures. Companies experiencing financial difficulty have various options to effect either the timely rescue of viable commercial enterprises or the orderly and competent management of affairs before ceasing operations. This chapter considers: the Insolvency Act 1986 Pt 1A moratorium; company voluntary arrangements; administration; receivership and administrative receivership; distribution of assets subject to the receivership; liquidation or winding up; investigating and reporting the affairs of the company; dissolution of the company; and restoration to the register.
Chapter
9. Company Auditors
This chapter discusses the available remedies when a company is poorly run, including the types of issues that are legitimate subjects of complaint. Topics covered include: pursuing claims for maladministration; why shareholder litigation is such a problem; the old common law rule in Foss v Harbottle; the statutory derivative action for bringing corporate claims and limitations based on reflective loss; personal claims by members; and unfairly prejudicial conduct of the company’s affairs.
Chapter
5. The company constitution
This chapter focuses on the company constitution and explores the meaning of ‘constitution’ in this context. For most companies, the constitution essentially is the articles of association and model articles may be adopted. The chapter covers the content of the articles, amending the articles, interpreting the articles, enforcing the articles, and shareholders’ agreements. While shareholders have a power to amend the articles, that power is limited at common law to prevent alterations that are not in good faith and the case law on that issue is explored. The courts are also constrained in how they interpret articles of association, given they are a public document, and the approach to interpretation is considered.
Chapter
5. The company constitution
This chapter focuses on the company constitution, essentially the articles of association. The chapter covers the need for articles (including the adoption of the model articles), amending the articles, interpreting the articles, enforcing the articles, and shareholders’ agreements. It particularly considers the extent to which shareholders can alter the articles and the common law limits to the power to do so. Altering the articles to allow for the compulsory transfer of members’ interests is also considered. Interpreting the articles and enforcing the statutory contract created is addressed. Shareholder agreements can provide better protection for shareholders and the chapter considers how they can supplement the company's articles.
Chapter
20. Company insolvency and liquidation
This chapter deals with procedures and legislation governing the insolvency and liquidation of a company and who are qualified as insolvency practitioners. It discusses insolvency procedures such as administration, voluntary arrangement, creditors’ voluntary winding up, winding up by the court and the appointment of a provisional liquidator. It considers the effect of insolvency and liquidation procedures on floating charges, court control of insolvency and liquidation procedures, and liability for fraudulent trading and wrongful trading. The legal principles underlying disqualification orders against a company’s directors, the use of an insolvent company’s name, the order of the application of assets in liquidation and the dissolution of a company are also examined.
Book
Brenda Hannigan
Company Law brings clarity and analysis to the ever-changing landscape of this field. The text aims to capture the dynamism of the subject, places the material in context, highlights its relevance and topicality, and guides readers through all the major areas. The book is divided into five distinct parts covering corporate structure (including legal personality, attribution, and constitutional issues), corporate governance (including board composition, directors’ duties, and liabilities), shareholders’ rights and remedies (including membership rights regarding meetings and resolutions, shareholder petitions, and derivative claims), corporate finance (including share and loan capital), and corporate insolvency.
Book
Lee Roach
Company Law guides the reader through the intricacies of the subject with expert analysis of the application of principles to real-life cases. The chapters provide comprehensive coverage of all core aspects of company law. The relationship between company law and corporate governance is explored, ensuring that readers have a full picture of how and why companies are create d and regulated. Topics include: the formation and nature of the company; the board of directors; membership of the company; and corporate rescue, restructuring, and insolvency; and new subjects such as the effects of the UK’s withdrawal from the European Union and the impact upon company law of the COVID-19 pandemic.
Book
Brenda Hannigan
Company Law brings clarity and analysis to the ever-changing landscape of this field. The text aims to capture the dynamism of the subject, places the material in context, highlights its relevance and topicality, and guides readers through all the major issues. From incorporation through to liquidation and dissolution, the work explores the workings of the corporate entity. The book is divided into five distinct sections covering corporate structure (including legal personality and constitutional issues), corporate governance (including directors’ duties and liabilities), shareholders’ rights and remedies (including powers of decision-making and shareholder petitions), corporate finance (including share and loan capital), and corporate insolvency.
Book
Alan Dignam and John Lowry
Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. Company Law provides an account of the key principles of this area of law. It aims to demystify this complex subject. Chapter introductions provide summaries of various aspects of company law and further reading provide the tools for further research and study. This volume includes coverage of new case law such as Hurstwood Properties (A) Ltd and others v Rossendale Borough Council and another (2021) on veil lifting, Sevilleja Garcia v Marex Financial Ltd (2020), and Primeo Fund v Bank of Bermuda (Cayman) Ltd (2021) on reflective loss; Chu v Lau (2020) on just and equitable winding up in ‘deadlock’ cases; Primekings Holding Ltd v King (2021) on unfair prejudice; Ming Siu Hung v J F Ming Inc (2021) on buy-out orders; Byers v Chen Ninging (2021) on breach of directors’ duties; CPS v Aquila Advisory Ltd (2021) on attribution; together with recent legislation including the Corporate Insolvency and Governance Act 2020; the Economic Crime (Transparency and Enforcement) Act 2022; the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021; and the Commercial Rent (Coronavirus) Act 2022. On corporate governance, the latest developments surrounding the UK Corporate Governance Code and Stewardship Developments 2020 together with the Wates Corporate Governance Principles for Large Private Companies, the FTSE Women Leaders Report 2022 on gender diversity on boards, and the Parker Review 2022 on ethnic diversity on boards are discussed as well as climate change litigation using s 172 of the Companies Act 2006.
