Company Law Analysis and Contract Review

This assignment delves into the intricacies of UK company law, analyzing key principles outlined in the Sale of Goods Act. It meticulously outlines the responsibilities of directors as stipulated by the Companies Act 2006, providing a clear comparative analysis with the 1985 act. The advantages of incorporating companies over sole proprietorships and partnerships are also highlighted. A specific case scenario involving George and Investors demonstrates the formation of a valid contract under contract law principles. The assignment concludes with recommendations for organizations to ensure legally binding contracts.

Company Law

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Analysing whether Alan, Bob and Cassy are in breach of duties under Companies Act
2006........................................................................................................................................1
1.2 Providing remedies available to Bob in terms of Companies Act 2006...........................1
TASK 2............................................................................................................................................2
2.1 Concept of separate legal personality...............................................................................2
2.2 Advantages of companies over sole proprietorship and partnerships..............................2
2.3 Advice to Ann regarding claim for compensation...........................................................3
3.1 Analysing the validity of agreement.................................................................................3
3.2 Remedies available to recover the debt in terms of Companies Act 2006 ......................4
TASK 4 ...........................................................................................................................................4
4.1 Comparing and Contrasting the Companies Act 2006 with Companies Act 1985 with an
attention to the procedures established in order to incorporate companies............................4
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................7

INTRODUCTION
Company law is quite helpful for the organisation so that it can carry business operations
in that way which is not detrimental to interest of customers and other stakeholders. Present
report deals with various case scenarios which are directly related to Companies Act 2006 of
UK. The remedies and fair judgements are provided by various sections of Act which are helpful
to organisation and its stakeholders as well. The Act provides fast and effective judgement in
accordance to the disputes and any other aspects occurred in organisation.
TASK 1
1.1 Analysing whether Alan, Bob and Cassy are in breach of duties under Companies Act 2006
Companies Act 2006 governs and regulates organisation in UK. ABC Ltd was formed in
2014 financial year by three directors in carrying out business operations in the best possible
manner. On of the director named Bob was blamed for loss making firm and removed from the
shareholdings and assets were transferred. In relation to this, Section 174 of Company governs
duty of directors. They should provide relevant skills, abilities to effectively promote firm and
attain efficiency in business operations (Schewe and Lipsens, 2018). One of director of ABC Ltd
which was Bob had been removed on insufficient grounds that profits were reduced. Thus, Alan
and Cassy are in breach of duty as they do not scrutinise main cause behind lower profits and
removed Bob. The case of John Shaw & Sons Ltd V Shaw is relevant in this aspect and as such,
other directors are in breach of duty as they do not perform due care, diligence to effectively
maintain business operations and incurred losses. Moreover, without conclusive proof, they can
be held liable under Act as Bob was removed without any evidence from the company
1.2 Providing remedies available to Bob in terms of Companies Act 2006
There are various remedies that are available to Bob under the Act and as such, he can get
fair judgement in the best possible manner (Bull, 2018). First one is derivative action which is an
effective and equitable remedy to the party. In relation to this, court can easily exercise its
discretion and take into account claimant's viewpoints, motives by which he has opted for sue
and as such, judgement can be provided. Another remedy is unfair prejudice remedy which
implies that Bob can file petition on grounds of organisation's affairs and unfair prejudicial to
interest of company's members. In relation to this, case of Ebrahimi V Westbourne Galleries can
be linked to the case of Bob and as such, remedy can be attained in a better way. Next remedy is
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Disqualifying director which are not performing as per the due diligence and in a manner
detrimental to interest of members, creditors etc. Thus, Alan and Cassy can be disqualified as
they have remove other director without having conclusive evidence of decreasing profits.
TASK 2
2.1 Concept of separate legal personality
The company has a separate legal personality apart from the persons forming it.
Company applies for getting registered under Companies Act 2006 so that legal position can be
attained and operations can be started in effective manner. When Cut & Design Ltd had applied
to Registrar of Companies so that certificate of incorporation can be attained. As soon as
organisation gets this certificate, it becomes artificial person and separate from owners forming
it. This is called as separate legal personality as directors who form the company are regarded as
different entity and as a result, organisation is termed as separate legal personality from the
owners who have formed them (Westermann-Behaylo, 2018). The relevant case law can be
applied to the scenario of Cut & Design Ltd is case of Salomon v A. Salomon & Co. Ltd in the
best possible manner. In this case, Salmon was shoe manufacturer who had sold business to a
company where shareholders were his wife and five children. The company ran among finance
related difficulties and taken loan from the creditor who provided some loan but afterwards,
organisation became insolvent and Salomon was held liable for making repayments but he
cannot be held liable as he is not included in organisation. Thus, firm which had taken loan is
liable as it has a separate legal entity.
2.2 Advantages of companies over sole proprietorship and partnerships
The incorporation of limited company is advantageous over partnerships and sole
proprietorship. The main reason behind is that company can operate at higher level as investment
can be garnered from the investors. Moreover, limited liability on shares held by members are
there. It is not found in partnerships as they share losses and profits in proportion drafted in
partnership deed (Sinha. 2018). On the other hand, sole traders have unlimited liability as they
are entitled to losses if business incurs. While, under company, risk is shared among the
shareholders and as such, it can be said that company as form of business is fruitful over other
two forms.
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2.3 Advice to Ann regarding claim for compensation
The person named as James had died to electric shock and had taken loan from the
organisation. Ann who is the wife of deceased member of company is claiming for compensation
of amount which she had invested in debentures worth 20000. However, Edward who is member
of organisation says that she has to repay 100,000 of loan which James had taken from firm
(Ridley-Duff, 2018.). It can be said that Ann should pay first the loan amount so that she can
repay outstanding loan amount. Moreover, she can then ask for compensation of 20000 which
she had invested in Cut & Design Ltd and is the right of Ann to claim for the same. The relevant
case law can be applied here is Illot V The Blue Cross and others. Hence, Ann has the right to
claim for compensation as she is the nominee of deceased husband and can avail the same from
company.
TASK 3
3.1 Analysing the validity of agreement
A contract is defined as the mutual agreement between two or more parties in which
each parties promises to execute specific task. Contract law identify and governs the rights and
duties arising from agreements. The legally valid and binding contract has following components
these are:
All parties must be in agreement -contract law dictates that in order to enter into valid as well
as legally binding agreement, it is required by one party to present written proposal to other. The
another condition of forming a legally applicable contract is that other party should accept the
proposal (Kraakman and Hansmann, 2017)
In content of given case scenario, parties have entered into a valid and legally binding
contract. As the proposal was made by the George and same has been accepted by the Australian
investor. Both the parties has successfully fulfilled the another condition that proposal has been
presented and accepted by the parties in written which is very much important as In given case
scenario , the parties has entered into a contract for more than one for constructing the hotel. As
per the state legislation which often require parties to enter into a written contracts for real estate
transactions or agreements that will last for more than one year. Entering into a legal and putting
business agreements in writing, is very much beneficial as it can be kept as evidence (Hudson,
2017)
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3.2 Remedies available to recover the debt in terms of Companies Act 2006
The companies act 2006, there are many acts in legal systems which provides
creditors certain rights which can be implemented by them in order to recover the money from
the company. Some of such regulations or policies created by the government states that a debtor
can demand money directly from the director of an organization. If in case , If directors failed to
start the insolvency process when they ought to have known insolvency was inevitable, they
would have to pay for the additional debts run up through prolonged trading. When business
entity deny repaying the debt than in such situation creditors has the right to file law suit against
company (French, ed., 2017)
Section 83(4) in the companies act enables the tribunal to make an order declaring that
the dissolution of the company is void, or that any other order that is just and equitable in the
condition. If in cases, the magistrate in the assembly declares the dissolving to be void then any
proceedings may be taken against an organisation as if it had not been dissolved. This section
can potentially support the creditor, if interpreted to include dissolution by de registration of an
enterprise.
According to the bankruptcy act , there is no remedy available to creditors. According to
the bankruptcy act, 1542 a fundamental principle of insolvency legislation has been that losses
are shared among creditors proportional. These principles are applicable to the creditors within
the strict categories of priority set by the legislative authority. Bankruptcy act, 1542 also allows
creditor those who have enter into a contract with an organisation to take security interest over a
company's property. Security here includes the special or valuable assets the holder of this fixed
charge may take the asset away free from anybody else's interest in order to satisfy the liability
(Wood, 2017)
TASK 4
4.1 Comparing and Contrasting the Companies Act 2006 with Companies Act 1985 with an
attention to the procedures established in order to incorporate companies
The companies act 1985, defines the responsibilities of an organisation, their directors
and secretaries. It has largely been superseded by the companies act 2006. As per the companies
act 1985, an entrepreneur planning to establish new business venture are required to fulfil all
statutory requirement. According to the companies act 2006 , it is the duty of director to ensure
that all the legal documents including memorandum as well as article of association has been
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submitted to the registrar. On the other hand companies act 1985 There are certain types of
organisation such as limited liability partnerships ,Current requirement that an entrepreneur who
desire to form a company must subscribe their names to the memorandum of association.
Sole trader were not regulated by the Act. There are some aspects cover by companies
act 1985 has not been replaced by the companies act 2006. The major difference between both
the acts is that companies act 1985 are applicable to both small or big companies. On the other
hand the companies act 2006 to be considered only when establishing small business venture.
According to the companies act 1985 public company” is a company whose certificate of
incorporation states that it is a public company. To obtain this certificate the company will need
to follow the several provisions in the act (Davies,2018)
CONCLUSION
It has been concluded from the report that company law covers all the aspects of
business. This legislation also highlights the roles as well as responsibility of directors as well as
organisations towards creditors. It has concluded from the assignment that there are many
remedies has been provided to the creditors through which they can easily recover their amount
from company. Study has successfully highlighted the important principles of the Sale of Goods.
Report has provided the detail description about the duties of directors as per the company law
2006. It has also explained the clear comparison between the company law 1985 and 2006.
Assignment has also highlighted the advantage of incorporating companies compared with sole
proprietorships and partnerships. It has been concluded from the given case scenario that as per
the contract law George has entered into a valid contact with Investors.
It has been suggested to an organisation that parties should also form and enter into a
valid and legally binding contract.
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REFERENCES
Bull, M., 2018. Reconceptualising social enterprise in the UK through an appreciation of legal
identities. International Journal of Entrepreneurial Behavior & Research, 24(3), pp.587-
605.
Davies, P.L., 2018. Related party transactions: UK model.
French, D. ed., 2017. Blackstone's Statutes on Company Law 2017-2018. Oxford University
Press.
Hudson, A., 2017. Understanding Company Law. Taylor & Francis.
Kraakman, R. and Hansmann, H., 2017. The end of history for corporate law. In Corporate
Governance (pp. 49-78). Gower.
Ridley-Duff, R., 2018. The internationalisation of FairShares model: where agency meets
structure in US and UK company law.
Schewe, C. and Lipsens, D., 2018. From EFTA to EC/EU and Back to EFTA? The European
Economic Area (EEA) As a Possible Scenario for the UK-EU Relations After Brexit.
InBrexit (pp. 215-235). Springer, Cham.
Westermann-Behaylo, M., 2018. Andreas Rühmkorf, Corporate Social Responsibility, Private
Law and Global Supply Chains (Cheltenham, UK: Edward Elgar Publishing, 2015), 288
pp. Business and Human Rights Journal.3(1). pp.149-151.
Wood, J., 2017. Brexit and the legal Implications for cross-border insolvencies: what does the
future hold for the UK?. Company Law Newsletter. (396). pp.1-4.
Online
Sinha. 2018 Advantages and Disadvantages of a Company Form of Business – Explained!
[Online] Available Through: <http://www.yourarticlelibrary.com/company/advantages-and-
disadvantages-of-a-company-form-of-business-explained/40801>
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