Business Law Case Study: UK Company Law and Expansion Strategies

This case study examines the legal aspects of forming and expanding a company, specifically focusing on the UK's Company Act 2006. It provides a detailed analysis of the steps involved in forming a company, the nature and essential elements of the memorandum and articles of association, and the implications of shareholder liability during expansion. The study differentiates between ordinary and preference shares, explains the process of passing resolutions within a company, and outlines the powers and duties of company directors. The case study advises LCR Ltd. on its expansion plans, emphasizing the importance of adhering to legal requirements, obtaining shareholder consent, and understanding the roles and responsibilities of directors. The conclusion summarizes the key takeaways, highlighting the significance of the Companies Act 2006 in regulating business activities within the UK.

Case Study Business
Law

Table of Contents
INTRODUCTION...........................................................................................................................1
PROJECT 3......................................................................................................................................1
Explaining steps to be taken to form a company.........................................................................1
Nature and essential elements of articles and memorandum of association................................1
Involvement and extent of liability of shareholder in expansion of company.............................2
Nature of shares and difference between ordinary and preference shares...................................2
Passing of resolution in company................................................................................................2
Powers of directors of company..................................................................................................2
Duties of directors of company ...................................................................................................2
CONCLUSION................................................................................................................................3
REFERENCES................................................................................................................................4

INTRODUCTION
Business law is a set of various rules, regulations and legislation that helps the
government in maintaining the control and monitor over various business activities. The present
study provides legal solution and advise to business for expansion purpose. The advise is being
provided on the basis of various laws relating to the company law in context the formation,
elements of memorandum of association, duties of directors, etc.
PROJECT 3
Explaining steps to be taken to form a company
As per the provisions of Company Act 2006 of UK, for the purpose of formation of a
company, the following steps are needed to be followed:
 First step is to set a name of the company that must not be identical to any another
existing companies (Set up a limited company: step by step, 2019).
 After setting name, LCR Ltd. needs to choose the board of directors of company.
 Further, the LCR Ltd. should decide the shareholders.
 After deciding board members and shareholders, the company needs to detect some
individuals that would have major control over business activities.
 Preparation of important documents and maintenance of company' s record is another
step of formation of company.
 After all these steps, the LCR Ltd. would be able to form and register the company.
Nature and essential elements of articles and memorandum of association
Memorandum and articles of association shows various clauses, rules, regulations and
limits of company to the extent of which it can perform its business activities. Creation of both
memorandum and article of association is a legal requirement stated in the company act 2006.
Recommendation
Being a limited company as per the provisions of company law, LCR Ltd. is required to
prepare its memorandum and articles of association (Nolden and Sorrell, 2016). While preparing
memorandum of association, it should include all the key information relating to the
incorporation of business should be included. In addition, the articles of association should be
prepared by involving all the rules and regulations that is needed to be comply by it while
performing its business activities.
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In addition, as the LCR Ltd. Wants to expand its business, it would need to amend the
clauses of both memorandum and articles of association.
Involvement and extent of liability of shareholder in expansion of company
The company Act 2006 of UK has provided If the LCR Ltd. wants to expand its
business, company is bounds to first take the consent of its shareholders regarding the expansion
purpose (Terjesen, Aguilera and Lorenz, 2015). It can expand the company only if the majority
of shareholders give their vote in favor of the expansion decision. Further, as per the provisions
of company act 2006, liability of the shareholders to the extent of value of shares held by them.
Nature of shares and difference between ordinary and preference shares
Shares majorly can be divided into 2 categories i.e. ordinary shares and preference shares.
LCR Ltd. can have both types of shares at a time. The major difference between these shares is
that ordinary shareholders gets voting right in the company's decision making. On the other
hand, the preference shareholder does not get any kind of ownership right.
Recommendation
In this order, ordinary shareholder's response towards the expansion decision needs to be
taken into account by the company.
Passing of resolution in company
As per Company Act 2006, there are majorly 2 types of resolution that is needed to be
passed by company while taking any decision i.e. ordinary resolution and special resolution.
Ordinary resolution can be passed by getting majority of vote in favor of any decision. Furthur,
for taking special resolution, company would need to atleast 75% of vote in favor.
For ordinary business transactions like declaring final dividend, fore retiring or
appointing directors or auditors, adopting final accounts, are some businesses for which ordinary
resolution is to be taken.
Recommendation
For all other businesses the LCR Ltd. Needs to take special resolution. Therefore, for expansion
purpose, it would need to take special resolution.
Powers of directors of company
In the Company Act 2006, Directors are given power to take decisions regarding
company, they also have power to appoint numerous key managerial persons of company like
managing directors, and deciding various terms of the contract of employment as well.
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Duties of directors of company
The Company Act 2006 held liable for each activity preformed by a business. In this
regard, it is the core duty of directors to ensure the compliance of each regulation while
performing the business activities (Hughes, Champion and Murdoch, 2015) . In this regard, the
as the LCR Ltd. Wants to expand its business, it is the duty of its directors to ensure that in the
expansion process, the company must follow and comply with each laws applicable to it.
CONCLUSION
From the above study, it can be concluded that companies act 2006 contains various rules
that is needed to be followed by each company of UK. It makes the company to prepare
memorandum and articles of association. Further, it also provides various powers and duties as
per which the directors are needed to perform their work.
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REFERENCES
Books and Journals
Hughes, W., Champion, R. and Murdoch, J., 2015. Construction contracts: law and
management. Routledge.
Nolden, C. and Sorrell, S., 2016. The UK market for energy service contracts in 2014–
2015. Energy Efficiency. 9(6). pp.1405-1420.
Terjesen, S., Aguilera, R. V. and Lorenz, R., 2015. Legislating a woman’s seat on the board:
Institutional factors driving gender quotas for boards of directors. Journal of Business
Ethics. 128(2). pp.233-251.
Online
Set up a limited company: step by step. 2019. [Online]. Available through:
<https://www.gov.uk/set-up-limited-company>.
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