Critically Evaluating Corporate Governance in UK Law and Its Code

This report critically evaluates the development of corporate governance in UK law and assesses the effectiveness of the current UK Code on Corporate Governance. It begins with an introduction to company law, exploring laws related to company operations and the role of corporate governance in maintaining a healthy organizational environment. The report delves into specific UK laws such as the Bribery Act 2010, Say on Pay, Corporate Manslaughter, and Listing Rules, analyzing their impact on corporate behavior. The report then analyzes complex legal issues, including incorporation issues, and highlights the importance of company law in resolving them. The analysis includes relevant case studies to illustrate key legal principles and their application in practice. The report emphasizes the significance of corporate governance in ensuring ethical business practices and compliance with legal requirements.

Critically evaluate the development
of the concept of corporate
governance in UK law and the
effectiveness of the current UK
Code on Corporate Governance.

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Information of laws related to company and its operation at workplace....................................1
Critical analyse, evaluation and apply laws relating to company law to complex legal issues. .5
Effects of corporate governance in relation to Plc s and large private companies.....................8
CONCLUSION................................................................................................................................9
Bibliography..................................................................................................................................11

INTRODUCTION
Laws is a cluster of acts, norms, beliefs, system, rules and regulation which is designed
by governmental institution for creating a peaceful environment at nation. However, number of
legal terms are framed by legitimate bodies which is applicable on every individual. Basically,
main objective of UK laws is to create a nation free from various types of wrongful and
fraudulent activities. Thus, assignment is going to highlight several essential norms followed by
corporate world to run their business entity in a best manner. Additionally, role of corporate
governance at workplace is also outlining in this project in order to maintain healthy
environment of an organization. Lastly, project is also throwing lights on various company laws
which is used by managers to resolve number of complex legal problems.
Information of laws related to company and its operation at workplace
The case of Falminio Costa 6/64 1 stated that in 1962 the Italian republic launched a act
which was going to nationalised the manufacturing or distribution of electrical energy by
creating an association that is ENL as well as transferred the land of electricity organizations.
Thus, this case is all about domestic and community law that was applicable on several domestic
issues faced by shareholders. Legal bodies are responsible for framing various types of norms,
beliefs, fundamental rules or regulations which is applicable on entire Europe. However, their
main reason behind enacting different types of acts is to reduce several types of wrongful
activities, issues or barriers faced by common people. Thus, legitimate bodies of UK is
classifying laws into various sections for removing the chances of confusion which may create
during enforcement process. Hence, advisory bodies of UK has framed separate department for
entire corporate world and design acts as per their need or requirements. Apart from this, one of
the major case of Adam Opel GmbH v Mitras Automotive Ltd [2007] EWHC 3205 (QB)2 is
specially based on conflicts between supplier and dealer due to claiming by Adam. However,
major issue in two businessmen's are “whether Adam will fulfils the payment to Mitras under
viloence”. Hence, as a result judgement was taken in favour of Adam in which he has to pay
Mitras because he is found guilty in the eye of law. Additionally, it has been found that in this
1 6/64 Falminio Costa v ENEL [1964] ECR 585
2 Adam Opel GmbH v Mitras Automotive Ltd [2007] EWHC 3205 (QB)
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case illegitimate pressure has been identified in this situation because Mitras is sole supplier of
specific product. It aids various corporations while understanding necessary legal terms in order
to run their business entity in ethical way. Therefore, company law was formed under the
companies act 2006 which is also governed or regulated by insolvency act 1986, European union
directives as well as several court cases. According to survey report it has been assessed that in
ancient time period number of private companies are hiring maximum people in order to increase
their wealth. In fact, at that time simple registration is used by corporations to start their business
as well as for establishing a new entity.
Consequently, company laws is further classified into two major fields such as one is
corporate governance which plays a major role at workplace due their roles or responsibilities
towards organization. Some of the essential roles of corporate governance is describing as
follows:-
 Direct shareholders towards their job role by assisting their rights3.
 Assist entire association towards their specific duties.
 Provide corrective information to higher authority of an enterprise to design an
appropriate policies for enterprise4.
 Corporate governance is a body whose main liability is to update board of directors with
their essential power, authority, rights or duties5.
In this case of A-G v Whelan [1993] IEHC 1 6 it has been states that Mr. Whelan was
ready to handling stolen products. Thus, as per law this act is found that he had acted under a
danger of death or instant duress. It means, according to law Mr. Whelan has done a biggest
crime by preserving the stolen goods which was close to commission of act. It means main
objective of company law is to promote entire corporate world to run their business in more
ethical manner by implementing several laws, norms and acts. Thus, it has been identified that
several number of acts or laws are enacted by legal bodies which is applied at workplace in order
to reduce chances of illegal activities. Hence, some of the useful acts related with company law
is describing as follows:-
3 Percival v Wright
4 Coleman v Myers
5 Lord Cranworth in Aberdeen Rly Co v Blakie (1854)
6 A-G v Whelan [1993] IEHC 1
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 Bribery act 2010:- It is an act which is enacted by parliament of united kingdom which
consist of criminal law related to bribery. This act was introduced to penalise the person
who is responsible to conduct unused activity or crime7. Basically, penalties for being
bribed is for maximum 10 years imprisonment and additionally unlimited fine as per
proceeds of crime act 2002. Along with this, as per the views of disqualification of board
directors under the company directors disqualification act 1986. Hence, according to
bribery act an association needs to ensure that their employees avoid this kind of activity
in order to protect image of an association from criminal acts8. For instance; XYZ is an
association whose main motive is to increase their revenue by satisfying needs of
maximum clients and having their branches in maximum clients. Thus, in order to
increase their wealth managers of a company is involving in a bribery activity which is
seen as wrongful task in the eye of law. It means member of a company is breaking the
rules of legal bodies as a result they might get punished by advisory bodies. Say on pay:- According to this act of UK law shareholders of a firm also have an
authority to vote on the earnings of executives. It means, compensation or remuneration
of directors also need to be set by an organization during their general meeting9. Thus, as
per the company law 2006 directors needs to disclose their remuneration package in their
“report”. Corporate manslaughter:- This act came into force in around 6 April 2008 whose main
motive is to punish those corporation due to which a person get enforced to quit their life.
However, legal bodies is enacting this law for punishing those organization whomsoever
are conducting fraudulent activities10. For example; XYZ company is offering best
opportunities to their newly hired employees but later on get failed in fulfilling their
desires. As a result some of them feel shy in front of their family due to which they may
commit suicide. Hence, to overcome these kind of issues which may occurred in
corporate world legal bodies is enforcing “corporate manslaughter” law in order to
support victim.
7 Regal (Hastings) v Gullier (1942)
8 Criterion Properties plc v Stratford UK Properties LLC [2002]
9 Bank of Credit and Commerce International (Overseas) Ltd v Akindele [2001] Ch. 437 CA (Civ Div)
10 Howard Smith Ltd v Ampol Petroleum Ltd [1974] AC 821
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 Listing rules:- Legitimate bodies plays a very crucial role in assisting various companies
towards corrective path by directing them with appropriate technique of handling
business. Therefore, “listing rules” is a suitable law which was enforced for directing
managers of an enterprise to make necessary norms, organizational policies, beliefs, rules
and regulations11. In fact, it may set standards for management team in order to make
necessary changes at workplace as well as requires to design effective plans or strategies.
For example; while establishing a new business at European marketplace company needs
to design an appropriate rules or regulations for employees, superiors, subordinates,
managers, board of directors as well as entire staff members.
 Articles of association:- According to company law is trying to cover all the necessary
details of an organisation in order to run business entity in much better way. Beside this
legal bodies involved in enforcing different types of acts as per requirement of an
enterprise from which articles of association is one of them12. However, main objective of
this act is to encourage managers of corporate world towards designing of an effective
blueprint which consist of necessary roles or responsibilities of staff members as well as
entire person available at workplace. Apart from this, another name of this act is
“memorandum of association” and consider as a constitution of an organization which
covers the necessary duties, policies, norms, defines various obligation of directors, kind
of business hence forth.
According to case of Alderslade v Hendon Laundry Ltd [1945] 1 KB 18913 it is case of
negligence and clarity in the wording of clauses which was set during agreement. Thus, major
problem of this scenario is that laundry defender lost the item of his client due to his careless
behaviour. Thus, as per law of companies act it has been analysed that negligence parties is liable
for issue. At last, it has been analysed that company laws are very much essential for entire
corporate world because overall success of an association is totally depend upon this only14. In
fact, an enterprise needs to consider all the necessary guidelines, norms, fundamental rules or
regulations which is designed by legal bodies at juridical court.
11 Regencrest v Cohen (2001)
12 The Companies Act 2006 (CA) S 33 (1)
13 Alderslade v Hendon Laundry Ltd [1945] 1 KB 189
14 Aberdeen Railway Co v Blaikie Bros
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Critical analyse, evaluation and apply laws relating to company law to complex legal issues
It is not easy to run a business entity because it takes maximum time period with lots of
legal formalities which is not easy to understand. In fact, managers of an association needs to
consider various terms or conditions for overcoming various legal barriers incurred at workplace
while running a business entity15. According to it has been stated that legal bodies is playing a
major role by designing several effective acts which is applicable at workplace in order to
manage complex legal situation. Basically, it is indispensable for managers of an enterprise to
fulfils all the formalities in an ethical manner by fulfilling the rights or interest of employees as
well as entire staff members. However, main objective of company laws is to offer best possible
paths to entire corporate world to resolve several complicated issues emerging at workstation.
For example; it is not easy to establish a new business because it requires suggestion from
experience person in order to minimize chances of wrongful activities16. Along with this,
decisional process of a company requires an effective norms and beliefs in order to consider
essential facts or figures. On the other hand, states that every company is facing high number of
issues or barriers while running their business entity due to availability of maximum employees
which belong from distinct backgrounds. As a result chances of contradictions get increased and
create a confusing state which makes problems for organization during running their business
entity as well as affects the environment of an association in various manner.
Hence, some of the complex issues which must take place at workplace and enforce
managers of an organization towards adoption of several company laws is describing as follows:-
 Incorporation issue:- According to company law is framed by legal bodies to resolve
organizational problems which might be encountered by managing director of an
enterprise during establishment of an association. It means registration of a firm requires
lots of legal formalities because it may related with entire society17. However, legal
bodies is implementing norms for facilitating entrepreneur of corporate world while
fulfilling overall procedure of registration process18. For example; according to UK law it
has been determined that number of private companies are emerging at European
marketplace for acquiring maximum revenue. Thus for controlling maximum chances of
15 Aberdeen Rly CO v Blaikie Bros
16 Anglo Petroleum Ltd V TFB (Mortgages) Ltd
17 Bishopsgate Investment Management Ltd v Maxwell (No 2)
18 Breckland Group Holdings Ltd v London and Sufflok Properties
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fraudulent activities advisory team was designed an appropriate steps to make a company
legal and acquired formal license for selling a specific goods or services across the
international boundaries.
As per the case of Alexander Barton v Alexander Ewan Armstrong and Others [1975] 2
W.L.R. 105019 it has been identified that it is case on illegal pressure, economic stress, economic
as well as contract validity issue. It means there is contraction between Barton and Armstrong
which are shareholders of leading organization. Basically, there is a issue of wrongful agreement
between both the contractors20. Thus one is claiming to another for coercion, life threat or
unlawful pressure. Hence, in this case of company part who is claiming for misinterpretation or
wrongful activity needs to proof it with the help of useful data. Bribery problem:- According to it has been analysed that number of foreign companies
are emerging at UK marketplace whose main motive is to gain maximum revenue by
satisfying needs of millions of clients. In order to entered into foreign or global market
company needs to follow specific guidelines by fulfilling the necessary terms or
conditions. Thus, some of the organization is involving in bribery action which resulted
in emergence of corruption21. As a result create an inappropriate environment across the
nation and increase the chances of crimes, wrongful task, exploitation of employees or
consumers and so on. Meanwhile, under company act of 2006 UK law was enacted one
of the useful law that is “Bribery act” whose main objective is to penalise those person
whomsoever are part of this kind of crime. Customer complaint:- Consumers are seen as a key to success because finally products
are consumed by them only. Therefore due to which it is indispensable for legal bodies to
introduce some laws or norms for overcoming the issues faced by various clients while
buying products22. In fact most of the companies are ignoring societal complaint after
selling their products in order to acquire maximum return on their investment. Thus,
some of the laws are designed by legitimate bodies for overcoming the complaints as well
as needs to give first priority to those person whomsoever are facing problems regarding
goods that are using by them .
19 Alexander Barton v Alexander Ewan Armstrong and Others [1975] 2 W.L.R. 1050
20 Clarke v Dickon
21 Cook v Deeks
22 Derry v Peek
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 Misinterpretation of financial statement:- Capital is considered as lifeblood for overall
enterprise because business is continuing with the help of funds. It means, it is essential
for managers of an enterprise is make an effective plan or strategy to overcome financial
legal issues in a much better way23. However, it has been observed that number of
fraudulent activities might be occurred at workplace during inappropriate planning or
structure of an organization. In order to resolve financial issues company law was
introduced some of the essential legal acts such as articles of association in which all the
rights, duties , obligation and company policies or information are mentioned. Hence, it
aids managerial team while forecasting their future or current expenses.
 Discrimination and harassment:- Corporate world is full of employees in which
maximum staff are appointed by managers to run a business entity in much better way as
well as aids to attain organizational objectives in a defined time frame. Beside this, it has
been observed that most of the private companies are creating a discrimination amongst
their employees which have a major impact on minds of employees24. Therefore, legal
bodies are enacting some of the effective acts or laws for preventing employees from
exploitation, frauds and so on. In fact, company is liable to create a positive environment
at workplace by offering equal opportunities to each or every member of an association
either belong from high authority and lower level.
Last but not the least according to company law of UK legitimate bodies overall
corporate world needs to consider necessary terms or conditions as well as laws which is
applicable on an enterprise in order to attain company goals or objectives in an ethical manner.
On contrary to this it has been analysed that main reason behind designing various laws, norms,
policies, rules and regulation is to create a nation free from any kind of crime, hacking, frauds
and so on. Along with this, it helps in developing the economy of UK nation in most appropriate
manner by improving the living standard of overall society as well as create a peaceful
surrounding.
23 Ebrahimi v Westboune Galleries Ltd.
24 Dorchester finance co Ltd v Stebbing
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Effects of corporate governance in relation to Plc s and large private companies
According to 25 corporate governance is set of rules that governs an organization and
control its operations. It is an effective way of maintaining the benefits and interest of various
interested parties of the commercial enterprise. It is important that in the various operations of an
enterprise transparency is maintained as only than the trust of stakeholders can be developed ...
gave their views on the impact that corporate governance has on the performance of an
organization. He says that it helps in promoting the financial activities as assurance is given to
the investors that they will receive an assured amount on their investment. This way it helps a
particular firm in attracting the interest of more and more investors as through Corporate
governance the best practices are being followed by the management. Apart from the financial
effects there are different non monitory effects also which are there on a particular organization
following the laws made against companies. It helps in the overall growth of the business with
the development in the present level of production.
Apart from this, one of the famous issue of corporate governance was taken place at
Marks and Spencer plc is that board members of an association was appointed chief executive
for holding a dual position at workplace. Additionally, responsibilities of executive chairman and
chief executive is combining together at Marks and Spencer but according to code of corporate
governance both the position are separated from each other. Thus, proper discussion is taking
place at court of justice on this subject.
Thereafter, suggested that companies not following the same concept faces issues like
less appropriate decisions that has their direct impact on the performance of an organization.
Other effects of the same concept were highlighted by he says that the system of corporate
governance has its direct on perception of people too. It is easy for the organization who follow
various laws to develop their goodwill in the eyes of others. In market they get preference over
the others and develops a long term connection with the customers. Organizations which show
less concern towards the surroundings finds it difficult to sustain for long in the market and also
has to compromise with the profit margins.
Corporate governance have a major impact on a company performance because all the
rules or regulations are set by them only because their main objective is to assist limits to their
stakeholders in order to run their business obligation in an ethical manner. However, it has been
25 Bratton, J. and Gold, J., 2017
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analysed that setting of policies is not an easy task because it requires experience, talent,
necessary knowledge or learning for executing overall activities in most appropriate manner.
However, private companies are following necessary steps designed by governance for reducing
several organizational barriers. Hence, some of the major influence of corporate governance on
private companies and several Plcs are highlighting as below:- Independence of boards:- According to it has been stated that regulations which is
designed by legal bodies are encouraging boards of directors towards their essential rights
or authority in order to run their business operations in much better way26. However,
boards members are considered as a indispensable persons of an organization because
most of the rules are passed by them only as well as their consent is highly necessary in
decision making process.
 Internal controls:- As per this factor, company boards have an opportunity or authority
to impose financial controls as well as authority to monitored reporting process. In fact,
it aids shareholders of an association from exploitation, fraudulent activities and
misinterpretation of financial data.
Hence, it has been assessed that corporate governance is very much essential for entire
corporate world because it aids them in removing various organizational barriers which might be
occurred at workplace27. This shows that how corporate governance has its direct and major
influence on the productivity of a particular company. It shows that organization must give
attention towards same so that the competitive advantage can be achieved and benefits can be
earned in long run.
CONCLUSION
From the above report it has been summarised UK legal bodies plays a very vital role in
overcoming issues which might be occurred in corporate world during running their business
organization. Therefore, assignment is mainly depend upon highlighting the influence several
company laws at workplace and how managers are applying it in various difficult circumstances
in order to resolve several legal issues or problems. Along with this, major role of corporate
governance was also mentioning in above information because they are also acting an effective
role in developing various companies with the use of several acts or norms which was falls under
26 Gencor ACP Ltd v Dalby
27 Harold Holdsworth and Co (Wakefield) Ltd V Caddies
9

company law. Hence by analysing this it has been understood that success or development of
overall corporate world is based on legal laws designed by legitimate bodies.
10