Company Law Assignment - Carillion

Added on - 24 Apr 2021

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Running head: COMPANY LAWCompany LawName of the StudentName of the UniversityAuthor Note
1COMPANY LAWIntroductionThe company Carillon has been in news because of its corporate failings. The purpose ofthis paper is to analyze the situation ofCarillionwhich has been subjected to corporate failing inthe light of directors’ duties and insolvency law in UK. The paper also provides the steps whichstakeholders and shareholders ofCarillionmay have taken against the directors for their actionsunder company law.Fiduciary and statutory duties of directors under Company LawDirectors of a company have been provided the sole responsibility to manage the affairsof the company as all shareholders and owners cannot directly participate in its operations(Hannigan 2015). In the light of the position which the directors have in the company they owe afiduciary duty to all stakeholders and shareholders of the company as provided by the case ofRegal (Hastings) Ltd v Gulliver [1942] UKHL 1. The duty is to act in best interest of thecompany and always give priority to the company’s interest over personal interest. TheCompanies Act 2006 specifically lays down statutory duties which the directors of the companyhave to comply with while discharging the duties in relation to the company through section 171-177 (Keay 2014). The directors are in a position to manipulate the functioning of the company insuch a way that the interest of the shareholders and stakeholders is overlooked in relation to thepersonal interest of the director as per Re D'Jan of London Ltd [1994] 1 BCLC 561. Thisposition allows the directors to misuse the resources of the company for making personal gainsand subjecting the company and other shareholders and stakeholders to losses as per HowardSmith Ltd v Ampol Petroleum Ltd [1974] AC 821. The boards also as the responsibility ofprovide accurate information in the general meeting however it failed to do so in this case.
2COMPANY LAWThe feature of limited liability which is present in the company further helps the directorsto get away with the losses which have been incurred by the organisation due to their activities(Roach 2016). This is because the shareholders and directors are only liable to pay the amountwhich they have invested in the company when the company faces insolvency as per Salomon vA Salomon & Co Ltd [1896] UKHL 1. A similar kind of situation has been seen in the UnitedKingdom with respect toCarillion. It has been seen that due to the actions of the directors theemployees and other stakeholders of the company have been subjected to significant detriment.The company which was involved in outsourcing and construction has faced one of the mostspectacular corporate failures in the United Kingdom. The company was made insolvent when ithad debts of over £2 billion and is only left with £29 million in its bank (O’Grady 2018). It wasthe duty of the directors to ensure the interest of the stakeholder while making a decision inrelation to the company as they are aware of the fact that their decision would have a directimpact on the shareholders and the stakeholder. The directors also have the duty to ensure thatthey make correct and evidence based disclosures, however the annual report of the company didnot provide for any of the problems faced by the company ( 2018). Theboards also as the responsibility of provide accurate information in the general meeting howeverit failed to do so in this case (French et al. 2014).Insolvency LawThe insolvency law which is present in the United Kingdom had made it more difficultfor the stakeholders such as pensioners associated with the company to recover the losses whichhas been incurred by them due to the corporate failure. The primary legislation which governsinsolvency in UK is the Bankruptcy Act 1952 and the Insolvency Act 1986. According to theBankruptcy Act when our organisation has become bankrupt the first priority is to be provided to
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