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Chapter

Cover Company Law

4. Corporate personality  

This chapter looks at one of, if not the, defining characteristic of the company, namely its corporate personality. At its most basic level, the doctrine of corporate personality simply provides that the company is a person. As such, it can do many things that humans are able to do, including own property, enter into contracts, and be subject to legal rights, duties, and obligations. However, the artificial nature of corporate personality, and the fact that it can be abused, means that a significant body of law has developed in this area. The law provides for several ways in which a company’s corporate personality can be set aside. These include statutory provisions and the common law. Moreover, individuals may contract away the protection of corporate personality and render themselves personally liable.

Chapter

Cover Sealy & Worthington's Text, Cases, and Materials in Company Law

8. Remedies for Maladministration of the Company  

This chapter discusses the functioning of directors and their duties under common law and the Companies Act 2006. Topics covered include: the scope and nature of directors’ general duties; the duty to act within powers; the duty to promote the success of the company; the duty to exercise independent judgement; the duty to exercise reasonable care, skill and diligence; the duty to avoid conflicts of interest; the duty not to accept benefits from third parties; the duty to declare an interest in a proposed or existing transaction or arrangement; remedies for breach of general duties; relief from liability; ratification of acts of directors; relief from liability granted by the court; contracting out of liability; statutory rules requiring special notice or members’ approval for certain transactions; and secondary liability (liability of third parties associated with directors’ wrongs).

Chapter

Cover Company Law

20. The derivative claim and the rule in Foss v Harbottle  

This chapter discusses further aspects of shareholder remedies, namely the common law multiple derivative claim; derivative claims under Companies Act 2006 (CA 2006), Part 11; the reflective loss principle; personal actions at common law; and specific statutory rights under the CA 2006. At common law, a shareholder aggrieved by a breach of duty by a director could bring a derivative claim on behalf of the company, as an exception to the rule in Foss v Harbottle. That common law claim now remains as a common law multiple derivative claim whereas the ‘ordinary’ derivative claim now is a statutory claim under CA 2006, Part 11. This chapter explores both types of derivative claim and assesses their value to shareholders. An important constraint on shareholder recovery is the principle governing reflective loss which has recently been restated by the Supreme Court. This chapter considers the current position in the light of that development.

Chapter

Cover Company Law

4. Promoters and pre-incorporation contracts  

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 one area where the motives of ‘promoters’ (that is, those who form a company) are relevant to the legal aspects of certain activities carried out in the company’s name, especially when they enter into contracts for the company prior to its formal registration. After defining the term ‘promoter’, the chapter discusses the fiduciary duties of promoters and the range of remedies available to the company against a promoter who breaches his fiduciary duties. It then considers problems involving contracts entered into prior to incorporation and the common law position on such contracts. It also explains pre-incorporation contracts, deeds, and obligations under s 51 of the Companies Act 2006 before concluding with an analysis of the issue of Brexit and its impact on corporate mobility.

Chapter

Cover Company Law

8. A statutory statement of directors’ duties  

The Companies Act 2006 (CA 2006) includes for the first time a statutory statement of directors’ general duties in Pt 10, Ch 2. This chapter explains the background to the introduction of this statutory statement and discusses the duties which have been set out. The duties remain based on and will be interpreted in accordance with the pre-existing common law while evolving in the normal manner through judicial decisions. The chapter notes that the duties are cumulative and non-exhaustive and are not owed to the shareholders individually but to the company, though in very exceptional circumstances, the courts may find a duty owed to shareholders.