United Kingdom company law

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London's new central business district, Canary Wharf, including the HSBC World Headquarters at West India Quay.

United Kingdom company law is governed by the Companies Act 2006. The Insolvency Act 1986, the Company Directors Disqualification Act 1986, and the old Companies Act 1985 are also important statutes. It applies across the United Kingdom, and is highly influential within Europe and around the world.

[edit] History

Main article: History of company law

[edit] Corporate governance

[edit] Personality and liability

Case of Sutton's Hospital (1612) 10 Rep. 32.; 77 Eng Rep 960, 973,^[1] per Edward Coke,

"And it is great reason that an Hospital in expectancy or intendment, or nomination, shall be sufficient to support the name of an Incorporation, when the Corporation itself is onely in abstracto, and resteth onely in intendment and consideration of the Law; for a Corporation aggregate of many is invisible, immortal, & resteth only in intendment and consideration of the Law; and therefore in 39 H. 6. 13b. 14 a. Dean and Chapter cannot have predecessor nor successor. 21 E. 4. 27. & 30 E. 3. 15. 6. They may not commit treason, nor be outlawed, nor excommunicate, for they have no souls, neither can they appear in person, but by Attorney33 H. 8. Br. Fealty. A Corporation aggregate of many cannot do fealty, for an invisible body cannot be in person, nor can swear, Plow. Com. 213, and The Lord Berkley’s Case 245, it is not subject to imbecilities, or death of the natural, body, and divers other cases."

Northern Counties Securities Ltd v Jackson & Steeple Ltd [1974] 1 WLR 1133, per Walton J,

"Mr. Price argued that, in effect, there are two separate sets of persons in whom authority to activate the company itself resides. Quoting the well known passages from Viscount Haldane L.C. in Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] A.C. 705, he submitted that the company as such was only a juristic figment of the imagination, lacking both a body to be kicked and a soul to be damned."^[2]

Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705, per Lord Haldane,

"My Lords, a corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation."

Bolton v Graham & Sons Limited, per Lord Denning,

"A company may in many ways be likened to a human body. It has a brain and nerve centre which controls what it does. It also has hands which hold the tools and act in accordance with directions from the centre... (the) directors and managers represent the directing mind and will of the company and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such."

Salomon v Salomon & Co [1897] AC 22
Adams v Cape Industries plc [1990] Ch 433
Piercing the corporate veil
Company formation - details for how to form a UK company.
Public limited company, private company limited by shares, European Company Statute, company limited by guarantee, unlimited company, community interest company, Limited Liability Partnerships Act 2000
F Goldsmith (Sicklesmere) Ltd v Baxter [1970] 1 Ch 85, on company names

[edit] Constitution

Main article: Articles of association

Articles of association and memorandum of association, Table A (now "Model Articles")

s 21 CA 2006
Brown v British Abrasive Wheel Co [1919] 1 Ch 290
Sidebottom v Kershaw, Leese & Co Ltd [1920] 1 Ch 154
Dafen Tinplate Co Ltd v Llanelly Steel Co (1907) Ltd [1920] 2 Ch 124
Shuttleworth v Cox Bros and Co (Maidenhead) [1927] 1 Ch 154
Southern Foundries (1926) Ltd v Shirlaw [1940] AC 701
Greenhalgh v Arderne Cinemas Ltd [1951] Ch 286
Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653

[edit] Shareholders

Right to change company constitution, registration of the memorandum, removal of directors
Shareholders' meeting
s 168 Companies Act 2006 (previously s 303 CA 1985), allowing an ordinary majority of shareholders to appoint and remove directors
Shareholders' agreement
Automatic Self-Cleansing Filter Syndicate Co Ltd v Cunninghame [1906] 2 Ch 34

[edit] Directors

See also: Board of directors, Fiduciary, and Directors' duties

Acting within powers - s 171

Hogg v Cramphorn Ltd [1967] Ch 254

Promoting company success - s.172

Hutton v West Cork Railway Co (1883) 23 Ch D 654, per Bowen LJ,

"money which is not theirs but the company’s, if they are spending it for the purposes which are reasonably incidental to the carrying on of the business of the company. That is the general doctrine. Bona fides cannot be the sole test, otherwise you might have a lunatic conducting the affairs of the company, and paying away its money with both hands in a manner perfectly bona fide yet perfectly irrational… It is for the directors to judge, provided it is a matter which is reasonably incidental to the carrying on of the business of the company… The law does not say that there are to be no cakes and ale, but there are to be no cakes and ale except such as are required for the benefit of the company."

Boulting v Association of Cinematograph, Television and Allied Technicians [1963] 2 QB 606

Care and skill - s.174

Re Cardiff Savings Bank
Re Barings plc (No.5) [1999] 1 BCLC 433
Re D’Jan of London Ltd [1994] 1 BCLC 561

Duty of loyalty - s.175 CA 2006

Keech v Sandford (1726) Sel Cas. Ch.61
Whelpdale v Cookson (1747) 1 Ves Sen 9; 27 ER 856
Bray v Ford [1896] AC 44
Cook v Deeks [1916] 1 AC 554
Regal (Hastings) Ltd v Gulliver [1942] All ER 378
Industrial Development Consultants Ltd v Cooley [1972]
Dorchester Finance Co Ltd v Stebbing [1989] BCLC 498
In Plus Group Ltd v Pyke
Foster Bryant Surveying Ltd v Bryant [2007] EWCA Civ 200

Duty to disclose interests in transactions, s 177

Aberdeen Railway v Blaikie (1854) 1 Macq HL 461, per Lord Cranworth,

"A corporate body can only act by agents, and it is, of course, the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Such agents have duties to discharge of a fiduciary nature towards their principal. And it is a rule of universal application that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting or which possibly may conflict, with the interests of those whom he is bound to protect... So strictly is this principle adhered to that no question is allowed to be raised as to the fairness or unfairness of the contract entered into..."

Say on pay

[edit] Employees

s.172 Companies Act 2006 (see previously, s.309 Companies Act 1985)
Bullock Report and Codetermination

[edit] Contracting parties

Royal British Bank v Turquand (1856) 6 E&B 32
Agency (law), Apparent authority and Ostensible authority
See now ss.39-40 Companies Act 2006 (previously ss.35 and 35A Companies Act 1985)
Hely-Hutchinson v Brayhead Ltd

[edit] Derivative actions

[edit] Unfair prejudice

Main article: Unfair prejudice

s 994 Companies Act 2006 (previously, s 459)
Mutual Life Insurance Co of New York v The Rank Organisation Ltd [1985] BCLC 11
Rock Nominees Ltd v RCO (Holdings) plc [2004] 1 BCLC 439; [2003] 2 BCLC 493
Ebrahimi v Westbourne Galleries [1973] AC 360

[edit] Corporate finance

[edit] Shares

Establishing rights

Birch v Cropper (1889) 14 App Cas 525
Scottish Insurance Corporation v Wilsons & Clyde Coal Co Ltd [1949] AC 462
Dimbula Valley (Ceylon) Tea Co v Laurie [1961] Ch 353
Will v United Lankat Plantations Co Ltd [1914] AC 11
Re Bradford Investments Ltd [1991] BCLC 224

Varying rights

Companies Act 2006, s.21(1), s.25
Citco Banking Corporation NV v Pusser's Ltd [2007] 2 BCLC 483^[3]
Companies Act 2006, s.629, s.630, s.633
Greenhalgh v Arderne Cinemas Ltd [1946] 1 All ER 512
Cumbrian Newspapers Group Ltd v Cumberland & Westmoreland Herald Ltd [1987] Ch 1
Companies Act 2006, s.22-24
Russell v Northern Bank Development Corp Ltd [1992] 3 All ER 161

Issuing shares

Companies Act 2006, s.10, s.617
Re Scandinavian Banking Group plc [1988] Ch 87
Companies Act 2006, s.542, 580, 588-9
Ooregum Gold Mining Co of India v Roper [1892] AC 125
Mosely v Kofffontein Mines Ltd [1904] 2 Ch 108
Hilder v Dexter [1902] AC 474
Paul Myners, Pre-Emption Rights: Final Report (2005) DTI, .pdf

[edit] Legal capital and creditor security

Second EC Directive 77/91/EEC on minimum capital maintenance for public listed companies, as amended by 2006/68/EC
Re Wragg Ltd [1897] 1 Ch 796
Insolvency Act 1986, ss.213-215
Company Directors Disqualification Act 1986, ss.6-7
Colin Gwyer Associates Ltd v London Wharf (Limehouse) Ltd
Adams v Cape Industries [1990] Ch 433
Re Hydrodam (Corby) Ltd [1994] 2 BCLC 180

[edit] Dividends

[edit] Reduction of capital

[edit] Financial assistance

Barclays Bank Ltd v British & Commonwealth Holdings plc [1996] 1 All ER 381
Chaston v SWP Group plc [2003] 1 BCLC 675
Anglo Petroleum Ltd v TFB (Mortgages) Ltd [2007] BCC 407
Brady v Brady [1988] 2 All E R 617

[edit] Prospectuses and disclosure

Directive 2001/34/EC (Listing Directive) Art.42 - 51
Financial Services and Markets Act 2000, ss.74-8
R v International Stock Exchange, ex parte Else [1993] QB 534
Directive 2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to trading and amending Directive 2001/34/EC
Financial Services and Markets Act 2000 Part VI
Derry v Peek (1889) L R 14 App Cas 337

[edit] Insider dealing

Directive 2003/6/EC
Directive 2003/124/EC on the definition and public disclosure of inside information and the definition of market abuse
Re an Inquiry under the Company Securities (Insider Dealing) Act 1985 [1988] 1 AC 660
Rigby and Bailey v R [2006] 1 WLR 306

[edit] Corporate insolvency

Main article: UK insolvency law

Insolvency Act 1986, as amended by the Enterprise Act 2002
Liquidation, Administration order, Administrative receivership and floating charge
Creditor, Secured creditor, Unsecured creditor, Preferential creditor
National Westminster Bank plc v Spectrum Plus Limited [2005] UKHL 41
Trading while insolvent (UK)
Wrongful trading, s.214 IA 1986, Fraudulent trading, s.213 IA 1986,s. 913 Companies Act 2006.
Undervalue transaction

[edit] Mergers and acquisitions

Main article: Mergers and acquisitions in United Kingdom law

In company law there are three main areas that regulate mergers and acquisitions (also, reconstructions or takeovers).

Insolvency Act 1986, ss.110-111, on schemes of arrangement or reconstructions
Companies Act 2006, Parts 26 (ss.895-901) and Part 27 (special rules for public companies), on arrangements, reconstructions, mergers (or amalgamations) or divisions (demerger or "scission"). The rules here implement the Third and Sixth EC Company law directives.
Companies Act 2006, Part 28, on takeovers. s.979 gives a takeover bidder who has already acquired 90% of a company's shares the right to compulsorily buy out the remaining shareholders (squeeze out). Conversely s.983 allows minority shareholders to insist their stakes are bought out. The Panel on Takeovers and Mergers, established in 1968, oversees Companies Act duties, including those laid down in the European Directive on Takeover Bids (2004/25/EC)
R v Panel for Takeovers and Mergers Ex p Datafin

[edit] Other issues

Corporate manslaughter (England and Wales) and Corporate Manslaughter and Corporate Homicide Act 2007
Tesco Supermarkets v Nattrass [1972] AC 153

[edit] See also

Other company law

Aktiengesellschaft, Vorstand, Aufsichtsrat and Mitbestimmung
Delaware corporation
European Company Statute

[edit] Notes

^ Case of Sutton's Hospital (1612) 10 Rep. 32.; 77 Eng Rep 960, 973
^ n.b. Lord Haldane never used such figurative words. They may trace back to Lord Chancellor Thurlow (1731–1806), who is said to have asked rhetorically, "did you ever expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?" Though it seems his exact phrase was, "Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like." John Poynder Literary Extracts (1844) vol. 1, p. 2 or 268
^ cf Gambotto v WCP Ltd (1995) 127 ALR 417

[edit] References

Paul Davies (2008) Gower's Modern Company Law, 8th Ed., Sweet and Maxwell
John Lowry and Adam Dignam (2006) Company Law, Oxford University Press ISBN 978-0-19-928936-3
Len Sealy and Sarah Worthington (2007) Cases and Materials in Company law, 8th Ed., Oxford University Press

[edit] External links

[0] Case of Sutton's Hospital (1612) 10 Rep. 32.; 77 Eng Rep 960, 973

[1] .b. Lord Haldane never used such figurative words. They may trace back to Lord Chancellor Thurlow (1731–1806), who is said to have asked rhetorically, "did you ever expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?" Though it seems his exact phrase was, "Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like." John Poynder Literary Extracts (1844) vol. 1, p. 2 or 268

[2] Gambotto v WCP Ltd (1995) 127 ALR 417

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