The UK corporate law regulates companies formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, the EU Directive, and the court cases, the company is the primary legal vehicle for organizing and running a business. Tracing their modern history to the late Industrial Revolution, public companies now employ more people and generate more wealth in the UK economy than any other form of organization. The United Kingdom is the first country to draft a modern corporate law, where through simple registration procedures, every investor can combine, limit liabilities to their commercial creditors in the case of business bankruptcy, and where management is delegated to the central board of directors. An influential model in Europe, Commonwealth and as a set of international standards, British law has always given people the freedom to design internal corporate rules, as long as the mandatory minimum rights of investors under its laws are met.
Company law, or company law, can be divided into two main areas. Corporate governance in the UK mediates rights and obligations between shareholders, employees, creditors and directors. Since the board of directors usually has the power to manage the business under the company's constitution, the main theme is what mechanism exists to ensure accountability of the director. English law is a "shareholder" shareholder, leaving employees aside, usually exercising a single vote in a rally. The general meeting holds a set of minimum rights to change the company's constitution, issue resolutions and remove council members. In turn, the directors owe a set of tasks to their company. The Board of Directors shall carry out their responsibilities with competence, in goodwill and undivided loyalty to the company. If the voting mechanism is insufficient to prove, especially for minority shareholders, the duties of directors and other members' rights may be proven in court. The most important in public companies and listed are securities markets, which are marked by the London Stock Exchange. Through the British Takeover Code greatly protects the right of shareholders to be treated equally and to freely trade their shares.
Corporate finance involves two options for raising money for a limited company. Equity financing involves the traditional method of issuing stocks to build a company's capital. Shares may contain any rights that companies and buyers desire, but generally grant the right to participate in dividends once the company gains and the right to vote in the company's affairs. The share buyer is assisted to make informed decisions based on the prospectus's requirements of full disclosure, and indirectly through restrictions on financial assistance by companies to purchase their own shares. Financial debt means getting a loan, usually for a fixed annual interest payment price. Sophisticated lenders, such as banks typically contract for the security interests of the company's assets, so in the event of a loan repayment failure they can seize the property of the company directly to meet the debt. The creditor also, to some extent, is protected by the power of the court to set aside unfair transactions before the company falls down, or to close money from the negligent director who is involved in the wrong trade. If a company can not afford to pay its debt when it matures, UK bankruptcy laws require administrators to try to save the company (if the company itself has the assets to pay for this). If rescue proves impossible, the life of the company ends when its assets are liquidated, distributed to creditors and the company is disconnected from the list. If a company becomes bankrupt without assets, it can be closed by creditors, at payment (not common), or more commonly by tax creditors (HMRC).
Video United Kingdom company law
Histori
Corporate law in its modern form dates from the mid-19th century, but business associations have grown considerably before. In medieval times, merchants would do business through construction of common law, such as partnerships. Whenever people act together for the purpose of making a profit, the law considers that the partnership arises. Initial guild and livery companies are also often involved in competition regulation among traders. As Britain attempted to build a trading Empire, the government created a corporation under the Royal Charter or the Parliament Act with a monopoly over a particular territory. The most famous example, founded in 1600, is the British East India Company. Queen Elizabeth I gave her the exclusive right to trade with all the countries east of the Cape of Good Hope. The corporation at this time will basically act on behalf of the government, bringing in revenue from its overseas exploitation. Furthermore, the Company became increasingly integrated with British military and colonial policy, as most British companies basically rely on the ability of the British Navy to control trade routes on the high seas.
A similar charter company, the South Sea Company, was established in 1711 to trade in Spanish colonies of South America, but met less successfully. The South Sea Company's monopoly rights should be supported by the Treaty of Utrecht, signed in 1713 as a settlement after the Spanish War of Succession, which gave England assiento to trade, and sold slaves in the region for thirty years. In fact, Spain remains hostile and only allows one ship a year to enter. Unaware of the problem, investors in the UK, attracted by the promises of profit promoter companies, bought thousands of shares. In 1717, the South Seas Company was so rich (still not doing any real business) that it was assumed to be public debt of the British government. This accelerated further inflation of stock prices, as did the Royal Exchange and London Assurance Corporation Act 1719, which (perhaps with the motive of protecting the South Sea Company from competition) prohibited the establishment of a corporation without Charter Royal. Stock prices go up so fast that people start buying shares just to sell them for a higher price. By inflating this demand in turn leads to higher stock prices. The "South Sea Bubble" was the first speculative bubble that the country had seen, but by the end of 1720, the bubble "exploded," and the stock price slumped from Ã, Â £ 1000 to under Ã, Â £ 100. When bankruptcy and allegations- accusations of bouncing through the government and the upper classes, the mood of the corporation, and the mischievous directors, became bitter. Even in 1776 Adam Smith wrote in Wealth of Nations that mass corporate activity can not match private entrepreneurship, for the person responsible for "the money of others" will not care as much as they do with them own.
The prohibition of the Bubble Act 1720 on the establishment of the company remained in force until 1825. At this point the Industrial Revolution was accelerating, urging legal changes to facilitate business activities. The restrictions gradually lifted up on the common people who joined, although the business as noted by Charles Dickens at Martin Chuzzlewit under primitive corporate law is often fraud. Without cohesive regulation, capital-deficient businesses such as the adage "Unexpected Anglo-Bengalee Loans and Life Insurance Companies" do not promise success, except for costly promoters. Then in 1843, William Gladstone took over the chairman of the Parliamentary Committee on Joint Stock Companies, which led to the Joint Stock Company Act of 1844. For the first time it was possible for ordinary people through simple registration procedures to be combined. The advantage of establishing a corporation as a separate legal entity is primarily administrative, as an integrated entity in which the rights and obligations of all investors and managers can be channeled. The most important developments came through the Limited Act of 1855, which allowed investors to limit their liability in the case of business failure with the amount they invested in the company. These two features - simple registration procedures and limited responsibilities - are then codified in the world's first modern corporate law, the Joint Stock Companies Act 1856. A Series of Companies Acting Up to The Company Act in 2006 basically retained the same fundamental features.
During the twentieth century, companies in Britain became the dominant form of organization of economic activity, raising concerns about how accountable those who control the companies are those who invest in them. The first Reformation after the Great Depression, in the Companies Act 1948, ensured that directors could be eliminated by shareholders with a simple majority vote. In 1977, the Bullock Government's report proposed reforms to allow employees to participate in the selection of boards, as occurred throughout Europe, exemplified by the 1976 German Anti-Terrorism Act. But Britain never implemented reforms, and since 1979 the debates have shifted. Despite making the director more responsible to the employee postponed, the Cork Report led to tougher sanctions in the 1986 Insolvency Act and the 1986 Company Director's Disqualification Act against directors who carelessly run the company at a loss. Throughout the 1990s the focus on corporate governance shifted to internal control mechanisms, such as audits, separation of chief executive positions from seats, and remuneration committees in an attempt to place some checks on excessive executive pay. These rules apply to registered companies, now found in the UK Corporate Governance Code, supplemented by principles based on regulation of institutional investors activities in corporate affairs. At the same time, the integration of Britain in the EU means the growing Law of EU Company Law and case law to align corporate law in the internal market.
Maps United Kingdom company law
Company and personal law
The company occupies a special place in private law, because they have separate legal personality from those who invest capital and labor to run the business. The general rules of contract, tort and unjust enrichment operate in the first place against the company as different entities. This is fundamentally different from other business associations. A sole trader obtains the rights and obligations as usual under general liability law. If people do business together with the aim of making a profit, they are considered to have formed a partnership under Partnership Act 1890 of Part 1. Like a sole trader, the partner will be responsible for contractual or joint liability and little in the same stock as the contribution their money, or according to their mistakes. Law, accounting and actuarial companies are generally governed as partnerships. Since the 2000 Limited Liability Act, partners can limit the amount they charge for their monetary investment in business, if the partnership owes more than the company owns. Beyond this profession, the most common method for businesses to limit their obligations is by forming a company. All directors of all public limited companies in the UK must prepare their financial statements and director reports and make them available to shareholders and the public. They are also expected to maintain an appropriate internal control system to safeguard and prevent possible misuse of company resources (Collis 2015, p. 79). The annual report shows that directors have lived up to expectations and have informed shareholders and the public of all financial statements. They include comprehensive income statement, balance sheet, cash flow statement, and statement of changes in equity and report of the general director (Di Pietr, Art, and Ronen 2015, p 39). Having a GMS and a planned program consistent with the board, and a dialogue with shareholders clearly visible in the shareholder engagement section The UK Regulatory Framework Assessment has a regulatory framework for all its public companies to follow when preparing their annual reports. It provides the core financial statements that should appear in the annual report, and they include; balance sheet, statements of comprehensive income, statement of changes in equity and cash flow statement as required in international accounting standards (IAS 1). If further indicates the existing relationships among shareholders, management and independent audit team (Gibbon et al., 2017, 31). It is imperative that all firms are guided by a universal code of corporate governance to enable companies to respond to issues pertaining to shareholders in ways that enhance the effectiveness of organizational governance principles. In addition, there are certain aspects of information that when not emphasized can not be given to shareholders (ICSA 2015, p. 23). Thus, the framework plays an important role through its emphasis on disclosure of legislation in highlighting all items considered important to shareholders. The financial statements should be compiled using a set of specific rules and regulations so that the reasons behind allow companies to apply corporate legal provisions, international financial reporting standards (IFRS), as well as UK stock exchange rules as directed by the Financial Behavior Authority (FCA). It is also necessary that shareholders can not understand the figures as presented in various financial reports so it is important that the board should provide a note of accounting policies as well as other explanatory notes to make them understand the report better. Conclusion
Forming a company
Companies can be established under the Companies Act 2006. People who are interested in starting a company - candidates for directors, employees and shareholders - can choose, first, limited or limited companies. "Unlimited" shall mean the Incorporator shall be liable for all losses and debts based on the general principles of private law. Limited company choices lead to second choice. A company can be "limited by guarantee", which means that if the company owes more than it can be paid, then the guarantee obligation will be limited to the level of money they choose to guarantee. Or the company may choose to be "limited by shares", which means the liabilities of capital investors are limited to the amount they subscribe in share capital. The third option is whether the company limited by the stock will be public or private. Both types of companies must display (partially as warning) suffix "plc" or "Ltd" following the company name. Most new businesses will choose private companies that are limited by stocks, while limited companies and restricted corporations are usually chosen by charities, risky businesses, or mutual funds who want to signal that they will not leave unpaid debts. The charity also has the option to become a public interest company. Public companies are the main business vehicles in the UK economy. Though far fewer than private companies, they employ a remarkable mass of British workers and surrender the lion's share of wealth. A public company may offer shares to the public, must have a minimum capital of Ã, Â £ 50,000, should allow a free transfer of its shares, and usually (as most large public companies will be listed) will follow the requirements of the London Stock Exchange or similar securities market. Businesses may also choose to enter under the Statute of European Companies as Societas Europaea. An "SE" will be treated in every EU Member State as if it were a public company established in accordance with the laws of that state, and may opt in or out of employee engagement.
Once a decision is made about the type of company, the formation takes place through a series of procedures with the registrar in Companies House. Prior to registration, anyone who promotes the company to withdraw investment falls under a strict fiduciary duty to disclose all material facts about its business and finances. In addition, anyone claiming to be a contract in the name of the company before its registration will generally be personally liable for the obligation. In the registration process, those who invest money in the company will sign a memorandum of association stating what shares they will take initially, and ensure their compliance with Company Law 2006. A constitution of a standard company, known as Model Articles, is considered valid, or the corporators may register their respective association articles. Directors must be appointed - one in a private company and at least two in a public company - and a public company must have a secretary, but no more than one member. The Company will refuse enrollment if it is set for unlawful purposes, and the name must be selected which is not appropriate or has been used. This information is filled in on the "IN01" form available on the Company's Home website, and a fee of £ 18 is payable for online registration through Business Link within 8 to 10 days, or a fee of Ã, Â £ 40 when using the IN01 paper form (the fee is Ã, Â £ 100 for same day registration using paper form). The registrar then issued a certificate of incorporation and a new legal personality entered the stage.
Corporate personality
British law recognizes for a long time that a company will have "legal personality". The legal personality means the entity is the subject of legal rights and obligations. It can sue and be sued. Historically, city councils (such as the Corporation of London) or charities would be a prime example of the company. In 1612, Sir Edward Coke said in the Sutton Hospital Case ,
The corporation itself is truly in abstracto , and rests completely in the intention and judgment of the Law; for many corporate aggregates that are invisible, timeless, & amp; lies only in the intent and judgment of the Law; and therefore can not have its predecessor or successor. They may not commit treason, or are prohibited, or excommunicated, because they have no soul, they can not appear personally, but by the Prosecutor. A corporation's aggregation of many can not commit loyalty, because the invisible body can not be personally, can not swear, it is not subject to the displeasure, or death of nature, body, and divers of other cases.
Without a body to be kicked or soul to be condemned, a company does not itself suffer punishment administered by the court, but those who stand to lose their investment will. The Company will, as a separate person, be the first entity to be responsible for any obligations made by the directors and employees on their behalf. If a company does not have enough assets to repay its debt when it matures, the company will go bankrupt. Unless an administrator (someone like an audit company's colleagues, usually appointed by creditors for corporate bankruptcy) is capable of saving business, shareholders will lose their money, employees will lose their jobs and the liquidator will be appointed to sell the remaining assets to distribute as much as possible to creditors not yet paid. But if business persists, a company can survive forever, even as natural people who invest in it and make a change of business or die.
Most companies apply limited liability to their members, which are seen in the suffix "Ltd" or "plc". This means that if a company is completely bankrupt, the unpaid creditors can not (generally) seek contributions from shareholders and employees of the company, even if shareholders and employees benefit substantially before the company's wealth decreases or will assume primary responsibility for losses under the principles of ordinary civil law. The company's obligations are unlimited (companies have to pay all their debts with assets they own), but the obligations of those who invest their capital in the company are (generally) limited to their stocks, and those who invest in labor they can only lose their jobs. However, limited liability only acts as a default position. These can be "contracted", provided that the creditor has the opportunity and the bargaining power to do so. A bank, for example, may not lend to a small company unless the directors of the company provide their own home as collateral for the loan (for example, with a mortgage). As it is possible for two contracting parties to establish in the agreement that a person's liability will be limited in case of breach of contract, the default position for the company can be re-exchanged so that shareholders or directors agree to pay off all debts. If corporate investors do not do this, then their limited liability is not "contracted", their assets will (generally) be protected from creditor claims. Assets are beyond the reach behind the metaphorical "veil of incorporation".
Attribution rules
While the limited company is considered a legal person who is separate from the shareholders and employees, because in fact the company can only act through its employees, from the board of directors down. So there must be a rule to attribute rights and obligations to the company of its actors. This is usually important because the injured third party will want to sue anyone who has the money to pay for the breach of liability, and companies rather than their employees often have more money. Until the reforms in 2006, this area typically becomes significantly complicated by requirements in companies to define object clauses for their business, eg "to make and sell, or lend on trains, trains". If the company acts outside of their object, for example by lending to build trains in Belgium, such contracts are said to be ultra vires and consequently void. This is what happened in the early case of Ashbury Railway Carriage and Iron Co Ltd v Riche . The policy is considered to protect the shareholders and creditors, whose investment or credit will not be used for unexpected purposes. However, it soon became clear that the ultra vires rule limits business flexibility to expand to meet market opportunities. The blank contract may be unexpected and at will hinder the business. Thus, the company begins preparing longer clauses of the object, often adding additional provisions stating that all objects must be interpreted entirely apart, or the company's objects include anything that the director considers reasonable. Now the 2006 Act states that companies are considered to have unlimited objects, unless they choose restrictions. The 2006 Reform has also clarified the legal position that if a company has limited objects, ultra vires action will cause the board of directors to have violated the obligation to follow the constitution under section 171. So a shareholder who disagrees with actions outside the object the company should sue the board of directors for any loss. The contract remains valid and the third party will not be affected by this alone.
Contracts between the company and a third party, however, may turn out to be unenforceable to the principles of regular agency law if the director or employee clearly exceeds their authority. As a general rule, third parties do not have to worry about constitutional details that give power among directors or employees, who can only be hard-earned searching the list at the Company House. In general, if a third party acts in good faith, any contract, even beyond the constitutional authority of the director or employee with whom they are engaged in transactions, is valid. However, if it will appear to the reasonable person that the company's employees will not have the authority to sign the agreement, then the contract may be canceled on the company's example as long as there is no fair bar for cancellation. Third parties will have claims against employees (may be less solvent). First, the agent may have real authority, in which case there is no problem. His actions will be tied to the company. Secondly, the agent may have implied the actual authority (also sometimes called "ordinary" authority), which is within the scope of the ordinary employee's office. Third, the agent may have a "clear authority" (also called an "ostensible" authority) because it will appear to a reasonable person, creating an estoppel. If the actions of company employees have authority derived from the constitution of the company in any of these ways, a third party will only seek help for a breach of obligation (an authoritative letter) against an individual agent, and not to the company as Principal. The Companies Act 2006 chapter 40 explains that directors are always regarded as free from the limitations of their authority under the constitution, unless a third party acting with an unfeeling conviction takes advantage of a company whose director acts outside the scope of authority. For employees in the delegation chain, the less likely that a reasonable contracting party would think a large transaction would have authority. For example, it is unlikely that the cashier of the bank will have the authority to sell the skyscraper Canary Wharf bank.
Problems arise where serious violations, and especially fatal injuries occur as a result of actions by company employees. All claims made by employees in employment will link responsibility to their company even if acting entirely outside of authority, as long as there are some temporal and close relationships to work. It is also clear that the actions of the directors become corporate actions, because they are "the ego and center of corporate personality." But despite strict accountability in the lawsuit, civil settlements are in some cases insufficient to discourage companies pursuing business practices that can seriously harm the lives, health and the environment of others. Even with additional regulations by government agencies, such as the Health and Safety Executive or the Environment Agency, companies may still have a collective incentive to ignore the rules in the knowledge that costs and enforcement possibilities are weaker than potential profits. Criminal sanctions remain problematic, for example, if the company's directors do not intend to harm anyone, there is no retirement, and managers in the corporate hierarchy have systems to prevent employees from committing violations. One step towards reform is found in the Company Corruption and 2007 Corporate Murder Act. This creates a criminal offense for ordinary murder, which means a criminal penalty of up to 10 per cent of the turnover of companies whose managers do business in a very negligent way, resulting in death. Without lifting the hijab remain, however, there is no personal responsibility for directors or employees acting in employment, for corporate murder or otherwise. The quality of corporate accountability to the wider public and their awareness of behavior must also rely heavily on governance.
Pricking the veil
If a company goes bankrupt, there are certain situations where the court lifts the veil of mergers on a limited company, and makes shareholders or directors contribute to paying off the debt to the creditors. However, in English law, situations are very limited. This is usually said to be derived from the "principle" in Salomon v A Salomon & amp; Co Ltd . In this prominent case, a Whitechapel shoemaker put his business under the Companies Act of 1862. At that time, seven people were asked to register the company, perhaps because the legislature had seen the right business vehicle for fewer people to become a partnership. Mr. Salomon fulfilled this requirement by asking six family members to subscribe for one piece each. Then, in return for the money he lends to the company, he makes the company issue a bond, which will secure its debt in priority to other creditors in the event of bankruptcy. The company is completely bankrupt, and the corporate liquidator, acting on behalf of the unpaid creditors, seeks to sue Mr. Salomon personally. Although the Court of Appeal stated that Salomon had defeated the Parliament's purpose in registering a fake shareholder, and would make it compensate the company, the House of Lords stated that as long as formal formal registration requirements are followed, the shareholder's assets should be treated as separate from a separate legal person ie the company. It is not possible, in general, there is the appointment of the veil.
This principle is open to a series of qualifications. Most significantly, the law may require directly or indirectly that the company is not treated as a separate entity. Under the Bankruptcy Act 1986, section 214 stipulates that the directors of the company should contribute to the repayment of the company's debt in closing if they keep the business to gain more debt when they should know that there is no reasonable prospect for avoiding bankruptcy. A number of other cases show that in interpreting the meaning of laws unrelated to corporate law, the objectives of the law must be met regardless of the existence of the company form. For example, in Daimler Co. Ltd v Continental Tire and Rubber Co. (United Kingdom) Ltd , Trading with the Enemy Act 1914 says that trading with anyone from "enemy characters" would be a violation. So even though Continental Tire Co Ltd is a "legal person" established in England (and therefore British) its directors and shareholders are German (and therefore enemies, when the First World War is being championed).
There are also exceptions based on the letters in principle Salomon , although the limited scope is not completely stable. The current rule under British law is that only if the company is set up to commit commission fraud, or to avoid pre-existing liability, its separate identity can be ignored. This follows from the Court of Appeal case, Adams v Cape Industries plc . A group of employees suffering from asbestos disease after working for a subsidiary wholly owned by Cape Industries plc. They sued in New York to make Cape Industries plc pay the debts of a subsidiary. Under conflict of legal principles, this can only be done if Cape Industries plc is treated as "present" in America through a US subsidiary (ie ignoring the separate legal personality of both companies). Rejecting the claim, and following the reasons at Jones v Lipman , the Court of Appeal stressed that a US subsidiary has been established for the legitimate purpose of creating a group structure abroad, and not to avoid accountability in case of asbestos litigation. A potentially unfair result for victims of torture, which can not contract limited liability and may be left alone with an unworthy claim against a bankrupt entity, has been altered at Chandler v Cape plc so the duty of care may be owed by parents to workers of subsidiaries regardless of separate legal personality. However, even though the victims of the lawsuit are protected, the limited position remains the target of criticism in which a group of companies are involved, since it is not clear that the company and the real people should have limited protection of responsibility in an identical way. The influential decisions, although later cast doubt by the House of Lords, were endorsed by Lord Denning MR at DHN Ltd v Tower Hamlets BC . Here Lord Denning MR states that a group of companies, two wholly owned subsidiaries, are single economic units. Since corporate shareholders and mind control are identical, their rights should be treated equally. This allows the parent company to claim compensation from the board for its mandatory business purchase, which is impossible without showing the address at the place of the subsidiary. Similar approaches to treating corporate "groups" or "concerns" as sole economic entities exist in many continental European jurisdictions. This is done for tax and accounting purposes in English law, but for general civil liability the rules that are still followed are that in Adams v Cape Industries plc . It is rare for a British court to lift the veil. Company obligations are generally associated with the company only.
Capital rules
Because limited liability generally prevents shareholders, directors or employees being sued, the Company Acts has sought to regulate the use of company capital in at least four ways. "Capital" refers to the economic value of a company's assets, such as money, buildings, or equipment. First, and most controversially, the Companies Act 2006 section 761, following the EU's Second Corporate Law Guidelines, requires that when a public company begins to trade, it has a minimum of £ 50,000 to be paid by shareholders. After that, capital can be spent. This is largely irrelevant for almost all public companies, and although the Company Act first requires it, since 1862 there has been no similar provision for private companies. Nevertheless, a number of EU member states keep minimum capital rules for their private companies, up until recently. In 1999, at Centros Ltd. v Erhvervs-og Selskabsstyrelsen, the European Court argued that Denmark's minimum capital rule for private companies was a disproportionate violation of the establishment rights for business in the EU. The British private limited company was denied registration by the Danish authorities, but was detained that the refusal was unlawful because the minimum capital rules did not proportionately achieve the purpose of protecting creditors. Less restrictive ways can achieve the same goals, such as allowing creditors to contract for bail. This led to a large number of businesses in countries with minimum capital rules, such as France and Germany, to start incorporating as "UK" Ltd. France abolished the minimum capital requirement for SARL in 2003, and Germany created the GmbH form with no minimum capital in 2008. However, while the Second Corporate Law Regulations are not changed, the rules remain applicable to public companies.
The second step, originally derived from general law but also entered into the Second Corporate Law Guidelines, is to regulate what is paid for the stock. Initial customers for a memorandum for a public company should purchase their shares with cash, although it is then possible to provide the services or assets of the company in return for the shares. The problem is whether the services or assets received are in fact as valuable to the company as the cash share price is the opposite. In common law, In Re Wragg Ltd says that any "honest and inappropriate" exchanges approved, between the company and the buyer of shares, shall be deemed valid. Then it is also held that if the given asset may be understood by both parties insufficiently, then this will be considered a "colorable" stain, and the stock may be deemed not paid properly. Shareholders have to pay again. The laissez faire approach is changed for public companies. Stocks can not be issued in return for services that will only be provided at a later date. Shares may be issued in exchange for assets, but public companies have to pay for independent appraisals. There is also an absolute limit for what stock can be bought in cash, based on the "nominal value" or "nominal value" of the stock. This refers to the number chosen by the company when it started selling the stock, and it can be anything from 1 cent to the market price. British law always requires that some nominal values ​​be set, since it is assumed that the lower limit of some kind must exist for how many shares can be sold, even though this figure is chosen by the company itself. Any stock, therefore, is still required to have a nominal value and the stock can not be sold at a lower price. In practice this means the company always sets a very low nominal value below the issue price, that the actual market price at which a stock ends up trading is highly unlikely to slump so far. This has led to criticism for at least 60 years that the rule is useless and best abolished.
The third, and the most important strategy for creditor protection, is that dividends and other returns to shareholders can only be made, in general, if a company has an advantage. The concept of "profit" is defined by law as having assets above the amount that shareholders, who initially buy shares from the company, contribute in return for their shares. For example, a company may launch its business with 1,000 shares (for a public company, called an "IPO" or an initial public offering) each with a nominal value of 1 cent, and an issue price of Ã,  £ 1. The shareholder will buy the à ,  £ 1, and if everything is sold, Ã,  £ 1000 will be the company's "legal capital". Profits are whatever the company produces above 1000's, though as the company continues to trade, the stock market price may rise to  £ 2 or  £ 10, or even fall to 50 cents or some other amount. The Companies Act 2006 states in section 830 that dividends, or other types of distribution, can only be granted from surplus profits outside legal capital. In general, the board's decision, confirmed by the shareholder resolution, whether to announce a dividend or perhaps just retain revenue and reinvest them into the business to grow and expand. The calculation of the company's assets and liabilities, losses and profits, will follow the Generally Accepted Accounting Principles in the UK, but this is not an objective, scientific process: a variety of different accounting methods can be employed that can lead to different judgments than when there is profit. The prohibition to fall under legal capital applies to "distribution" of any kind, and "disguised" distributions are also caught. This has been done to include, for example, unwarranted salary payments to the wife of the director when she is not working, and transfer of property in a group of companies with half the market value. A general principle, however, recently described in Property Progress Co Ltd v Moorgarth Group Ltd is that if a transaction is negotiated in good faith and long-handed, then it may not be canceled, and this is apparently so even if it means the creditor has been "robbed". If the distribution is created without meeting the legal criteria, then the company has a claim to recover the money from any recipient. They are responsible as guardians of the building, which may reflect the general principles of any action in unfair enrichment. This means that the responsibilities may be strict, depending on the change of defense position, and the tracking rules will apply if the incorrectly paid assets of the company have been forwarded. For example, on the Sugar Company's directors' bankruptcy, the directors of bankrupt companies argue that they are unaware that their own dividend payments are unlawful (since there is actually no gain) because their tax advisors say it's fine. The Court of Appeal believes that ignorance of the law is not a defense. A disagreement exists as long as one has to know the facts that show dividends will be against the law. Directors may also be liable for breach of duties, and to refund incorrectly paid money if they fail to take reasonable action.
Legal capital must be maintained (not distributed to shareholders, or distributed "in disguise") unless a company officially reduces its legal capital. Then it can create a distribution, which may be desirable if the company wants to shrink. The private company must have 75% of the votes from the shareholders, and the director must ensure that the company will remain a solvent and will be able to pay its debts. If this turns out to be a negligent statement, the director may be prosecuted. But this means it is difficult to get any profit back from shareholders if the company is really broke, if the director's statement looks good at the moment. If not all directors are prepared to make a solvency statement, the company may apply to the court for a decision. In a public company, a special resolution must also be passed, and a court order is required. The court may make a number of orders, for example that the creditor must be protected with security interests. There is a general principle that shareholders should be treated equally in making capital reductions, but this does not mean that unequal shareholders should be treated equally. In particular, whereas ordinary shareholders may not lose their shares disproportionately, it is lawful to cancel preferenceal shares before others, especially if those shares are entitled to preferential payments as a way to consider "the position of the enterprise itself as an economic entity". Economically, companies that buy back their own shares from shareholders will achieve the same effect as capital reductions. Initially it was banned by general law, but now even though the general rule remains in section 658 there are two exceptions. First, firms may issue shares on condition that they may be redeemed, even if only if there is a clear authority in the constitution of public corporations, and repeat purchases can only be made from distributed profits. Second, since 1980 stocks can be bought back from shareholders if, again this is done from a profit that can be distributed. Importantly, the directors must also state that the company will be able to pay all its debts and continue for next year, and shareholders must agree to this with a special resolution. Under the Registration Rules for public companies, shareholders should generally be given the same buyback offer, and get the stock repurchased pro rata. How many shares held by the company as treasury or canceled shares must be reported to the Companies House. From a corporate perspective, legal capital is being reduced, hence the same rules apply. From a shareholder's perspective, a company that repurchases a portion of its shares is almost equal to paying dividends, except for one major difference. Taxation of dividends and stock repurchases tend to be different, which means that frequent repurchases are popular simply because they "dodge" The Exchequer.
The fourth major area of ​​the regulation, which is usually regarded as preserving the company's capital, is the prohibition of companies that provide financial assistance to others to buy the company's own shares. The main problem meant by the rule to prevent is the purchase of debt, where, for example, an investor gets a loan from a bank, secures a loan to the company to be bought, and uses the money to buy the stock. It is seen as a capital problem in the sense that if the business proves unsustainable, all company assets will be confiscated under mortgage terms, although technically it does not reduce the company's capital. Buying leveraged, in essence, is the same as a bank that gives someone a loan to buy a home with a 100 percent mortgage in that house. However, in the case of a company, a bank may only be one of a large number of creditors, such as employees, consumers, taxpayers, or small businesses that depend on corporate trading. Only banks will have priority for their loans, so the risk completely falls on other stakeholders. Financial assistance for the purchase of shares, primarily compensating for the loss of takeover loans, is therefore seen as encouraging risky businesses vulnerable to failure, thus harming creditors other than banks. It was banned from 1929. The ban remained in the case of a public company, but the Companies Act 1981 loosened the company's 2006 Restrictions section and section 678, following various sources of academic criticism, lifting a ban for private companies altogether. It becomes possible to "take private" public company (on its purchase, change company from plc to be Ltd.). The result is an increasing number of leveraged purchases, and an increase in the private equity industry in the UK.
Corporate governance
Corporate governance mainly deals with the balance of power between the two basic organs of British companies: boards of directors and general meetings. The term "government" is often used in a more narrow sense in reference to the principles of the Code of Corporate Governance of the United Kingdom. This made recommendations on the structure, accountability and remuneration of the board of directors in listed companies, and developed after Polly Peck, BCCI and Robert Maxwell scandals led to the Cadbury 1992 Report. However, it puts corporate governance widely in the UK's legal focus. on the relative rights and obligations of directors, shareholders, employees, creditors and others deemed to have "milestones" in the success of the company. The Companies Act 2006, together with other law and law, establishes the irreducible minimum core of compulsory rights for shareholders, employees, creditors and others to be obeyed by all companies. UK rules typically focus on protecting shareholders or people who invest, but above the minimum, the company's constitution is essentially free to allocate rights and obligations to different groups in whatever form it desires.
Constitutional separation of powers
The company's constitution is usually referred to as the "Articles of Association." Companies are considered to adopt a set of "Model Articles", unless the initiators choose different rules. The Model article sets out important procedures for conducting company business, such as when to hold a meeting, appointing a director, or setting up an account. These Rules may always be altered unless the term is a mandatory term originating in the Companies Act 2006, or a similar mandatory law. In this sense, the constitution of a company is functionally similar to any business contract, although it is usually a variable among contracting parties with less than consensus. In Belize At Belize v Belize Telecom Ltd. Lord Hoffmann argues that the court interprets the meaning of the company article in the same way as any other contract, or piece of law, which takes into account the context in which it is formulated. So in this case, the precise construction of a company article leads to the implication that a director may be discharged from the office by a shareholder (and does not have a job for life), although a literal construction would mean no one has both. Stock classes are required to remove the director's under the article. Even if the company's articles are silent on a matter, the court will interpret the gaps to be filled with provisions that are consistent with the rest of the instrument in its context, as in the case of the old Attorney v Davy where Lord Hardwicke LC argues that a simple majority is enough for the selection of a pastor.
Typically, corporate articles will provide general management power on the board of directors, with the full power of the director to delegate duties to other employees, in accordance with the rights of the instructions provided for the general meeting acting with a three-quarters majority. This archetype can theoretically vary in various ways, and to the extent not inconsistent with the Act, the courts will enforce the balance of power. In the Automatic Self-Cleansing Syndicate Co Ltd v Cuninghame filter, a shareholder sued the board for not following a resolution, which brings a majority of the usual votes, to sell the company's assets. The Court of Appeal rejected the claim, because the articles stipulated that a three-quarters majority was required to issue special instructions to the council. Shareholders always have the option to get votes to change the constitution or threaten directors with removal, but they should not avoid the separation of powers found within the company's constitution. Although an older case creates an element of uncertainty, the majority opinion is that other provisions of the company's constitution produce private rights that can be enforced by individual company members. The most important is the right of members to vote at the meeting. Sound should not always be attached to stocks, because preferential shares (for example, those with extra dividend rights) often do not vote. However, common stock always has a voice and in Pender v Lushington Lord Jessel MR states a very sacred sound that can be enforced like a "property right". Otherwise, articles may be enforced by any member under contract. The Company is excluded from the Contract (Third Party Rights) Act of 1999, so that those who are granted benefits under the constitution, but not members themselves, may not always demand compliance. Partly for certainty and to achieve the purpose of the Act would prohibit, shareholders in tightly held small companies often complements the constitution by entering into shareholder agreements. With contract shareholders can manage their rights outside the company, but their rights in the company remain a separate issue.
Technically, shareholders have very few rights in the Companies Act 2006, because only in some places are "shareholders" (those who invest capital in companies) are clearly identified as subject rights. Instead, "members" have rights in UK corporate law. Anyone can become a company member through an agreement with others involved in a new or existing company. However, because of the bargaining position people have through capital investment, shareholders are usually the only members, and usually have a monopoly over governance rights under the constitution. In this way, Britain is a "pro-shareholder" jurisdiction relative to European and American partners. Since the Report of the Corporate Legal Changes Committee , led in 1945 by Lord Cohen, resulted in the Company Act 1947, as a member and voter in a public company meeting, the shareholders have the right to be removed by a simple majority, while in Germany, and in most American companies (especially those incorporated in Delaware), directors can only be removed for "good reasons". Shareholders usually have the right to change the constitution of companies by a majority of three-quarters, unless they choose to keep the constitution at a higher threshold. Shareholders with the support of 5 percent of the total votes may call the meeting, and may circulate advice for resolutions with the support of 5 percent of the total votes, or a hundred other shareholders holding more than Ã, Â £ 100 in each share. Important decision categories, such as large asset sales, merger approval, takeover, corporate closures, political donations, stock repurchases, or (for now) unbound, say on directors' payments, are reserved exclusively for shareholder bodies.
Investor rights
While shareholders have a privileged position in UK corporate governance, most of them are institutions - especially asset managers - holding "someone else's money" from pensions, life insurance policies, and mutual funds. The shareholder institution, which is included in the list of shares of public companies on the London Stock Exchange, is primarily an asset manager and they rarely exercise their governance rights. In turn, asset managers take money from other institutional investors, especially pension funds, mutual funds and insurance funds, owning most of the stock. Thousands or perhaps millions of people, especially through pensions, are beneficiaries of the return on stock. Historically, institutions often did not vote for or participate in rallies about their beneficiaries, and often exhibit uncritical support management patterns. Under the 2004 Suspension Law, sections 241 to 243 require that the trustee of the pension fund be selected or appointed to be accountable to the recipient of the funds, while the Companies Act 2006 section 168 ensures that the director is accountable to shareholders. However, the rules of contract, equity and fiduciary obligations operating between asset managers and real capital investors have not been codified. Government reports have suggested, and case law requires that asset managers follow instructions about the voting rights of investors in a pool of funds in proportion to their investments, and follow instructions wholly when investors have separate accounts. Some institutional investors have been found to work "behind the scenes" to achieve corporate governance goals through informal but direct communication with management, although increased concerns have grown since the global financial crisis that asset managers and all financial intermediaries face structural interest conflicts and must be barred from voting other people's money completely. Individual shareholders form an increasingly small share of total investment, while foreign investment and institutional investor ownership have increased their share over the past forty years. The institutional investor, who deals with the money of others, is bound by fiduciary obligations, derived from the law of trust and the obligation to perform care that comes from the common law. The 2010 Stewardship Code, drafted by the Financial Reporting Board (corporate governance supervisor), strengthens the duty on agencies to actively engage in government affairs by revealing their voting policies, voting records and voting. The goal is to make directors more accountable, at least, to capital investors.
Employee rights
Although not yet the norm, employee participation rights in corporate governance have existed in many specific sectors, especially universities, and many workplaces are organized as partnerships. Since the turn of the 20th century Stories such as the Port of London Act 1908, the 1967 Iron and Steel Act, or the Post Office Act of 1977 require all workers in certain companies to vote for directors on the board, the first "codetermination" law in the world. However, as many of the updated Acts of the Apostles, the Company's 2006 Law currently lacks the general requirement for workers to vote in general meetings to elect directors, which means corporate governance remains monopolized by shareholder or asset managers. In contrast, in 16 of the 28 EU member states, employees have the right of participation in private enterprises, including the election of members of the board of directors, and a binding vote on decisions on individual employment rights, such as dismissals, working hours and social or accommodation facilities. At the board level, UK corporate law in principle allows every measure of employee participation, along with shareholders, but voluntary action rarely occurs outside the employee division scheme that usually brings little noise and increases the financial risk of employees. Importantly, the Companies Act 2006 section 168 defines "members" as those who have the ability to elect councils. According to article 112, a "member" is anyone who originally advertises their name into a company memorandum, or is subsequently included in the members list, and is not required to contribute money as opposed to, for example, work. A company may write its constitution to create an "employee" member with voting rights under the terms of his choice.
In addition to national rules, under the Statute of European Companies, businesses that join as Societas Europaea may choose to follow the Guidelines for employee engagement. The SE can have a two-tier board, as in a German company, where shareholders and employees choose a supervisory board which in turn designates the management board responsible for running the day-to-day company. Or SE can have a tiered board, because every UK company, and its employees and shareholders can choose board members in the desired proportions. An "SE" may have fewer employee participation rights than previously available, but for British companies, there is likely to be no participation in any case. In 1977 the Government Investigative Committee Report on Investigation submitted by the Government, in line with the new Codet Tightening Act of 1976, and the inclusion of a Fifth Rule of the EU Company's Draft Law, that the board of directors must have a representative number the same is chosen by the employee because it exists for the shareholders. But reforms stopped, and were abandoned after the 1979 elections. Despite successful businesses like John Lewis Partnership and Waitrose that are fully managed and owned by the workforce, voluntary participation is rare. Many businesses run employee-sharing schemes, especially for highly paid employees; However, such stocks rarely form more than a small percentage of capital in the enterprise, and these investments entail substantial risks for workers, given the lack of diversification.
Board of Directors
The Board of Directors designated to establish a central authority board in a British company. In carrying out their functions, directors (whether officially appointed, de facto, or "shadow director") have a series of tasks to the company. There are currently seven main tasks codified under the Companies Act 2006 sections 171 to 177, reflecting common law and fair principles. This may be unlimited, exempt or contracted from, but the company may purchase insurance to protect the director for a fee in the event of a breach. Solutions for breach of duty are not codified, but follow general law and equality, and include compensation for damages, restitution of unauthorized gain and certain performance or orders.
The job of the first director under section 171 is to follow the constitution of the company, but also to train only the power for the "right purpose" implied. Before the right goal cases often involve the director robbing a company's assets for personal enrichment, or trying to install a mechanism to thwart takeover efforts by outside bidders, such as poison pills. Such practices are inappropriate, because they transcend the reasons that directors delegate their powers. The most important maintenance tasks can be found in Section 174. The Board of Directors should demonstrate reasonable awareness, skills and competence for a person performing office functions, and if a director has a special qualification, a higher standard will be expected.. However, under section 1157 the court may, if the directors neglect but prove to be honest and should be forgiven, freeing the director from paying compensation. The "objective plus subjective" standard was first introduced in the incorrect trade terms of the Insolvency Act 1986, and applied at Re D'Jan from London Ltd . The liquidator attempted to recover the compensation from Mr D'Jan, who failed to read the insurance policy form, not revealing her previous director of a bankrupt company. The policy was nullified when the company's warehouse was burned. Hoffmann LJ considers Mr. failure D'Jan is negligent, but runs a policy of freeing responsibility on the grounds that he owns almost all of his small business and is just risking his own money. The court insisted that they would not judge unfavorable business decisions with the benefits of backward, but the failure of simple assessment procedures would be vulnerable. Cases under the Director of the Company Disqualification Act 1986, such as Re Barings plc (No. 5) indicate that the board of directors will also be responsible for failure to adequately supervise employees or have an efficient risk management system
Source of the article : Wikipedia
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