A Comprehensive Guide to Rules and Regulations Governing Corporations in the United Kingdom
- 05 Pages
- Published On: 07-12-2023
Set of rules and regulations regarding the corporation in United Kingdom is been cited in Companies Law 2006. It provides a comprehensive code and statutes regarding formation of the company, its rules, amendments, duties and responsibilities of its shareholders and directors. The act was introduced as “The Company Law Reform Bill” and later got its royal assent in 2006. For students seeking guidance on understanding the intricate details of this law, seeking a UK dissertation help provide the most invaluable insights.
There has been proposed a few situations where the resolutions or decisions may be passed. Firstly, ratification of conduct of Martin Briggs by Frary Mew construction ltd. Where Blaise and Sonia showed less interest in ratifying Martin’s conduct, other members did not have a problem. Since ratification of conduct means “agreement to adopt” and is derived from the principle “omnis ratihabitio mandato aequiparatur.” There has to be an approval of the second individual, to whom it is communicated, whether expressed or implied. Although it is not an easy task to differentiate between ratifiable and non-ratifiable breach of a duty. It was proposed that Frary Mew Construction ltd. Should ratify Martin’s conduct that upset Blaise as their opinions differed. However, the resolution for ratification may be passed under the guidance of some precedents mentioned below;
In, Rolled Steel Products (Holdings) Ltd v British Steel Corporationat 296 F per Slade LJ as well as in the case Bamford v Bamford at 237 H to 238 B per Harman LJ a principle and rule was derived that has been used as a precedent in a lot of cases. The court in both the cases held that the shareholders have the power to ratify a director’s breach or conduct only if the conduct is not unlawful on the part of the concerned director.
As stated in Prest v Prest it was held by Lord Sumption that a company’s shareholders may approve or ratify a foolish conduct committed by the director, especially when the company is completely solvent.
In another case, Ultraframe (UK) Ltd v Fielding and ors and Progress Property Company Ltd v Moorgath Group Ltd [2010] it was held that in order to assess that the conduct should be ratified, if it does not amount to ultra vires of the company as whole.
As per section 238 of the Companies Act, 2006, A special resolution may be passed by the members of the company if any legitimate reason is found as such. It would need total 75% of majority of vote in order to pass the bill.
The resolution of amending the Article of Association may pass because there are only two members opposing the amendment in articles. The matter of in issue here is, conflict of interest which is said to be attained by Martin. Where Blaise and Sonia are against Martin and other directors, Frary Mew Construction agreed with Martin’s conduct where they learned that there was no personal interest rather, it caused a relief into taking overburden into the company.
Duty of a director to avoid conflict of interests is stated ins section 175 of Companies Act, 2006, which states that a director must avoid such situation that might bring up conflict or conflicts in the interest of the company or its integrity.
In, Regal (Hasting) v Gulliver , the court held that even if a director works in a bonafide manner, their actions led to conflict of interest of the company and a huge loss as whole. In another case, Bhullar v Bhullar , the court stated that a director holding a fiduciary authority cannot exercise such authority or power in order to plant his own interest.
Section 170-180 underlies the duties and responsibilities of a director which needs to be followed by him under any circumstances. His payment at the loss of the company has to be
approved by the rest of the members and shareholders at first according to companies Act, 2006.
Section 260 of the Companies Act, 2006states the definition of derivative claims of England and Wales whereas section 261 lays down the rules for Scotland. A statutory derived action is a corporate action taken by the shareholders of a company in order to protect the company from suffering any wrong caused by breach of duty by the directors. This rule of exception of derivative claim is derived from the case Foss v Harbottle (1843) 67 ER 189, (1843) 2 Hare 461 also known as exceptions to the rule in Foss v. Harbottle. This right applies only on a corporate member who is aggrieved of infringement of his corporate right.
It was also held in Langley Ward Ltd v Trevor & Anor [2011] that it is in the discretion of the court to decide whether it will take up the case of derivative action or not. Exceptions to the derivative claim action is present and it states that if a company is void and is ultra vires then the action cannot be claimed by a company’s shareholders.
In, Nurcombe v. Nurcombe 1985, a wife came to be aware of the misdeeds of her husband who happened to be making money and keeping profits to himself and was one of the directors of the company and claimed derivative action. But it was held that she was not a proper plaintiff in order to claim such an action
In Greenhalgh v. Aderne cinemas ltd., 1981 chapter 286, the court held that if a claim held a discrimination between the majority and minority shareholder, a special resolution shall be impeached against such an action.
Continue your journey with our comprehensive guide to Streamlined incorporation process in the uk companies act 2006.
REFERENCES
Internet Sources
- guildhallchambers.co.uk, https://www.guildhallchambers.co.uk/uploadedFiles/BreachesRA.pdf, accessed on 26th March, 2021.
- Legislation.gov.uk, https://www.legislation.gov.uk/ukpga/2006/46/section/175, accesed on 26th March, 2021. Lawteacher.net, https://www.lawteacher.net/free-law-essays/business-law/duties-of-Directors-and-relevant-case-law-business-law-essay.php, accessed on 26th March, 2021.
- Legislation.gov.uk, https://www.legislation.gov.uk/ukpga/2006/46/part/10/chapter/2, accessed on 26th March, 2021.
- Woolridge F, Davis L, “ Derivative claims under UK company law and some related provisions of German law” < https://core.ac.uk/download/pdf/19919319.pdf, >accessed on 26th March, 2021.
- More, H, (2019), “Foss v. Harbottle: Rule of Majority”, https://thefactfactor.com/facts/law/civil_law/company-law/foss-v-harbottle/5626/, accessed on 2th March, 2021.
- Bamford v Bamford [1970] Ch 21
- Prest v Prest [2013] 2 AC 415
- Ultraframe (UK) Ltd v Fielding and ors [2003] EWCA Civ 1805
- Progress Property Company Ltd v Moorgath Group Ltd [2010] UKSC 55
- Regal (Hasting) v Gulliver 1 ALL ER 378, 2 AC 134,UKHL 1
- Bhullar v Bhullar EWCA Civ 424, 2 BCLC 241
- Foss v Harbottle (1843) 67 ER 189, (1843) 2 Hare 461
- Langley Ward Ltd v Trevor & Anor [2011]EWHC 1893 (Ch)
- Nurcombe v. Nurcombe 1985 1 WLR 370
Cases
Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] Ch 246,
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