Company Law Report: UK Corporate Environment and Legal Framework

This report delves into the intricacies of UK company law, examining key concepts such as corporate personality and the lifting of the corporate veil. It analyzes the advantages and disadvantages of expanding small business enterprises (SBEs) and explores various strategies for growth, includin...Read More

COMPANY LAW

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1.1 Explaining the concept of corporate personality as well as lifting the veil......................1
2.3 Justifying the areas of expansion for small business enterprise.......................................1
1.2 Analysis over incorporation expansion and their merits and demerits.............................2
1.3 Describing the law on Promoters and pre-incorporation agreements..............................2
1.4 Requirement of registration before commencing trading.................................................3
1.2 Analysing the two comparative measures of organisation...............................................3
TASK 2............................................................................................................................................3
TASK 3............................................................................................................................................3
3.1 Various capitals for new incorporated Ltd firm...............................................................3
3.2 Assessing law on issue of shares, class rights as well as dividends.................................4
3.3 Discussing laws which applicable for maintaining capital and insider dealing...............4
TASK 4............................................................................................................................................5
4.1...........................................................................................................................................5
4.2 Explaining rules on various types of meetings.................................................................5
4.3 Discussing law on minority protection.............................................................................6
4.4 Evaluating rights of shareholder as well as debenture holder..........................................6
4.5 Discussing rights on liquidation.......................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8

INTRODUCTION
Growth in the small business enterprise as well as lifting such corporation at a high level
will need legal influences which helps the firm in gaining the adequate framework. Hence, in the
present assessment there will be discussion based on company law and the various rights,
regulation, legislations and examples of cases held in UK’s corporate environment. Thus, the
report will also shed some lights on the role and responsibilities of directors and executive
officers in the expansion of a company. Hence, In this report there will be discussion based over
the various legislations and acts that will help the small business enterprise in expanding the
business.
TASK 1
1.1 Explaining the concept of corporate personality as well as lifting the veil
By considering the jurisdictional point of view, An organisation is a separate legal entity
distinct from its owners it has its own identity as well as it must be denoted as an individual
person or a personality. Hence, it can be said that its self-denoted as a person which are
concerned with the Veil of incorporation. Thus, such Veil describes that the firm has its own
legal framework as well as its own principles. There has been various legislation or relevant to
such factors as Company act, 1956 it says that if a person committed any illegal or unlawful act
must be punished and penalised (Lifting of The Corporate Veil, 2017). Hence, the case of
Salomon v A Salomon & Co. Ltd is the example of lifting the Corporate Veil.
2.3 Justifying the areas of expansion for small business enterprise
In accordance with improving the firm's operational ability there is need to make changes
in such activities. Hence, it can be done by analysing the actual strength and weakness of the
firm as well as its competitors. Thus, in context with expanding the operational activities of SBE
there is required to adopt various techniques such as benchmarking, Monitoring the quality of
work, Employee engagement as well as must consider the external environment such as inviting
shareholders or investors to raise the capital funds. Thus, there is need to expand the business by
promoting the online marketing, exporting the products in different locations or out of the
national territory.
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1.2 Analysis over incorporation expansion and their merits and demerits
By considering the expansion of the small business enterprise there will be various
advantages and disadvantage of the business. Hence, such areas of weaknesses need to be
recovered by taking necessary steps and decision making which will help the firm in having
effective growth.
Advantages of expanding SBE:
 In consideration with the small size of the business there will be need of less capital and
investment as well as less involvement of people.
 In making the operational framework they have their own rights and methods to make
innovations and make changes in their activities.
 Firm will be able to have the strong commitment and stability in external environment as
well as they are self-governed and operated and managed (Sealy and Worthington, 2013).
Disadvantages of Expanding SBE:
 They are not able to make extra ordinary thinking on the basis of global level. Thus, they
have narrow operational setup and will think in accordance with that.
 They will have fewer contracts and fewer connections with big MNCs and other
corporations.
 There will be obstacles in gathering the adequate amount of funds. Thus, this in turn
affects the low growth and development of the firm.
1.3 Describing the law on Promoters and pre-incorporation agreements
In Order to bring expansion for firm there will be requirement of various company laws
and regulations which in turn will be fruitful in facilitating legal framework for the operational
activities. Hence, there has been use of such acts and laws which in turn affects duties, roles and
responsibilities of Promoters and pre-incorporation contrasts such as:
Promoters: In accordance with the company Act 1956 where in sections 62,478,519 and
in 69 describes the guidelines and framework of the promoters. Hence, the promoter can be
defined as the person who has the direct or indirect influence in the company whether he will be
manager, director or the investors of the firm (Pre-incorporation contracts and the promoter,
2017). Thus, it can be said that such person is promoting the organisation.
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Pre-incorporation contract: These are the agreements which are acted by promoter in
consideration with firm. Hence, these kinds of contracts are bilateral in nature because the
promoter established a contract with the interested party and describes all the legal framework of
the firm. Hence, in accordance with the small scale enterprise it can be said that owner or
director will be promoter of organisation and they hare making contracts with interested people
on behalf of firm which is known as pre-incorporation contracts. Thus, it describes that the firm
itself is not making any contract but it is involved because of its promoters (Hannigan, 2015).
1.4 Requirement of registration before commencing trading
To have the legal framework of the organisation as well as creating the identification of
the business in the external market there is need to get registration of the company. Hence, in
accordance with registering the business there is need to file the proper documents which in turn
contains all the information such as name of the owner or partners who are involved in the
business, structure of firm and the operational duties as well as benefits facilitated by them to
investors (How to Start Your Business: Your Legal Requirements, 2017).
1.2 Analysing the two comparative measures of organisation
In order to measure business performance of the firm, key performance indicators and
360 degree appraisal, these two comparative methods are useful. KPIs help to assess two kinds
of the aspects which are like financial and non financial both. On the other side, 360 degree
appraisal is highly supportive in order to measure performance of the whole organisation. As per
this, questionnaire is to be prepared initially and distributed among the employees of cited firm.
Questionnaire helps to cross check performance of all the employee where information of one
worker is taken from another (Moore, 2015). After applying these both tools it can be said that
the SBE performs well in the industry.
TASK 2
Covered in power point presentation
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TASK 3
3.1 Various capitals for new incorporated Ltd firm
 Owner's capital: An amount which is raised by the owner of the organisation at the
establishing or any other purpose is considered as owner's capital. Cost of fund is zero in
this condition.
 Share capital: Fund which is raised after issuing shares in the market and purchased by
people is known as share capital. At this situation the company has to pay dividend
amount to the shareholders which is cost of finance for it (Kennon, 2016).
 Debt capital: When company approaches to the bank and takes loan that is referred as
debt capital.
3.2 Assessing law on issue of shares, class rights as well as dividends
At the time of issuing shares in the market, it is mandatory to for the legal procedures i.e.
IPO and FPO. If the firm issues shares at the first time then necessary to for the Initial public
offerings (IPO) in legal manner. On the other side, if issuing shares second or more time the as
per legal rules it has to consider Follow on Public Offer (FPO) (Braun and et.al., 2013). Further,
it is compulsory to complete all the formalities of listing procedure legally.
Shareholders who attached with the specific kind of shares like ordinary, preference etc.
considered as class rights. As per the legal laws, preference shareholders mandatory to involve in
the voting process whereas ordinary shareholders are depended as per their convenience.
Moreover, in the class rights some have authority to take part in decision-making and some not
have.
As per the laws, when company allows preference shares then compulsory to give
dividend to the shareholders. However, when it issues ordinary shares then decision to give
divided is depended on the profitability condition of it (Sjåfjell and Richardson, 2015).
3.3 Discussing laws which applicable for maintaining capital and insider dealing
In order to maintain capital amount, the company has to make all the financial
transactions using accounting standards, laws and principles. Further, it is necessary to invest or
use the capital raised in highly profitable alternative. So that, management can maintain fund and
provide attractive return to the shareholders. According to Criminal Justice Act 1993, while
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going for insider dealing the company must keep in mind capital invested by investors and
shareholders. The reason behind this is that, investment of investors should not hamper or affect
adversely (Insider dealing, 2012).
TASK 4
4.1
The company is mainly run by two bodies of people either by its shareholders or by board
of directors. The board of directors are in charge of the company and its management or have the
rights to take decision of business which include both strategic and operational decisions
(Malberti, 2015).
Duties-
To act within the powers and according to company's constitution.
To promote the success of the company. And interests of shareholders (Schwimbersky and Gold,
2013).
To exercise independent judgement and make own decision. And an agreement
4.2 Explaining rules on various types of meetings
 Statutory meeting: A firm which is limited and issues shares in the market or having
share capital then go for statutory meeting. Basic rule of this is that, necessary to arrange
between one month to six months once. It contains fully and partially paid-up shares
allotted in the market and cash received by the firm from shares. Further, under this kind
of meeting only shares and amount related to this are discussed.
 Annual general meeting: Under this, meeting between members or subordinates and
managers is arranged where queries of employees are to be evaluated and suitable
solutions made by the authorised people (Veress, 2014). This kind of meeting is held for
particular objectives and purposes where specific time or duration is not mentioned.
 Meeting of board of directors: When all the board of directors gather together and
discuss with reference to firm then considered as meetings of BOD. Particular rule of this
type of meeting is that, it must be arranged once in every three months.
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 Meeting of shareholders: Here, meeting held between shareholders and managers which
must be arranged at least two or three times in a year. Further, when entity makes
decisions of business then also meeting arranges with the shareholders (Rosen, 2014).
4.3 Discussing law on minority protection
A person who purchase shares of a company and belongs under age of 18 is considered as
minor shareholder. As per the legal rules, minority shareholder has not any kind of rights to
interfere in the business decisions procedures. Until and unless he or she not cross to age of 18
years then unable to take part in taking business judgements. Apart from this, minority
shareholders cannot sue for the return amount like dividends and all on the firm (Minority
shareholder protection—overview, 2017). Further, any kind of derivative claims are also not
entertained in the case of minority protection laws.
4.4 Evaluating rights of shareholder as well as debenture holder
Shareholders have one kind of ownership towards the company where they have full
rights to interfere in the decision making process of business. In case, enterprise not give
participation to the shareholders under the procedure of decision making then they have right to
sue upon it. On the other side, debenture holders have key right is take amount from the firm on
specific period of time in terms of return. Further, if management not completes its all the
principles and not provide timely interest then debenture holders have right to sue against to
enterprise (What are the rights of debenture holders?, 2013).
4.5 Discussing rights on liquidation
Rights on the firm at the time of liquidation differ as per the hierarchy as well as position
at the workplace. Basic right is to receive each and every step through which the company is
going for liquidation. Apart from this, secured creditors have first right to collect the money
which is invested in the firm and then followed by general kinds of the creditors. After that,
preferred shareholders come into consideration who have right to take specific amount in terms
of dividend (Malberti, 2015). At the last, common shareholders come who have negligible rights
for taking money at the time of liquidation.
CONCLUSION
It can be concluded from the above analysis that, when an enterprise follows all the laws
and legislation at the time of converting in incorporation in legal manner then able to operate
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smoothly in the industry. Further, it is mandatory prepare memorandum of association along
with the article of association by following its legal requirements. After that, it should be
published in the market which provide whole overview of the entity to stakeholders. Moreover,
when the incorporated limited firm is going to raise capital at the workplace then basically three
options available with it which are like owner's capital, share and debt capital. Besides this, there
are various kinds of the meetings arranged in the limited company.
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REFERENCES
Books and Journals
Braun, R. and et.al., 2013. Does charter competition foster entrepreneurship? A difference‐in‐
difference approach to European company law reforms. JCMS: Journal of Common
Market Studies. 51(3). pp. 399-415.
Hannigan, B., 2015. Company law. Oxford University Press, USA.
Malberti, C., 2015. The relationship between the Societas Unius Personae proposal and the
acquis: Creeping Toward an Abrogation of EU Company Law?. European Company and
Financial Law Review. 12(2). pp. 238-279.
Moore, M. T., 2015. Comment: Bridging the Gap Between Labour Law and Company Law.
Industrial Law Journal. 44(3). pp. 425-429.
Rosen, K. M., 2014. Company law and the law of succession droit commercial/commercial law.
The American Journal of Comparative Law. 62(suppl_1). pp. 387-405.
Schwimbersky, S. and Gold, M., 2013. The European Company Statute: a tangled history. A
decade of experience with the European Company. pp. 49-66.
Sealy, L. and Worthington, S., 2013. Sealy & Worthington's Cases and Materials in Company
Law. Oxford University Press.
Sjåfjell, B. and Richardson, B. J. eds., 2015. Company Law and Sustainability. Cambridge
University Press.
Veress, E., 2014. Towards a Legal Theory of Nationalization. Controversies of Company Law
History in Central and Eastern Europe. Romanian Journal of Comparative Law n. 1. p.
185.
Online
Contents of Prospectus of a Company. 2015. [Online]. [Available through]:
<http://www.commercepk.com/contents-of-prospectus-of-a-company/>
How to Start Your Business: Your Legal Requirements. 2017. [Online]. [Available through]:
<http://smallbusinessbc.ca/article/how-start-your-business-your-legal-requirements/>.
Insider dealing. 2012. [Online]. [Available through]: <https://www.out-law.com/page-11115>
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Kennon, J., 2016. The Three Primary Types of Financial Capital. [Online]. [Available through]:
<https://www.thebalance.com/the-three-primary-types-of-financial-capital-357332>
Lifting Of The Corporate Veil. 2017. [Online]. [Available through]:
<https://www.lawteacher.net/free-law-essays/business-law/article-on-lifting-of-the-law-
essays.php>.
Minority shareholder protection—overview. 2017. [Online]. [Available through]:
<https://www.lexisnexis.com/uk/lexispsl/disputeresolution/document/393747/58XG-2F51-
F18B-7005-00000-00/Minority%20shareholder%20protection%E2%80%94overview>
Pre-incorporation contracts and the promoter. 2017. [Online]. [Available through]:
<https://www.lawteacher.net/free-law-essays/contract-law/pre-incorporation-contracts-
and-the-promoter.php>.
What are the rights of debenture holders?. 2013. [Online]. [Available through]:
<http://www.bms.co.in/what-are-the-rights-of-debenture-holders/>
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