Company Law: Characteristics, Functions, Regulatory Frameworks, and Policy Issues

This article discusses the characteristics, functions, regulatory frameworks, and policy issues of company law, including the rights of shareholders, legal nature, roles, powers, and liabilities of shareholders and directors, consequences of breach of directors' duties, responsibilities of directors to creditors, role of auditors, winding up process, and the role of licensed insolvency practitioners for advice on corporate insolvency.

Company Law

Table of Contents
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
Analyse the Characteristics of the sole trader, partnerships, public and private company.........4
Evaluate different function of EU companies.............................................................................5
Evaluate regulatory frameworks of incorporation of UK and EU companies...........................6
Assess the policy issues that arise regarding the regulation of companies in the UK and
Europe.........................................................................................................................................6
TASK 2............................................................................................................................................7
Describe rights of shareholders in public and private limited companies..................................7
Identify the legal nature, roles, powers and liabilities of shareholders and directors towards the
company......................................................................................................................................7
Assess the consequences to the breach directors’ duties in the company law............................7
Assess the directors’ responsibilities to creditors of the company in the financial distress........8
TASK 3............................................................................................................................................8
Evaluate the role of the auditor...................................................................................................8
Outline of winding up process and dissolution including powers and duties of the liquidator.. 8
Assess the priority of creditors in a winding up process.............................................................9
Describe the role of licensed Insolvency Practitioners for advice on corporate insolvency.......9
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Corporate law which is also recognised as company law which deals with the
incorporation of company under the present company law of nation. It is an association of
artificial and natural person. The objective of company law is to make easy the daily activity of
business which protect the transaction of companies like creditors, for effective company
governance and investors. It is based on statue and common law of UK. Corporate structure
widely used in UK, it have variety of structure provided for foreign entity which establish their
business in UK (Borselli and Miguel 2020). Such as set up of branches, partnerships, limited
liability partnerships, and joint venture. Basically company are of following types like sole
traders, private company, public company which further divided into limited by shares and
limited by guarantee in public company Ltd. Word used while in private company Pvt. Limited
used. In this project briefly discuss about characteristic of company, their functions, regulatory
frameworks and policy issues.
TASK 1
Analyse the Characteristics of the sole trader, partnerships, public and private company.
Sole trader is a person who run their business individually without another interference. The
characteristics are as follow:
 Control Fully: sole proprietor who have full control on their business having authority to
take their own decision without any others interruption.
 Non recognize of separate legal personality: sole proprietors and business of them are
consider as one company will no longer exist on death, insolvency, retirement and
imprisonment.
 Liability as unlimited: In sole trader individual is personally liable for whole debt of
business which means assets are belonging to individual also liable.
 Levy of tax: tax imposed on sole proprietorship will be paid by an individual (Flores,
2021).

 Less documentation: there is no need to file so many documents i.e. less formalities of its
formation.
 Secrecy: As sole trader consider as owner or employee of firm so, there is less chance of
leakage of information it always be confidential.
Partnerships of Characteristics:
 Presence of an agreements.
 Presence of business like trade and occupation.
 Profit sharing among partners.
 Acting like agency for each others.
 Minimum two person required for enter into partnership.
 Partners are liable up-to their share of capital.
 combination of ownership between partners and they have control over it.
 Interest of partners are not transferable.
 And last firm is registered as partner's deed.
Public company: it require minimum seven members for its formation having no maximum
limit. Three member in minimal required for board of directors and 12 member as maximum.
Members are elected by their share holders in AGM (Hardman and Santos 2022). Purchasing of
share is not so tough so it easy to quit from the company. It is consider as separate entity having
perpetual succession.
Private company: it can run any type of business but should be legal. Small group of persons
having ownership. And the type of owners depends on type of business. No need of reporting
requirement. Having paid up capital, liability is limited, company should not named as royal,
imperial etc., succession of it is perceptual.
Evaluate different function of EU companies.
EU company law governs the formation, operations and disclosure of capital required for
companies. Maximum part of it now codified which provides the use of digital implements. Like
directive of EU made new rules for cross border business transactions. These companies are
consider as limited liability companies which is administered by community law it apply on
member nations of EU. In short it establish their company within the boundary of EU only. Such
companies are governed by two legislation 1. the regulations on the statute for a European

companies and 2. directives of supplementing the statue for a European company along with
involvements of company. They are not bound to establishing an SE but its optional. While
keeping in mind the CSR and corporate governance.
Evaluate regulatory frameworks of incorporation of UK and EU companies.
For incorporation of company in UK following laws should be followed. Such as
companies act 2006 as per it in UK company will be incorporated which state about minimum
share capital, paid up capital, name of company etc., the UK corporate governance code
applicable on listing of equity shares in the London stock exchange instead of it establish in UK
or not. While in EU companies are formed as per the regulations on the statute far a European
companies and the statute for a European companies. These provides the formation and
operative of companies as well as association of companies, operational and bilateral
undertaking which have corporate governance, right of share holders along with cross-border
balloting and general meetings, firm constitution and flexibility like transferring of companies
seats. European private company law should be introduce which is relevant to SME's. And make
simple the provision of company law in EU (Moore, 2018).
Assess the policy issues that arise regarding the regulation of companies in the UK and Europe.
Policy issues which are faced by companies in UK and EU are as follow:
As antagonistic interest rate prevailed in EU. Due to which banks passed the fees to customer
which affect the currency presently a big percent of CFOs use their funds to expand the product
line, entering into new market and acquiring business.
Structure of banking depends on short period borrowing. They depend on two sources
competition for deposit and EU banks have high loan deposit ratio.
Mode of payment: payment system of UK an across EU is electronic like SEPA, AND SEPA
instant and faster payment system which effect UK after brexit. Accounts related to capital and
non resident which create problem as it required minimum capital for establishing European
entity. And non resident face difficulty in operating their accounts.
Tax related issues and issues related to management of liquidity as pooling of cash prevail in
corporation for managing liquidity globally at low price to several companies which give the

status of MNC to them. Removes barriers on entry and promote fresh newcomer and
competition. Problem regarding security system and provide better facilities to customers.
Expansion of their networks beyond Europe. Improve legally as per bad transaction and refund
facilities and remove surcharge from transactions and take steps against unauthorised payment.
TASK 2
Describe rights of shareholders in public and private limited companies.
The share holders rights depend on certain limitations which are attached with shares as
per the article of association of company. Different shareholders have different rights which they
have as per different form of shares. The rights to appoint directors of company. Before taking
any action shareholders should be informed and consulted. They have right to vote with certain
restrictions. Like certain restriction are shareholders not received dividend. They are liable up-to
the unpaid amount of shares. Right of another category of shares can not be change without the
consent of holders of first class shares. Provide five percent right to approach court against the
conversion of company. General meeting can be call, circulation of express resolution in private
companies (Nsubuga, 2019).
Identify the legal nature, roles, powers and liabilities of shareholders and directors towards the
company.
The directors of company manage the management and operations of company. They
exercise their power by BOD ,the board will make take decision collectively by passing
resolution. Law impose certain duties on directors against the shareholders like to act as per their
power, director should work for promoting development of company. Act as an independent as
per the requirement. Duty to work reasonably, diligence and skilfully. On the other hand share
holders have voting rights, transfer of ownership, they can inspect document of company along
with approach to court for wrongful act of company. Along with duty to participate in meeting,
they have to consult in financial and other matters. And be in contact with companies members.
Assess the consequences to the breach directors’ duties in the company law.
In case directors' breach the duty which have to perform in such condition company take
action against them. The consequences of breach are they are removed from office either

temporary or permanently, if more than fifty percent shareholders voted. Property which is used
by directors as a official of company should be restore. Transaction which he made on behalf of
company should be set aside. Imposition of interim injunction for the prevention of further
damage cause because of directors' breach of duty. Compensate or provide damages to company
because of breach of duty financial loss cause or leads to insolvency.
Assess the directors’ responsibilities to creditors of the company in the financial distress.
There are certain responsibilities which director have against the creditors of company.
As they have to secure the interest of creditor in case of financial distress which occurs due to
wrongful and fraudulent trading. At the time of financial distress they have to comply with their
obligations. As creditors are stakeholders of company so, creditors are protected by contractual
right because they suffer from more loss in case of company insolvent (Osier 2020). Due to the
doctrine of limited liability the risk passed from shareholder to creditors. Directors are
responsible to keep the account of interest of creditors (Parker, 2020). Any failure from directors'
side adversely effect the interest of company and creditors. In case of liquidation of company or
company unable to get financial stability then it is director duty to secure creditors interest.
TASK 3
Evaluate the role of the auditor.
Auditors or reviewer plays and important role in company as auditor review and verify
the financial records of company so the company smoothly run their businesses by ensuring the
compliance of tax laws. Financial stability of any company depends on his report only. Opinion
of auditor either build or destroy the business trustworthiness or credibility regarding financial
status of company. An auditor audit as per ISAs in UK like identify and evaluate risk from
misstatement which is material as concern to company. To understand the internal control of
company so auditing properly conducted. Assess the accuracy of policy related to accounts of
company. And to report on consolidation of financial statement of entity.
Outline of winding up process and dissolution including powers and duties of the liquidator.
In UK wind up and dissolution of company takes place by calling a general meeting
along with shares holders within a five weeks in which resolution is passed to wind up. An
authorize insolvency practitioners appoint as a liquidator in general meeting of company. And

declare in the official public record within the 14 days of meeting. Liquidator have certain power
and duties like to verify claim of creditors and the consolidate it, to take the control on the assets,
actionable claim and property of company of companies and keep into their custody and then
prepare the report, settle down the disputes and contracts and struck the name of company from
companies register as per insolvency act 1986.
Assess the priority of creditors in a winding up process.
When the process of winding up takes place the main issues before liquidator is who have
priority to first paid this issue clear by UK government in insolvency act 1986 in which hierarchy
was laid down as per it payment made like first paid to creditors which are further divided in
secured creditor having a fixed charge they are like banks, assets based lenders after them,
preferential creditors like employees of an organisation then secure creditors having floating
charge such as stock, raw material and other assets after that unsecure creditor like supplier,
contractors and customers and at last shareholders of company (Parkinson, 2018).
Describe the role of licensed Insolvency Practitioners for advice on corporate insolvency.
Insolvency practitioner or liquidator is an individualist authorized who act for financially
stiff companies so they can avoid insolvency or insolvent company and individuals. He is
consider as officer of courts and responsible to administered and find out best solution for
liquidators by balancing their ethical and legal facultative for employees, stakeholders and
directors. In case of corporate insolvency liquidator will be appointed who take control of
company for operating winding up process. They are permit to sell the property of company for
generating funds which distribute to creditors. He also function as a trustee in bankruptcy. For
ensuring that they perform their duty fairly their act govern by regulation and statute.

CONCLUSION
This project conclude about the characteristics of sole trader, public and private company
and partnership, how companies function in UK and Europe and regulatory framework from
which they are governed. And also discuss about rights of share holders in public and private
company, auditors, liquidator and their role and responsibility toward creditors and company and
process of winding up of company.

REFERENCES
Books and Journals
Borselli, A. and Miguel, I.F., 2020. Corporate law rules in emergency times across
Europe. European Company and Financial Law Review, 17(3-4), pp.274-317.
Flores, M., 2021. The Recognition and Enforcement of UK Insolvency Proceedings in Spain
After a Hard-Brexit. Special Reference to Schemes of Arrangement. European
Company and Financial Law Review, 18(3), pp.377-397.
Hardman, J. and Santos, G.R., 2022. Empirical evidence for the continuing need to'think small
first'in UK company law. European Business Organization Law Review.
Moore, M.T., 2018. Shareholder primacy, labour and the historic ambivalence of UK company
law. In Research handbook on the history of corporate and company law. Edward Elgar
Publishing.
Nsubuga, H.J., 2019. Employee rights in corporate insolvency: a UK and US perspective.
Routledge.
Osier, M., 2020. Discussion Report–UK and EU Company Law After Brexit. European
Company and Financial Law Review, 17(2), pp.200-204.
Parker, S., 2020. Thomas Cook's Collapse and Airline Insolvency-Lessons for the
UK. Insolvency & Restructuring Int'l, 14, p.11.
Parkinson, M.M., 2018. Corporate Governance in Transition: Dealing with Financial Distress
and Insolvency in UK Companies. Springer.