1. Sources of company law

Question 1

Principal piece of UK company law legislation?

Answer 1

CA 2006

Question 2

Why is subordinate legislation is such an important source of company law?

Answer 2

• It extends basic rules found within Act of Parliament
• It brings part of Acts of Parliament into force (in the form of Commencement orders)
• Can be used to amend existing legislation
• used to implement EU law
• empower certain bodies to create law

Question 3

What is the role of BEIS re company law?

Answer 3

Responsible for gov’s relationships with business

Most closely involved in co law and corp gov reform

Question 4

Which company law rules have legislative backing?

Answer 4

Non-statutory rules that have legislative backing include:

• FCA handbook
• the City Code on Takeovers and Mergers
• standards imposed b the FRC re conduct of audits

Question 5

What are the 2 major sources of Eu company law?

Answer 5

1. Regulations

2. Directives

Question 6

What is the “right of establishment”?

Answer 6

It prohibits restrictions on the freedom to set up and manage undertakings, including companies.

Question 7

Why EU process of company law harmonisation have largely been carried via directives?

Answer 7

Directives provide member states with flexibility, by setting goals and objectives and then allowing member states with discretion on how they are implemented

Question 8

Which areas of UK company law have been influenced by EU law?

Answer 8

• Cross border insolvencies and mergers
• the Listing Regime
• regulation and independence of auditors
• the market abuse regime
• the capital maintenance regime
• shareholders’ rights
• corporate transparency

Question 9

What are the procedures for alteration of Articles?

Answer 9

Articles may only be altered if it is for the benefit of the members a whole

• Special resolution
• 14 days notice
• copy of resolution to registrar
• articles may say that for a meeting affecting an alteration, the affected member must be present
• alteration is binding on all members
• so the affected member can prevent alteration by not attending
• articles may require greater majority than 75%
• can never be drafted to prevent amendment

Question 10

Articles as contractual force

Answer 10

• Members enter into contract with company and other members through Articles.
• The terms of contracts are contained within Articles
• The effect is to bind the members to the company
• But the articles do not created a contract between the co and third parties

eg. case of Eley

Question 11

Ratio decidendi of Eley case?

Answer 11

The outsiders cannot enforce the articles.
The court held that there was no breach of contract since the articles of association had no contractual effect between the company and Mr Eley. In his capacity as a solicitor, he was an outsider. So, he could not rely on the contractual effect of the company’s articles of association.

The Court of Appeal also rejected an argument that the plaintiff could rely on articles as evidence of an extrinsic contract outside the articles.