Routledge Student Statutes

Company Law 2012-2013

Book Information
How to Use This Book
Quizzes
Interpreting Statutes
Useful Websites
Think Points

Book Information

Company Law Statutes 2012-2013

4th Edition

Author: Marc Moore

Publication date: 16th August 2012

Purchasing Options:

How to Use This Book

Company law is one of the most heavily statute-based areas of law in the UK. The recent Companies Act 2006 in particular comprises 1300 sections, making it the longest piece of British legislation in history. As a student of company law, therefore, the importance of knowing one's way around a statute book cannot be understated. However, having taught this subject for many years now it still surprises me how frequently students tend to misuse statute books, with the unfortunate result that they fail to take advantage of having such a potentially valuable resource at their disposal during examinations.

Law students must respect that while a statute book is a valuable tool that in the long run will save you time and work, like many labour-saving tools it is not necessarily user-friendly at first. Getting value from a statute book thus involves an initial investment of time and effort on your part. Too often students tend to take the view that a statute book, while essential for examinations, is nevertheless something that you worry about at the last minute after you have undertaken your revision. It is thus unsurprising that sales of statutes in bookshops often tend to peak in the days imminently preceding an examination. But by failing to integrate the use of primary statutory materials into their week-to-week learning of the subject during term time, many students pass up the opportunity to develop the basic skills of locating, interpreting and applying statutory rules in relation to specific legal propositions or problems. Such attributes are especially valuable in the context of learning company law, given the sheer scale and complexity of much of the legislation.

The main benefit of a statute book for students (and also practising lawyers) is its capacity to alleviate the near-impossible task of learning complex legal doctrines in a comprehensive level of detail. However, this strength of the statute book can also be its main weakness, because excessive or unthinking reliance on primary legislation can sometimes cause its user ‘to fail to see the wood for the trees’: in other words, to get bogged down in the minutiae of the various sub-sections and exceptions, and, consequently, to fail to forge a proper critical understanding of what the rule is actually about and why it is important. This emphasises the necessity of using the statute book in conjunction with high quality secondary sources such as textbooks and academic articles on an ongoing basis, particular when it comes to formulating critical positions on the law for the purpose of answering essay-style questions. It also highlights the need to be economical with your use of statutory materials, in the sense of being able to select in an informed and discerning way those specific parts of a section that enable you to deal concisely with a legal proposition or problem within a limited space of time.

Last but not least, remember that while page dividers and/or highlighters are highly beneficial (if not essential) methods of gaining familiarity with your statute book in advance of an examination, annotation of statute books is strictly prohibited in orthodox (i.e. closed-book) law examinations. In any event, such practices will never be an effective substitute for thorough familiarity with your statute book and the ability to use it in an informed and proper manner under examination conditions.

Quizzes

Directors

Directors' Duties

Officers, Liability for Offences

Shareholders

Share Capital

Constitution

Corporate Governance

Takeovers

Winding Up

Micellaneous

Interpreting Statutes

Scenario 1

Emily started up in business as a florist. For the purpose of doing so she set up a private limited company, Floral Ltd, and became the company's sole shareholder and director. To fund the running of the business Emily caused Floral Ltd to take out a £5,000 loan from the Caledonian Bank. Due to an economic recession Floral Ltd's business stumbled upon hard times and, before long, the company was struggling to meet its day-to-day outgoings. Although Emily had no prior knowledge of accounting, it became clear to her by the end of her first year of trading that Floral Ltd was insolvent and had virtually no chance at all of surviving as a going concern. Nevertheless, Emily continued to purchase new stock on credit in the vain hope that custom would pick up. After a further 3 months had passed, Emily decided that Floral Ltd's trading debts had become completely unsustainable. She therefore closed down the shop immediately and left her remaining stock of flowers to perish. One week later Floral Ltd was put into insolvent liquidation.

+ Show Answer

Scenario 2

Brian is a director of Stars Ltd, a company that specialises in providing agency and promotional services to musicians. In the course of developing the company's business Brian has built up close working relationships with a number of clients. Chelsea, one of Stars Ltd's most valuable clients, recently became discontented with some of Brian's colleagues at Stars Ltd and asked that Brian represent her in a personal capacity from now on. Brian agreed to this request, and has since received significant agency fees from Chelsea following the release of her new album. Furthermore, while walking in his local park Brian spotted a bright young amateur footballer called David. Brian offered to act as David's agent, and has since made a lucrative commission after David was signed by a leading professional club. Brian's co-directors at Stars Ltd have recently found out about Brian's dealings. They believe that the company is rightly entitled both to the fees that Brian made from his dealings with Chelsea, and also the commission that he received from David.

+ Show Answer

Statute

Companies Act 2006, section 175

Key terms to be included

duty to avoid conflicts of interest
exploitation of any property, information or opportunity
immaterial whether the company could take advantage of the ... opportunity
authorisation must be given by the directors
duty is not infringed if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest

Example Answer

In respect of Brian's dealings with Chelsea, it is likely that he will be held liable for breach of his duty under s 175 of CA 2006 to avoid conflicts of interest. This is because he exploited an opportunity that should rightfully have been offered to Stars Ltd first, without either disclosing the opportunity to his fellow directors or gaining the board's authorisation as required by s 175(4)(b)-(5). Indeed, s 175(2) provides that the director's duty to avoid conflicts of interest applies in particular to the exploitation of any property, information or opportunity. Under s 175(2), it is immaterial whether the company could take advantage of the opportunity therefore the fact that Chelsea was dissatisfied with Brian's colleagues at Stars Ltd is irrelevant when assessing Brian's liability for breach of duty. As regards Brian's dealings with David, on the other hand, it is likely that Brian will not be held in breach of s 175 because s 175(4)(a) establishes that the duty is not infringed if the situation cannot reasonably be regarded as likely to give rise to a conflict of interest. Since football agency is (arguably) a substantially unrelated business to music promotions, Brian could be said to have acted reasonably in determining that his dealings with David did not pose a conflict of interest with his position in Stars Ltd.

- Hide Answer

Scenario 3

Tracks Ltd is a company that specialises in the operation and maintenance of public rail tracks. In 2009, four people were killed when a passenger train derailed as a result of a broken piece of track on a busy commuter route into London. In the years leading up to the crash, Tracks Ltd's board of directors had progressively reduced the frequency of internal safety inspections and ongoing maintenance work on the tracks, in an attempt to reduce the company's spiralling costs. A subsequent investigation established that the piece of track in question had not been replaced for a number of years, and that the crash would almost certainly have been avoidable had the company's safety inspections been more frequent. It has also transpired that no individual director or officer of Tracks Ltd had sole responsibility for determining the company's inspections and track maintenance schedule.

+ Show Answer

Statute

Corporate Manslaughter and Corporate Homicide Act 2007, ss 1-2

Key terms to be included

relevant duty of care
duty owed in connection with the supply by the organisation of goods or services
gross breach
the way in which [an organisation's] activities are managed or organised by its senior management
the making of decisions about how the whole or a substantial part of its activities are to be managed or organised
conduct [that] falls far below what can reasonably be expected of the organisation in the circumstances

Example Answer

In this case, Tracks Ltd is arguably guilty of corporate manslaughter on account of causing the deaths of the four rail passengers in 2009. Section 1 of the Corporate Manslaughter and Corporate Homicide Act (CMCHA) 2007 provides that an organisation is guilty of corporate manslaughter if the way in which its activities are managed or organised causes a person's death, and amounts to a gross breach of a relevant duty of care owed by the organisation to the deceased. A relevant duty of care is defined in section 2(1)(c) of the Act as including a duty owed in connection with the supply by the organisation of good or services, which clearly encapsulates the case in question. Section 1(4)(b) of the Act establishes that a breach of a duty of care by an organisation is a “gross” breach if the conduct in question falls far below what can reasonably be expected of the organisation in the circumstances. Tracks Ltd's failure to carry out regular inspections and maintenance work on its rail tracks arguably constitutes conduct of this nature. Section 1(3) of CMCHA emphasises that an organisation is guilty of corporate manslaughter only if the way in which its activities are managed or organised by its senior management is a substantial element in the breach. Moreover, “senior management” for this purpose is defined in section 1(4)(c) as including the making of decisions about how the whole or a substantial part of [an organisation's] activities are to be managed or organised. It would clearly appear that Tracks Ltd's board of directors meet this description, therefore the fact that responsibility for determining the company's inspections and tracks maintenance cannot be attributed to any one individual director or officer will not prevent Tracks Ltd from being held guilty of corporate manslaughter. Furthermore, the evidence presented would suggest that the senior management failure in this regard was indeed a substantial element in the company's breach of duty.

- Hide Answer

Scenario 4

Gemma, Harry and Ian are the founders of Trips Ltd, an online travel agency. Each founder has retained a minority 3% equity holding in the company, although the majority of its voting share capital is owned by numerous small investors who are not involved at all in the running of the business. While Ian is the company's managing director, Gemma and Harry ceased being directors of Trips Ltd many years ago in order to pursue other business opportunities. However, following a period of poor performance Gemma and Harry now doubt Ian's competence as a director. They wish to call an extraordinary general meeting, at which they intend to persuade the company's shareholders to pass a resolution dismissing Ian as a director of the company with immediate effect. They are also unwilling to pay Ian any compensation for loss of office. Ian believes that Gemma and Harry have acted too hastily, and wishes to have a formal opportunity to put his side of the story to the shareholders in writing.

+ Show Answer

Statute

Companies Act 2006, sections 303 & 168-169

Key terms to be included

The directors are required to call a general meeting once the company has received requests to do so from members representing at least 5% of [the company's voting share capital]
A company may by ordinary resolution at a meeting remove a director before the expiration of his period of office
This section is not to be taken as depriving a person removed under it of compensation or damages payable to him in respect of the termination of his appointment as director
Where ... the director concerned makes with respect to [the resolution to dismiss him] representations in writing to the company ... and requests their notification to members of the company, the company shall ... send a copy of the representations to every member of the company to whom notice of the meeting is sent

Example Answer

Under section 303 of CA 2006, Gemma and Harry are entitled to require that Trips Ltd's directors call an extraordinary general meeting for the purpose of voting on the issue of Ian's dismissal from office. Section 303(1) provides that the members of a company may require the directors to call a general meeting of the company, and section 303(2) establishes moreover that that the directors are required to call a general meeting once the company has received requests to do so from members representing at least 5% of the company's voting share capital. Since Gemma and Harry together hold a 6% equity stake in Trips Ltd, they clearly meet this threshold. In respect of the proposed dismissal of Ian, section 168 of CA 2006 states that a company may by ordinary resolution at a meeting remove a director before the expiration of his period of office. Therefore Gemma and Harry will be successful in effecting Ian's removal from office if they can garner the support of a majority of the general meeting. However, even if they are successful in securing a resolution to this end, they cannot deny Ian any contractual compensation to which he is due, as section 168(5) clearly specifies that a director removed under the section 168 procedure is not to be deprived of any compensation or damages payable to him in respect of the termination of his appointment as director. Furthermore, under section 169(3) Ian must be given the opportunity to make representations in writing to the company in respect of his proposed dismissal, which the company must circulate to the shareholders in advance of the meeting. This will give Ian the change to put his side of the story across before the issue of his proposed dismissal is voted upon.

- Hide Answer

Scenario 5

Harry had for a number of years carried on a retailing business through a company called Localstores Ltd. He decided that it was time to retire from the trade and, struggling to find a suitable person to run his business, had no choice but to appoint his 2 carefree and arrogant nephews Ian and John as directors of the company. Harry resigned as a director of Localstores Ltd but remained the company's majority shareholder. Worried about Ian and John's free-spending ways, Harry also initiated a change to Localstores Ltd's articles of association, inserting a special clause which provided that any borrowing in excess of £10,000 must be expressly authorised by the company's shareholders in General Meeting. On becoming directors of Localstores Ltd, Ian and John began to rapidly expand the company's business by investing in a number of expensive new shop premises. Struggling as a result to fund the day-to-day operation of the business, they approached Kwik-Kredit Bank with a view to borrowing £25,000. Kwik-Kredit Bank's manager Laura was familiar with Harry from past dealings and suspected that he would not be altogether happy with this arrangement. Nevertheless, she proceeded with setting up the loan agreement without asking any further questions. Ian and John then signed the loan agreement on the company's behalf. Harry has just found out about the arrangement and seeks your advice on whether the loan agreement is valid and binding on the company.

+ Show Answer

Statute

Companies Act 2006, section 40

Key terms to be included

In favour of a person dealing with a company in good faith, the power of the directors to bind the company...is deemed to be free of any limitation under the company's constitution
a person dealing with a company is not bound to enquire as to any limitation on the powers of the directors
a person dealing with a company...is not to be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors

Example Answer

By causing Localstores Ltd to borrow in excess of £10,000 without the prior consent of the company's shareholders in General Meeting, Ian and John have exceeded a limitation on their powers as directors under the company's constitution. However s 40(1) provides that in favour of a person dealing with a company in good faith, the power of the directors to bind the company is deemed to be free of any limitation under the company's constitution. The key question insofar as the validity of the transaction is concerned, then, is whether the bank manager (Laura) can be regarded as acting ‘in good faith’. For this purpose, s 40(2)(b) provides (inter alia) that a person dealing with a company is not bound to enquire as to any limitation on the powers of the directors to bind the company, nor are they to be regarded as acting in bad faith by reason only of knowing (or, by implication, suspecting) that an act is beyond the powers of the directors under the company's constitution. Therefore, despite Laura arguably having grounds for suspicion that Ian and John were acting in excess of their authority as directors, this alone will not put her in bad faith nor trigger any duty on her part to enquire as to Ian and John's eligibility to bind the company to the loan agreement. The loan agreement will consequently be deemed valid regardless of the constitutional limitation on Ian and John's authority.

- Hide Answer

Scenario 6

Boozy Ltd is a company which specialises in brewing beer. Its articles of association are in the form of the Draft Model Articles for Private Companies Limited by Shares. The company was formed by Charlie, who was initially the company's sole shareholder holding 500,000 ordinary shares each of £1 nominal value. Each of Charlie's ordinary shares carried a voting right but no definite entitlement to dividends. Later on Charlie decided to raise £1 million of new capital in order to expand his brewing business therefore he caused the company to issue 500,000 new preference shares each with a nominal value of £2. In contrast to Charlie's ordinary shares, each of the new preference shares entitled the holder to a fixed annual 8% dividend, but carried no voting rights. This meant that Charlie retained sole voting control over the General Meeting. Due to the declining market for alcoholic drinks Boozy Ltd is beset by cash flow problems. Charlie has therefore proposed to alter the rights of the preference shareholders so as to reduce their 8% dividend rate to the more manageable level of 5%. The preference shareholders are incensed by Charlie's proposal and seek your advice on how they can stop him from putting his plan into effect.

+ Show Answer

Statute

Companies Act 2006, sections 629, 630 and 633

Key terms to be included

classes of shares (s 629)
variation of class rights (s 630)
consent in writing from the holders of at least three-quarters in nominal value of the issued shares of that class, or a special resolution passed at a separate general meeting of the holders of that class sanctioning the variation (s 630)
the holders of not less in the aggregate than 15% of the issued shares of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation) may apply to the court to have the variation cancelled (s 633)

Example Answer

Charlie's proposed variation of the dividend rate attached to the preference shares constitutes a variation of the class rights of the preference shareholders. Section 629(1) of the Companies Act 2006 provides that shares are of one class if the rights attached to them are in all respects equal. This is undoubtedly true in the case of both the ordinary and preference shares of Boozy Ltd, thus clearly distinguishing them as 2 separate classes of shares. Under s 630(2), rights attached to a class of a company's shares may only be varied: (a) in accordance with provision in the company's articles for the variation of those rights; or (b) where the company's articles contain no such provision, if the holders of shares of that class consent to the variation in accordance with the default statutory procedure. The fact that Boozy Ltd's articles are in the form of the Draft Model Articles for Private Companies Limited by Shares means that there is no special provision in the company's articles for the variation of class rights. It is therefore necessary for Charlie to obtain the consent of the preference shareholders via the statutory procedure. This is set out in s 630(4), which provides that consent of the affected class of shareholders to the proposed variation may be given either: (a) in writing from the holders of at least three-quarters in nominal value (i.e. £750,000) of the issues shares of that class; or (b) via a special resolution (i.e. a 75% vote) passed at a separate general meeting of the holders of that class sanctioning the variation. If Charlie is unsuccessful in obtaining the consent of the preference shareholders in either of the above ways, the proposed reduction of the dividend rate will be prohibited. Moreover, even if Charlie is successful in obtaining the consent of a special majority of the preference shareholders in either of the above ways, the proposed variation may still be prohibited under s 633 in the event that dissenting preference shareholders holding not less in the aggregate than 15% of the preference shares apply to the court within the following 21 days to have the variation cancelled (s 633(2)–(4)). If such an application is made, the court, after hearing the views of the dissenting shareholders and any other interested persons (most notably Charlie), may cancel the variation if it is satisfied having regard to all the circumstances of the case that the reduction of the preferential dividend rate would unfairly prejudice the dissenting preference shareholders. Otherwise the court will confirm the variation, and its decision to this effect will be final (s 633(5)).

- Hide Answer

Scenario 7

Brian, a retired chartered accountant, is a part-time non-executive director of Contex plc, a large UK-listed petrochemicals producer. Alan also chairs meetings of Contex plc's audit committee. In its most recent annual statement of accounts, Contex plc failed to disclose £2 million of trading debts that it had incurred over the most recent financial year. When the true state of Contex plc's financial affairs became apparent, the company found it impossible to raise further finance due to serious distrust from investors, and it has since gone into liquidation owing significant sums of money to many creditors. It has also transpired that Contex plc's unscrupulous chief executive director, David, has for a number of years been misappropriating company funds into his own personal offshore bank account. David has since been imprisoned for fraud. However creditors and the general public are furious that these serious lapses in accountability were allowed to occur in the first place, and blame has begun to focus also on Brian. The Secretary of State consults you on whether there are adequate grounds for obtaining a court order to disqualify Brian from acting as a company director in future.

+ Show Answer

Statute

Directors' Disqualification Act (DDA) 1986, sections 6 and 9 and Schedule 1

Statute

Companies Act (CA) 2006, section 174

Key terms to be included

The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied - (a) that he is or has been a director of a company which has at any time become insolvent, and (b) that his conduct as a director of that company makes him unfit to be concerned in the management of a company. (DDA 1986, s 6)
Where it falls to a court to determine whether a person's conduct as a director of any particular company...makes him unfit to be concerned in the management of a company, the court shall, as respects his conduct as a director of that company..., have regard in particular - (a) to the matters mentioned in Part I of Schedule 1 to this Act, and (b) where the company has become insolvent, to the matters mentioned in Part II of that schedule (DDA 1986, s 9)
Part I Matters Applicable in All Cases: 1. Any misfeasance or breach of any fiduciary or other duty by the director in relation to the company. (DDA 1986, Sch 1)
Part II Matters Applicable Where Company has Become Insolvent: 6. The extent of the director's responsibility for the causes of the company becoming insolvent. (DDA 1986, Sch 1)
Duty to exercise reasonable care, skill and diligence (CA 2006, s 174)
A director of a company must exercise...the care, skill and diligence that would be exercised by a reasonably diligent person with - (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the functions carried out by the director in relation to the company, and (b) the general knowledge, skill and experience that the director has. (CA 2006, s 174)

Example Answer

Since it is clearly established that Contex plc has become insolvent, the key question in determining whether Brian should be disqualified from acting as a director is whether his conduct as a director of Contex plc makes him unfit to be concerned in the management of a company in future (DDA 1986, s 6(1)). Although the precise meaning of ‘unfitness’ is not automatically clear and depends to a considerable extent on the specific facts of the case in question, s 9(1) of the DDA 1986 provides that in making a determination of unfitness in any particular case a court shall have regard in particular to the matters mentioned in Pt I of Sch 1 of that Act. Moreover, where (as in the present case) the company has become insolvent, the court should also take into account the matters mentioned in Pt II of Sch 1. It would appear that the only matter in Pt I on the basis of which a finding of unfitness could be made in respect of Brian is the fact that he has arguably committed a breach of duty in relation to the company. Specifically, Brian may be argued to be in breach of his duty under s 174 of the CA 2006 to exercise reasonable care, skill and diligence, on account of his failure to stop the company from publishing inaccurate and misleading accounts, and also his inability to detect David's fraudulent misappropriations. In determining whether Brian's conduct puts him in breach of duty, the court will take into account as an objective consideration the general knowledge, skill and experience that Brian should have been reasonably expected to possess by virtue of his specific functions in the company. In this regard, the fact that Brian was responsible for chairing the company's audit committee will expectedly lead to him being held to a considerably higher standard of care, skill and diligence than he otherwise would when scrutinising the accuracy and integrity of Contex plc's financial accounts. The court will also take into account as a subjective consideration the general knowledge, skill and experience that Brian actually has, meaning that any relevant skills and experience which Brian acquired in his previous profession as a chartered accountant will further heighten the standard of care, skill and diligence expected of him in relation to matters concerning the company's financial accounts. If the court decides on the basis of the above considerations that Brian is indeed in breach of duty, this will constitute an ‘applicable matter’ under Sch 1 of the DDA 1986 for the purpose of making a finding of unfitness against Brian. Moreover, Pt II of Sch 1 of the DDA 1986 (‘Matters Applicable Where Company has Become Insolvent’) further specifies, as a relevant matter in determining unfitness, the extent of the director's responsibility for the causes of the company becoming insolvent. In this context, although Brian was not directly involved either in the accounting irregularity or the misappropriation of company assets, the court might infer that his failure to detect these lapses indirectly brought about the company's insolvency. If so, the court will consequently be more likely to hold that Brian is indeed unfit to be concerned in the management of a company, and hence that he should be disqualified from acting as a director in future.

- Hide Answer

Useful Websites

www.berr.gov.uk
This is the website of the Department for Business, Enterprise and Regulatory Reform (or DoBERR for short), which is the UK government department responsible for promulgating and updating the vast majority of company law rules in this country, and in particular the new Companies Act 2006. This is the most authoritative and up-to-date online source on the 2006 Act and any recent amendments thereto.
http://www.frc.co.uk
This is the website of the UK Financial Reporting Council (FRC), which is the body responsible for maintaining and updating the Combined Code on Corporate Governance. This website contains a full-text pdf version of the Code itself, plus copies of recent discussion documents concerning possible future amendments to the Code.
www.fsa.gov.uk
This is the website of the UK Financial Services Authority. The FSA is the official UK Listing Authority and also the country's main financial markets regulator. Although the majority of information on this site relates to wider aspects of financial markets regulation outside of the strict scope of company law, it is nevertheless a useful source of information on some important company law issues affecting the listed sector. The website also contains a full-text html version of the FSA Handbook, in which you will find (amongst other things) the official UK Listing Rules and also the Disclosure Rules and Transparency Rules (DTR) applying to UK-listed companies.
www.thetakeoverpanel.org.uk
This is the website of the Takeover Panel, a City-based non-governmental body responsible for promulgating and administering the application of the Takeover Code. The website contains a full-text pdf version of the Code together with copies of the influential Practice Statements that are issued by the Panel on an ongoing basis.
www.companylawforum.co.uk
This is a new website established by the legal publisher LexisNexis in 2008. Although it is aimed primarily at the professional community, it is nevertheless a useful, free and up-to-date source of information and opinion on current regulatory developments with particular emphasis on the Companies Act 2006.
www.companieshouse.gov.uk
This is the official website of the Registrars of Companies for England & Wales, and Scotland, who are based in Cardiff and Edinburgh respectively. It is likewise aimed primarily at professional users, although it does contain up-to-date information on the Companies Act 2006 including a detailed breakdown of the implementation schedule for the new Act's various provisions.
www.insolvency.gov.uk
This is the official website of the UK government's Insolvency Service. It provides useful practical information not only in relation to corporate insolvency procedures, but also on directors' disqualification procedures and the work of the DoBERR's company investigations branch.
www.icaew.com/companylaw
This is the company law section of the website of the Institute of Chartered Accountants for England and Wales. It is a further up-to-date and reliable source of information on the new Companies Act 2006, albeit geared more towards an accountancy rather than legal readership.
www.ecgi.org
This is the website of the European Corporate Governance Institute, which is an international organisation bringing together academics, policy-makers and practitioners working within the field of corporate governance. It contains some useful information and publications in relation to this topical and growing field of company law, plus an excellent and comprehensive index of all major corporate governance codes and principles promulgated both in the UK and globally.
www.ssrn.com
This is the Social Science Research Network website, which is a vast and free-to-access database of unpublished working papers by academics, many of which are in the field of company law. Although it is US-based and much of the material is American in focus, it is possible to locate some excellent UK — and EU-focussed company law papers written by leading academic authors. Although the papers on the database are generally unpublished, it is normally okay to cite them in essays (unless the authors expressly state otherwise) and the as-yet-unpublished status of many of the papers means that they can often be an up-to-date source of academic opinion on current legal and wider social issues. You will need to register with the site in order to download any papers, although registration is free and relatively straightforward.
www.legislation.gov.uk
This is the official online database for all primary and secondary legislation of the UK Parliament, Scottish Parliament and the National Assembly for Wales.

Think Points

Where a director of a company fails to observe a limitation on his powers under the company's articles of association, what are the implications of s 40 of the Companies Act 2006 in respect of: a) the validity of any transaction entered into by the company, and b) the personal liability of the director concerned? Which of the general duties in Pt X of the Act will the director have breached by virtue of exceeding his constitutional authority?
How do the types of conduct governed by s 175 of the Companies Act 2006 (Duty to avoid conflicts of interest) differ from the type of conduct governed by s 176 (Duty not to accept benefits from third parties)? In what respect is the s 176 duty stricter in form than the s 175 duty? Can you think of any rationale for regulating these 2 situations differently from one another?
In what way does the disclosure obligation established by s 417 of the Companies Act 2006 (Contents of directors' report: business review) support the application of the director's duty to promote the success of the company under s 172 of the Act? In large public companies, who ultimately will have the role of policing directors' conformity with their s 172 duty on an ongoing basis?
Consider the statement in s 263(2) of the Companies Act 2006 to the effect that permission for a minority shareholder to bring a derivative claim against a director must be refused if the court is satisfied that a person acting in accordance with s 172 would not seek to continue the claim. What is the policy rationale for this particular mandatory bar to the raising of a derivative claim? Can you think of any example(s) of a situation where permission to bring a derivative claim is likely to be refused by a court on this ground?
Compare and contrast the fraudulent and wrongful trading rules under ss 213 and 214 of the Insolvency Act 1986 respectively? How does the type of conduct prohibited by each of these rules differ, and which (if either) of the rules would you say is the wider reaching in terms of its potential application? From a policy perspective, what is actually ‘wrongful’ about wrongful trading? Why is it necessary to have s 993 of the Companies Act 2006 in addition to s 213 of the Insolvency Act 1986?
Read the opening sections of the latest (June 2010) edition of the UK Corporate Governance Code. How does the novel method for the Code's enforcement differ from the normal method of statutory enforcement? In your opinion what are the advantages and disadvantages of the Code's mode of regulatory enforcement?
What is the fundamental difference between a derivative claim (or, in Scotland, derivative proceedings) brought under Pt 11 of the Companies Act 2006, and a petition for unfair prejudice brought under Pt 30 of the Act? Why would it arguably be illogical for a claimant to seek to bring both types of action in respect of the same matter?
Consider the combined effect of ss 232(2) and 233 of the Companies Act 2006, which provide that whilst, on the one hand, a company is prohibited from providing an indemnity for a director against any liability for breach of duty, this does not prevent the company from purchasing and maintaining an insurance policy to cover the director against such liability. Is there any rationale at all for this distinction? In your opinion, how will the widespread use of directors' liability insurance today impact on the practical effectiveness of directors' duties as a constraint on managerial misconduct? Can you think of any convincing policy rationale for allowing directors to insure themselves against potential liability at the company's expense?
What is the effect of Rule 9 of the Takeover Code (the ‘mandatory bid’ rule) in respect of any person attempting to acquire a controlling shareholding in a public company? What possible ‘evil’ might be perpetrated by the offeror against the offeree company's shareholders if this rule did not exist?
Compare and contrast the prohibitions on ‘transactions at an undervalue’ and ‘transactions defrauding creditors’ under ss 238 and 423 of the Insolvency Act 1986 respectively (applicable within England and Wales only). In what key respect does the type of conduct prohibited by each of these rules differ, and which (if either) of the rules is the more extensive in terms of the period of time over which it applies prior to the onset of insolvency? How are the rules of standing in respect of the latter rule arguably more liberal than those applying in the case of the former?