UK Corporate Governance Code and its Importance in Financial Crisis

LAW OF BUSINESS
ORGANSIATION

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY ..................................................................................................................................3
CASE LAWS...............................................................................................................................5
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Law is defined as the various kinds of rules and principles and refers to the set or rules
and regulation that is created by government and is enforceable by court. Law imposes a and
obligation on the citizens to comply with the rules and regulations. Various acts have been made
for the protection of the society , related to the business that is company law (Sachko, 2019).
The provisions are mentioned under these acts which the company or and individual is bound to
follow and it also helps in protecting the rights of the citizens and protect the society form
exploitation. Every country has its own laws and procedures which the citizens are bound to
follow. The report is based on the UK Corporate Governance Code and critical analysis of
importance of this code in the situation of financial crisis.
MAIN BODY
The UK Governance Code was firstly introduced in 1992 by the Cadbury committee with
the main purpose of facilitating effective management which results into long term success of the
company. Corporate governance is a system through which the management of the organisation
is managed and controlled (Anheier, and Baums, 2020). The board of directors of the company
is responsible for the its governance. The shareholders of the company have the role in the
governance as they appoint the directors and auditors in order to satisfy about the present
position of the company. The company also sets out the standards for good practices related to
the issues division of responsibilities, audit, internal control and evaluation.
The issue stated is that in the situation of financial crisis, The UK Corporate Governance code
insufficient and inadequate in those times and there is a need to make modifications in it.
The UK corporate governance code is based on the principle based approach which is defined as
the set of inappropriate principles(Ong, 2018). It states that every company has its own set of
corporate governance practices and the these practices can change depending upon the
situations.
The Sarbanes Oxley Act 2002 refers to Federal law that established sweeping auditing
and financial regulations for the public companies (Gorshunov, and et.al, 2020). It is the law in
U.S. That was passed in order to protect and help the investors from financial frauds This act is

also known as Corporate responsibility act 2002. The provisions of this act was made more strict
and also imposed new penalties on the companies who violates the provisions of the act. The act
was reformed and added new set of reforms such as corporate responsibility, increased
punishment related to the criminal acts, various regulation related to accounting and other new
provisions related to the protection of the interest of the investors and shareholders(Gao, and
Zhang, 2019). This act is incorporated in order to help the shareholders, employees and public
from any accounting errors. With the establishment of new set of rules , the auditors and officers
are held accountable . This act was created in order to improve the reliability of the pubic
companies and eliminate errors which can benefit the company and there shareholders. The
Sarbanes Oxley Act 2002 is a complex and lengthy set of legislation. Some of its key provisions
are mentioned under section 302, 404, and 802.
The section 302 of the act makes it mandatory for the senior corporate officers to certify
in writing the financial statement of the company and also bound to disclose all the material
facts regarding the financial position of the company (Williams, 2018). Furthermore, section 404
of the act states that the management and auditors should establish the internal reports and
reporting methods for effective functioning of the financials of the company. Section 802 of the
act mention three rules regarding the record keeping that is associated with the fabrication of the
records, second is defining the retention period of the records and specific records that need to be
mandatory stored by the company.
The corporate governance of US is defined as the set of fiduciary and managerial
responsibilities that helps the management of the company, its shareholders which is defined by
the rules and regulations (Atkinson, and Duca, 2019). The UK corporate governance follows
the comply and explain approach that depends on the transparency of the operation of
companies. There are many reasons for the codes of corporate finance as it help in the protection
of the interest of the investors as they need more reliable information about the companies which
helps in taking decisions whether to invest in the company or not. Therefore the financial
statements should be reliable (Westland, 2020). The main purpose of these approaches is to get
the required information about the internal management of the company such as internal control,
risk management etc. The countries are making continuous efforts in developing effective
corporate governance codes which help in attracting large number of investors in the company.
The approach of corporate governance of US Is based on rules which is named as Sarbanes