Company Law and the Driving Force behind It

A company is accepted as an individual with the right to sue and be sued in its own name. The UK company law governs the companies that are formed on the basis on Companies act of 2006. In additional to that, the law is also fueled by the UK corporate governance code, European Union Directives and Insolvency act of 1986.

Companies Act of 2006

The main features of this law are:

• It emphasises and clarifies the duties of directors of a company. Previously the duties were coded in the common law. According to this new law, the directors have seven duties that include:
• To act within their powers
• To promote success to company.
• They must exercise independent judgment.
• The director must have knowledge of the subject under study
• They should avoid conflict of interest.
• They should maintain their integrity and moral grounds. Their loyalty to the company should not be shattered by third party incentives.
• To be inclined to offer approval for existing transactions and policies.
• Incorporates European Union Directives according to which, the countries that have ratified this directive need to change their laws to suit the other countries.
• It has simplified the business regime for small private companies on appointing secretaries, majority of shareholder’s resolution, abolition of annual general meetings, share allotment, etc.
• For the public companies, it has simplified many grey areas of political donations, trade union expenditure, etc.

UK Corporate Governance Code 2010

This is a code for good corporate governance. According to this Code, there are basic few requirements:

• Requirement of non-executive directors with assured independence.
• Decides the director remuneration and the committee is to be composed of non-executive directors.
• Non executive directors of high integrity need to form the audit committee.
• The relationships with the shareholders should be cordial and they should be kept well informed of the developments in the company.

Insolvency Act 1986

If a company can no longer survive and decides to wind up, the insolvency procedures come into action.

Insolvency of companies:

The company voluntary arrangement (CVA) allows a company with debt to come to an agreement with the creditors regarding payment of the debt or parts of the debt over an agreed period of time. This arrangement comes into effect with approval of all the directors, 75% of the creditors and the company liquidator.
No legal action can be taken by the creditors while the CVA is in effect. The money is paid as monthly installments to the creditors. The lawyer drafts the proposal and takes his/her fee from these monthly payments.

Insolvency of individuals

The IVA is exact same as CVA, minus the directors. Here the agreement is between the creditors and the individual. This agreement is flexible according to the individual’s needs and strength of repayment.
These are the laws and acts that constitute the Company law and run a corporate business.