Company Law: Characteristics of Sole Trader Partnership, EU Functions and Policies, Rights of Shareholders and Rules of Directors

This report covers the characteristics of sole trader partnership, EU functions and policies, rights of shareholders and rules of directors. It also covers the role of auditor, priority of creditors and the winding up process. The report explains the different forms of corporations and the rights of shareholders and directors. It also discusses the responsibilities of directors towards creditors in financial distress.

Company Law

TABLE OF CONTENT
INTRODUCTION.....................................................................................................................................3
TASK1.....................................................................................................................................................3
TASK2.....................................................................................................................................................6
TASK3.....................................................................................................................................................9
CONCLUSION.......................................................................................................................................11
REFERENCES.........................................................................................................................................12

INTRODUCTION
Company law is the body of law governed with different relations, rights that are
being conducted of persons, organisations, companies and business practices. This provides
out a legal practice which is being related to Corporation and also govern out the
responsibilities and rights related to companies and the process related to rights of directors,
dissolution and registration of company. This mainly a practice which is being related to all
the commercial and contract law. The main purpose of this law is it helps out to maintain the
standards, also provides resolution of disputes, maintaining law and order and also protecting
the rights and liberties of corporations and individuals1. This report will cover characteristics
of sole trader partnership of public and private companies with different functions of EU and
policies needed for regulation of companies. With the rights of shareholders and the rules of
directors. Furthermore, it will also cover the role of auditor, Priority of creditors and the
winding up process.
TASK1
Sole proprietorship is also known as sole trader is mainly all the business activities
which are being privately owned by one individual and they will not be any kind of legal
distinction between the business practice and the owner. All the profits are being gained by
the owner itself and they will have unlimited responsibilities on account of losses and debts.
It is mainly a form of business in which single owner used to carry out total responsibilities
of the organisation and the business is mainly being run by a sole owner all die risk and the
failure of business lies on the owner itself. Single man is mainly the organisation of all such
business practises2. There are some important characteristics of sole proprietorship for
public and private companies which are like firstly they have sole ownership as a single
person used to carry out all the business practises and that person relates to all the risk and the
profit that is being arise in the business practice and they were being personally liable for all
the agreements. Secondly there is mainly Limited work area which is being provided to the
sole proprietorship as all the capital acquiring is limited so the organisational skill with the
individual is limited. Thirdly no legal formalities are being needed in all such business
practises as all other business organisations need proper registration but in sole proprietorship
1 Ferran E, 'Corporate Mobility And Company Law' (2016) 79 The Modern Law
Review
2 Wymeersch E, 'Company Law In Europe And European Company Law' [2017] SSRN
Electronic Journal

There will not be any kind of formalities in regarding to their public and private business
practice. Fourthly, All the public and the private sole trader business practices have to
maintain inefficient tax structure as they do not have to return tax that were being filed for
businesses and again for the company’s profit and loss. As they can pass a small portion of
their companies profit and loss to their personal income tax return. Other than that, all the
corporation will have to file corporate tax return. Sole trader will have to pay self-
employment tax3.
European Union directs and codify all the European company law through which
they try to operate and maintain the separate company act in order to maintain a proper
compilation of directive principles and regulations. This mainly helps out to establish all the
efficient laws for the companies and also to maintain corporate governance framework.
European Union used to undertake all the employees, investor and all the improvement
related to business environment and EU. The main function of EU companies is like to
conduct Cross-border economic activities which helps out to maintain the globalisation and
better business transactions and also implements out companies to make friendly relations
and terms and also increase the growth in production. Second important function is to carry
out business on single EU brand name. As European Union focus on maintaining all the
regulations and directive principles according to their laws and with that, they try to
implement all the business practises to be carried out according to the brand name of EU.
Thirdly it helps out to encourage the export and import business activities in whole EU
countries. As their main motive is to enhance the business and also to outgrow their resources
and production the proper validity and for that they try to maintain their treaties and
globalisation with proper import and export facilities and providing all the countries a better
profit and production with their goods and services4. Other than that, the EU companies focus
on providing all internal market with a proper sustainable development and with all the
prevention of social exclusion and advancement in their technological development. All the
EU companies follow all the important regulation with the harmonisation of their national
rules and also follow the cross-culture trade and business treaties.
Incorporation is usually a process through which new and all the existing business
can be registered as limited company. A company is mainly being known as a separate legal
entity which has their own perpetual identity for all those who used to run it. All such
3 Lim E, 'Attribution In Company Law' (2017) 77 The Modern Law Review
4 Oliver M, and Marshall E, Company Law (Pitman 2016)

business which is to carry vast majority and have limited liabilities where the members is
limited their shares or by guarantees. All the EU citizen are being entitled to start their own
business in any of the EU country or they can also set up any subsidiary branch in an existing
EU-based business that were already being registered in one of the EU countries. The major
requirements for it is they should complete all the important documentation and procedure is
through single administrative bodies. The costing should be less than EUR100, they should
complete all the formalities and registration online in EU country5. There is mainly
applicability of you funds that are being available for starting a business activity for all the
EU countries. And in order to expand the business in European country as in public limited
liability company or in private business there should be following above all the important
rules like registration, documentation and many more all the accounting rules were being
made according to Europe in company is for the financial institution and insurance
undertaking. And they generally have Same rules as that of European companies.
In order to incorporate in UK and companies it is important to have one or more
individual being involved information of company with a lawful procedure and they will
have to complete the memorandum with all the formalities and agreements to form a
company. They should be legally capable to make a contract and there can be public limited
company, private companies with limited shares and with limited by guarantees. It mainly
incorporates three important ways which includes the electronic software filing, web services
and paper documents filing through which all the registration procedure can be implemented
by the EU companies and all the applicability and Documentation can be framed.
Other than that all the registration process is merely same like the name should be proposed
and proper MOA and AOA is being formed with the details and registration.
As there was general governance of EU with the corporate areas and companies there
has been analysed that certain policy issues were being regulated regarding to laws and
legislations concerning for the rights of employees and with that the withdrawal of
agreements that were being generated6. There were changing in laws and norms that were
being arise at the time of EU as they used to impose all their laws regarding to the European
company law implementations through which they try to analyse and regulate all the
5 Engsig Sørensen K, 'Branches Of Companies In The EU: Balancing The Eleventh
Company Law Directive, National Company Law And The Right Of Establishment' (2017)
11 European Company and Financial Law Review
6 Fleischer H, 'Legal Transplants In European Company Law – The Case Of Fiduciary
Duties' (2017) 2 European Company and Financial Law Review

important legislative areas with their foregoing tendencies. The focus on employment rights,
equality act, trade union and labour relations and all the acts that are being related to
consumers, employment and all the company’s regulatory areas. This mainly provides out the
political issues through which the government has made compilations to implement all such
strategies through which people Will acquire safe environment.
TASK2
Company Law regulates different forms of corporation that were being made under
companies act 2006. As companies can be private or public and in all the public companies
the liability for members is mainly limited by shares and for private company’s liabilities
arises with the shares or with the help of guarantee. All the company limited by shares
usually carry out their separate legal personality from their shareholders and all the important
liabilities of the shareholders is mainly limited. For all the private companies shares issued
are mainly limited with the capital requirement and both the private and public companies
can have single member or can have more than two or three shareholders under it.
Shareholders have some basic rights for their public and private companies and their rights
usually being dependent on attaching with the companies act like rights that are being related
to appointment of director as they can appoint a director for the company and for the better
functioning of it7. Right to be informed before taking any important actions for the company.
Right to vote. Right to call a general meeting in order to discuss some important working
procedure for the company right to pass some important resolution and to prevent a meeting
that has been held on a short notice. Right to receive the shares from the company’s profit
that were being on by them as a company can choose to distribute and share their profit and
payment with the shareholders. Right to receive documents from the company as all the
shareholders have the right that they can generally take the annual report and accounts in any
kind of document copy with the help of written resolution. Right to inspect statutory books
and all the constitutional documents. As according to companies act 2006 shareholder can ask
at any time for the number of documents which includes the term and directed services and
agreements with the provisions and the records. Right to any kind of final distribution for the
winding up company as they are usually has different shares and rights for the distribution
and the shareholders have the right to take all the final distribution from their company and a
members8.
7 Keenan D, Company Law (Pearson Education UK 2018)

The director and shareholders other two important bodies in the company and they
have important role as directors used to manage the company’s business any proper strategic
and operational decisions are being implemented by them. And they are being appointed by
the shareholders in order to manage all their day-to-day affairs. Shareholders used to have
additional rights on the company as they help out to take an important decision for the growth
of the company. The liability of the director in the shareholder in the company are to
maintain uniformity and proper welfare for the company as they can be disqualified on any
kind of criminal offence or any breach of obligation that is being performed while running
the company. The general duties that are performed by the director are like to promote
growth of the company, to implement independent judgements for the welfare of company, to
maintain an exercise reasonable care with due diligence and skill. To avoid all the conflicts of
interest and also maintain friendly environment with better communication between the
members. They should not accept any kind of benefit from the third parties. They should
declare other directors about the proposed transactions. Shareholders on the other hand have
important duties to give their free judgements and also take regular an active part in all the
important decision making and also avoid conflicts for the company. All the record keeping
should be maintained by them in order to have safer rules and guidelines9.
It is the important duty of director to promote growth and success for the company
and also to maintain independent judgement with all the reasonable care and caution and also
to avoid conflicts. If the director breached their duty the company will thereby take the
action against the director and shareholders can also claim against directors when they had
suffered any kind of financial loss or damage personally or if they tend to believe that other
directors would have been prevented claim that were being made by company10. Some of the
consequences for the breach are like the director will be removed from the office through
the voting made by the shareholders either temporary or permanently, the restoration of the
companies property can be made, All the transactions that were being made at the time of
breach will be set aside, and interim injunction can be raised in order to prevent all the loss
and the damage that has been suffered by the breach of directors duty, compensation and
damages can be claimed for the financial loss that were being incurred and criminal fines can
8 Sørensen K, 'Enforcing EU Company Law: Requirements And Limitations In
Implementing Penalties For Infringements Of EU Company Law' (2017) 18 European
Business Organization Law Review
9 Hamilton W, Company Law (Gale Ecco, Making Of Mode 2017)
10 Taylor C, Company Law (2018)

be imposed on the directors for all the defaults that were being made by them while acting for
the company. As when the director is being found in order to breach their obligation the
company can also claim for restitution of profits in which when the company suffered the
loss due to the director’s misconduct, they can go to the court for relinquishment of the
company for the personal profit at were being made, restoration of property can be made of
directors in order to make hold off on any property that were being belong to company. All
such actions can be taken by voting and also by going to the court in order to avoid all the
future issues. As no director have a right to do any kind of such activity personally while
performing any act that is for the benefit of company, They were not being allowed to use the
company for their personal interest11.
The directors have major responsibility towards creditors when the company is in
financial distress and in formal insolvency it is the important duty of director to promote
growth and success of the company and to focus on the interest of members is being replaced
by focusing on the duty to act toward the interest of company and its creditor as a whole. The
director of the company will have the duty to minimise all the losses of the company’s
creditors into focus on providing them the maximum benefits by removing them from the
financial difficulties. They should take on account of interest of creditors as their prime
source and also consider to propose dividends and all distribution with an immediate cash
flow implication by maintaining the containing ability for the company in order to remove the
downfall. If the company is going to insolvent liquidation the director will be liable and will
have to focus on the creditors to maintain and take every step-in order to minimise the
potential loss to creditors12. Directors have the responsibility for maintaining and complying
all the laws in context of financial crisis and instability and they should include the legal
systems through which they will help creditors in order to remove from the challenges of
financial difficulty, improper measures are to be taken with the help of their shareholders and
the company funds and shares through which they can help the creditors to remove from the
other loss which is being created by their actions.
11 Lombardo S, 'The Comparative, Law And Economics Analysis Of Company Law.
Reflections On The Second Edition Of The Anatomy Of Corporate Law. A Comparative And
Functional Approach' (2018) 8 European Company and Financial Law Review
12 Dean J, 'A. Dignam And J. Lowry, Company Law B. Hannigan, Company Law'
(2016) 47 The Law Teacher

TASK3
Auditor are the authorised personnel Who used to review and also verify all the
accuracy regarding the financial records and also try to ensure that companies are been
complying with all the tax norms. The mainly focus on protecting the business from all the
frauds and misconduct. They are the trained individual who used to keep close monitor,
review, verifies all the accuracy regarding the financial records that were being maintained in
the company. They are the individuals who used to ensure company is to maintain and
comply in order to protect the business from all the frauds and also to maintain the financial
documents. Auditor used to work as an employee in the companies and they are only mainly
being known as internal auditors. The major role of internal auditor of company is to stay
compliant and manage all the taxes in an effective manner. According to section 139 of
companies act all the companies have to appoint an auditor they used to perform various roles
and duties like preparation of audit reports which provides out the appraisal regarding the
company’s financial position, prepare certain reports which will provide out all the form of
negative opinions that are being necessary in order to gather the information13. Auditors helps
out to make enquiries regarding the personal expenses, loans, advances etc. and also comply
with all the auditing standards that are being issued by the central government The used to
report frauds in the company which were being taken place and also assist investigation in
order to know about the proper details regarding the smooth functioning of company. Thus,
Auditors are mainly the person who used to comply with different regulations and rules that
are being needed in business through which all the significant and efficiency is being
maintained in the companies and they also help out in maximising the productivity and also
in implementing different strategies that are being rude important for financial records that
are being maintained. They used to keep an overlook on all the accuracy and financial records
which were being made in order to protect the business from all the frauds14.
Winding up its process of dissolving any organisation or company in which company
is being seized in order to perform any kind of business activities and their sole purpose is to
focus on selling of stock and distributing all their assets to their shareholders and partners and
also to pay off to their creditors. Liquidator are the person or entity who used to liquidate all
the assets as they are legally empowered for all the rights on behalf of company in order to
perform on various capacities. A liquidator is million officer who is being appointed in order
13 Morotock Insurance Company V. Fostoria Novelty Company. Decided At Richmond,
March 18, 1897' (2018) 3 The Virginia Law Register
14 Company Law (Brierley Price Prior 2018)

to wind up the company on the circumstances when company is closing or is being bankrupt.
And then all the assets are being sold by the help of liquidator. The important powers and
duties of liquidated are they have been granted with all the complete authority regarding the
details in matters of business practice and they used to sell the assets in order to pay off all
the debts. They have the right to hold meetings with all the creditors in order to know about
the losses and can also control all the funds and sell them accordingly. As winding up of
company is mainly an end of organisation or company which is being administered by the
help of liquidator and its sole responsibility is that at the time of winding up there will not be
any kind of assets or liabilities that will be remain on company15.
When there is a winding up of company and the company has been turned out to be
insolvent and has to be liquidated on all such cases creditors will be paid and there will be
implied hierarchy which used to divide out the classes of creditors through which the
liquidator is used to pay the amount to them as they are mainly secured, unsecured and
preferential creditors. All the secured creditors are being prioritised they are generally the
banks, asset-lenders who use to provide mortgage like Machinery, Land, premises etc.as they
used to have security over all the ledgers and they have fixed charges regarding their assets.
Preferential creditors are mainly the employees who used to work in the company you are
being registered to HMRC. And all the unsecured creditors are mainly the group and the
classes like treat suppliers, contractors and all the payments that are being related to
employment and customers. Thus, And the companies being winding up then the shareholder
used to focus on all the different stages according to which they used to pay the creditors the
amount that were being invested by them in the company in which the prioritise the banks, all
the mortgage is in securities to be on the prominent position.
Insolvency practitioner are mainly the licensed person who used to act on behalf of
companies and also for individuals when they used to face difficulties or insolvency or any
kind of financial distress. The major role of licensed insolvency practitioner (IP) is at the
time of company’s insolvency they used to overlook on all the available options for the
directors in order to give them professional advice regarding to take the measures to rescue
the company from closure and also try to negotiate with HMRC and the creditors in order to
influence them regarding their intermediary and also generate the confidence in creditors in
order to gain the trust for the company. Licensed IP can also sell the company’s asset in order
to realise money to the creditors and also to distribute the funds for creditors group. IP can
also be responsible for the inspection and also for general agreement from the creditors claim
15 Cilliers H, Benade M, and Henning J, Company Law (Butterworth 2019)

and they can send report for all the conduct of directors at the time of insolvency16. In case of
all the voluntary liquidation IP used to assist the directors regarding their important legal
obligations and all the arrangement that are being required for the shareholder meetings and
for the supervision and guidance. They are being required in order to maintain the code of
conduct and to behave and perform their service with ethical guidance and professionalism.
CONCLUSION
From this above essay It is concluded that company law yeah is a branch of law which
provides out legal practice for all the responsibilities and rights of company. Sole
proprietorship are mainly the sole traders who used to carry all the business in their private.
European Union used to provide out different European company law and focus on providing
different functions for business growth and implementations. Incorporation is registration as
limited company of all the business practises. Furthermore, it is also concluded that directors
and shareholders covers important roles liabilities and duties like to avoid conflicts to create
welfare of the company and many more.
16 Company Law (Brierley Price Prior 2018)

REFERENCES
Books and Journals
'Morotock Insurance Company V. Fostoria Novelty Company. Decided At Richmond, March
18, 1897' (2018) 3 The Virginia Law Register
Cilliers H, Benade M, and Henning J, Company Law (Butterworth 2019)
Company Law (Brierley Price Prior 2018)
Dean J, 'A. Dignam And J. Lowry, Company Law B. Hannigan, Company Law' (2016) 47
The Law Teacher
Engsig Sørensen K, 'Branches Of Companies In The EU: Balancing The Eleventh Company
Law Directive, National Company Law And The Right Of Establishment' (2017) 11
European Company and Financial Law Review
Ferran E, 'Corporate Mobility And Company Law' (2016) 79 The Modern Law Review
Fleischer H, 'Legal Transplants In European Company Law – The Case Of Fiduciary Duties'
(2017) 2 European Company and Financial Law Review
Hamilton W, Company Law (Gale Ecco, Making Of Mode 2017)
Keenan D, Company Law (Pearson Education UK 2018)
Lim E, 'Attribution In Company Law' (2017) 77 The Modern Law Review
Lombardo S, 'The Comparative, Law And Economics Analysis Of Company Law.
Reflections On The Second Edition Of The Anatomy Of Corporate Law. A
Comparative And Functional Approach' (2018) 8 European Company and Financial
Law Review
Oliver M, and Marshall E, Company Law (Pitman 2016)
Sørensen K, 'Enforcing EU Company Law: Requirements And Limitations In Implementing
Penalties For Infringements Of EU Company Law' (2017) 18 European Business
Organization Law Review
Taylor C, Company Law (2018)
Wymeersch E, 'Company Law In Europe And European Company Law' [2017] SSRN
Electronic Journal