Legal Issues of Company | Report

Added on -2019-09-18

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IntroductionJane Ball, the corporate partner of the company has sent a memo to Ellen Collini, the associate ofthe company to prepare a report for Westlands Investment PLC for giving them certain advice onsome of the issues that they are facing currently. Westlands is one of the most importantcorporate clients and thus, this report aims to help the company in dealing with its legal issues. Issue 1: Westlands is an active fund manager and it has shareholdings in almost 200 companies of UK. Infew of them, they even have 5% or more ownership of the total shares of the company. Thecompany is very serious about its responsibility as a shareholder but the company is not muchaware about what are its rights and responsibilities as a shareholder. Advice:Westland should first understand the difference between a shareholder and a director.Shareholders are the members of the company as they own its shares (Goldstein, 2014). Butdirectors are the ones who manage the shares so that its value is maintained and it does notdecline in comparison to the competitors (Manzaneque, 2016). Westlands has shareholdings inother companies which mean that they own the shares in those companies. As shareholders, theyare advised to fulfill the following responsibilities and practice the following rights: Division of responsibility between shareholders and directorsDirectors of the company are responsible for maintaining and practicing the stewardship (Wu,2016). They have to manage and supervise the activities and practices of the company. They areresponsible for all the decisions of the company that they take by mutually deciding the best1
course of action for the company. They are also responsible to serve the interest of theshareholders of the company. They have to take care of the fact that whatever money theshareholders invest in their company, it gets utilized properly and all the resources arechannelized in a proper direction. On the other hand, shareholders of the company are responsible for fulfilling the financialrequirements of the company by making investment in its plans and procedures. To some extent,shareholders are also responsible for the decisions that companies take (Singh, 2015). This isbecause when shareholders are dissatisfied with the way directors run the company, they canremove them or they can refuse to re-elect them. The statutory rights and responsibilities under UK legislationThe UK legislation follows the Companies Act 2006 for deciding the rights and responsibilitiesof shareholders of a company. The Companies Act has a provision of forming and agreementwith the shareholder which has all their rights and responsibilities mentioned in it. Though, therights are different as per the class of share that the shareholder has, but the general rights aregiven below (De Lacy, 2013). These rights are also applicable to Westlands. The shareholders have the Right to attend the general meeting of the company and vote init. Even if they cannot attend and vote, they can appoint a proxy on their behalf, bypassing a written resolution who can vote in the meeting.The shareholders get a dividend which is a part of the profits of the company. So, theyhave the right to share the profits of the company in the form of dividend.2
During the winding up of the company and after paying the dues of the creditors, theshareholders are paid by the company. So, they have a right on distribution of incomeduring winding up.They also have the right to get a copy of the annual accounts of the company so that theycan see the progress of the company.Finally, the shareholders have the right to sue the company if they find that it is indulgedin any unlawful activity and they can make the company act in a lawful manner. Therefore, Westlands has all the above statutory rights and responsibilities under UK legislationThe provisions of the UK Stewardship CodeThe Stewardship Code of UK aims to enhance the quality of engagement between the companyand its investors (Council, 2012) so that they are able to improve their long term risks adjustedreturns to the shareholders. The provisions of the code involve the following elements (Reisberg,2015):1.The institutional investors have to disclose their policy regarding the discharge ofstewardship responsibilities publically. 2.The investee companies have to be monitored by the institutional investors.3.They also have to clearly make the guidelines related to escalation of their stewardshipactivities. 4.The institutional investors need to act collectively with the other investors wheneverappropriate.5.Then, the polices related to the voting rights and the disclosure of the voting have alsoto be made clear3

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