Importance of Company Law
Added on 2023-06-12
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Running head: IMPORTANCE OF COMPANY LAW
Importance of Company Law
Name of the Student
Name of the University
Author Note
Importance of Company Law
Name of the Student
Name of the University
Author Note
1IMPORTANCE OF COMPANY LAW
It is evident that from the very beginning the principal statute that governs the Companies
Law in UK is the Companies Act 2006. In this regard, it is worth noting that the functions of a
company and the regulations regarding the governance of a company have been depicted in the
Articles of Association after the implementation of the Companies Act 20061. Therefore, the
essay is commissioned to examine the necessity of company law and why it has been designed.
A company can be regarded as an artificial person however; it existence and functions
must be recognized by the application of law2. In this regard, it is worth mentioning that the
artificial legal personality that exists within a company can be regarded as a veil which separates
the company from its shareholders. Therefore, it can be stated that for this purpose there is a
need to implement company law for the purpose of protecting the members of the company in
case of any corporate fraud. In Salomon v Salomon & Co Ltd (1897) AC 223 there was an issue
regarding the applicability of the separate legal identity of the company and that whether the
shareholders be held liable for the acts of the owners. It was held by the Court that the
shareholders were responsible under the Companies Act as the company was legally
incorporated. It is worthwhile to mention here that with the introduction of the Companies Act
2006, considerable changes have been observed in the role of the directors and shareholders. As
a result of these changes, the responsibilities of the directors and the shareholders have reached
to a new position. With the advent of the Companies Act 2006, the directors and the shareholders
of the companies have become aware of the existing legal principles and regulations governing
the company. Therefore, the application of company laws is required for the purpose of
safeguarding the interests of the directors and shareholders of a company.
1 Abraham, Santhosh, and Philip J. Shrives. "Improving the relevance of risk factor disclosure in corporate annual
reports." The British accounting review 46.1 (2014): 91-107.
2 Turley, Stuart. "Developments in the framework of auditing regulation in the United Kingdom." Auditing, Trust
and Governance. Routledge, 2015. 223-240.
3 (1897) AC 22
It is evident that from the very beginning the principal statute that governs the Companies
Law in UK is the Companies Act 2006. In this regard, it is worth noting that the functions of a
company and the regulations regarding the governance of a company have been depicted in the
Articles of Association after the implementation of the Companies Act 20061. Therefore, the
essay is commissioned to examine the necessity of company law and why it has been designed.
A company can be regarded as an artificial person however; it existence and functions
must be recognized by the application of law2. In this regard, it is worth mentioning that the
artificial legal personality that exists within a company can be regarded as a veil which separates
the company from its shareholders. Therefore, it can be stated that for this purpose there is a
need to implement company law for the purpose of protecting the members of the company in
case of any corporate fraud. In Salomon v Salomon & Co Ltd (1897) AC 223 there was an issue
regarding the applicability of the separate legal identity of the company and that whether the
shareholders be held liable for the acts of the owners. It was held by the Court that the
shareholders were responsible under the Companies Act as the company was legally
incorporated. It is worthwhile to mention here that with the introduction of the Companies Act
2006, considerable changes have been observed in the role of the directors and shareholders. As
a result of these changes, the responsibilities of the directors and the shareholders have reached
to a new position. With the advent of the Companies Act 2006, the directors and the shareholders
of the companies have become aware of the existing legal principles and regulations governing
the company. Therefore, the application of company laws is required for the purpose of
safeguarding the interests of the directors and shareholders of a company.
1 Abraham, Santhosh, and Philip J. Shrives. "Improving the relevance of risk factor disclosure in corporate annual
reports." The British accounting review 46.1 (2014): 91-107.
2 Turley, Stuart. "Developments in the framework of auditing regulation in the United Kingdom." Auditing, Trust
and Governance. Routledge, 2015. 223-240.
3 (1897) AC 22
2IMPORTANCE OF COMPANY LAW
It has been emphasized that from the beginning, the Companies Act 2006 formed the
primary source of legislation on the UK company law. In addition to this, the other existing Acts
affecting the companies in UK can be summarized as the Companies (Audit, investigations and
Community Enterprise) Act 2004, Enterprise Act 2002 and the Financial Services and Markets
Act 2000, Insolvency Act 20004. In this regard, contemporary authors were of the perspective
that in order to form a company it is important that the company must have incorporated by
applying the relevant provisions of the Companies Act 2006 and the other existing Act as
mentioned above5. Therefore, it is noteworthy to mention the relevant provisions which
constitute the incorporation of a company. In United Kingdom, the provisions of Section 7 of the
Companies Act, 2006 states that the formulation of a company takes place with the subscription
of the names of one or more individuals to the memorandum of association by complying with
the specifications of the Act6. Therefore, for the purpose of incorporation of a company, it is
required to apply the provisions of Companies Act 2006 accordingly and in order to support
there is a need to implement company laws within the country.
It is important to note here that, company law helps in the regulation of various
corporations. In such process, company law regulates the functioning of the existing investors,
creditors, shareholders and directors and their interaction with each other. Company laws has
been designed or enacted by the legislature for the purpose of examining the issues faced by
business entities while performing their day to day activities. With the implementation of
4 Barker, Roger, and Iris H-Y. Chiu. "Protecting minority shareholders in blockholder-controlled companies:
evaluating the UK’s enhanced listing regime in comparison with investor protection regimes in New York and Hong
Kong." Capital Markets Law Journal 10.1 (2014): 98-132.
5 Keay, Andrew. "Comply or explain in corporate governance codes: in need of greater regulatory oversight?." Legal
Studies 34.2 (2014): 279-304.
6 Dhaliwal, Dan, et al. "Corporate social responsibility disclosure and the cost of equity capital: The roles of
stakeholder orientation and financial transparency." Journal of Accounting and Public Policy 33.4 (2014): 328-355.
It has been emphasized that from the beginning, the Companies Act 2006 formed the
primary source of legislation on the UK company law. In addition to this, the other existing Acts
affecting the companies in UK can be summarized as the Companies (Audit, investigations and
Community Enterprise) Act 2004, Enterprise Act 2002 and the Financial Services and Markets
Act 2000, Insolvency Act 20004. In this regard, contemporary authors were of the perspective
that in order to form a company it is important that the company must have incorporated by
applying the relevant provisions of the Companies Act 2006 and the other existing Act as
mentioned above5. Therefore, it is noteworthy to mention the relevant provisions which
constitute the incorporation of a company. In United Kingdom, the provisions of Section 7 of the
Companies Act, 2006 states that the formulation of a company takes place with the subscription
of the names of one or more individuals to the memorandum of association by complying with
the specifications of the Act6. Therefore, for the purpose of incorporation of a company, it is
required to apply the provisions of Companies Act 2006 accordingly and in order to support
there is a need to implement company laws within the country.
It is important to note here that, company law helps in the regulation of various
corporations. In such process, company law regulates the functioning of the existing investors,
creditors, shareholders and directors and their interaction with each other. Company laws has
been designed or enacted by the legislature for the purpose of examining the issues faced by
business entities while performing their day to day activities. With the implementation of
4 Barker, Roger, and Iris H-Y. Chiu. "Protecting minority shareholders in blockholder-controlled companies:
evaluating the UK’s enhanced listing regime in comparison with investor protection regimes in New York and Hong
Kong." Capital Markets Law Journal 10.1 (2014): 98-132.
5 Keay, Andrew. "Comply or explain in corporate governance codes: in need of greater regulatory oversight?." Legal
Studies 34.2 (2014): 279-304.
6 Dhaliwal, Dan, et al. "Corporate social responsibility disclosure and the cost of equity capital: The roles of
stakeholder orientation and financial transparency." Journal of Accounting and Public Policy 33.4 (2014): 328-355.
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