1 - Sources Of Company Law And Governance

Question 1

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

Answer 1

It expands upon the basic rules found within an Act of Parliament;
It is used to bring parts of Acts of Parliament into force in the form of Commencement Orders;
It can be used to amend existing legislation, including (controversially) amending Acts of Parliament;
It is often used to implement EU law; and
It can empower certain persons (e.g. Secretary of State) or bodies to create law.

Question 2

What role does BEIS have in relation to company law?

Answer 2

BEIS is the governmental department that is responsible for (amongst other things) ‘leading the government’s relationship with business’. To that end, it is the government department that is most closely involved in company law and corporate governance reform.

Question 3

Provide three examples of company law rules that have legislative backing.

Answer 3

The FCA Handbook.
The City Code on Takeovers and Mergers.
Standards imposed by the FRC in relation to the conduct of audits.

Question 4

Name the principal corporate governance codes that operate in the UK.

Answer 4

The UK Corporate Governance Code.
The UK Stewardship Code.
The Wates Corporate Governance Principles for Large Private Companies.

Question 5

Explain how the ‘comply or explain’ approach operates, and how it differs to the ‘apply and explain’ approach.

Answer 5

The ‘comply or explain’ approach requires companies with a premium listing to:

(i) apply the Principles of the UK Corporate Governance Code; and
(ii) comply with the Code’s Provisions or explain why they were not complied with. The Wates Corporate Governance Principles adopt an ‘apply or explain’ approach, under which large private companies are expected to apply the Principles fully and explain how they have applied them.

Question 6

What type of company is subject to the UK Corporate Governance Code?

Answer 6

The UK Corporate Governance Code applies to companies with a premium listing, although other companies may comply with the Code’s Principles and Provisions if they wish to do so.

Question 7

What are the two major sources of European company law?

Answer 7

Regulations and directives.

Question 8

What is the ‘right of establishment’?

Answer 8

The right of establishment prohibits restrictions on the freedom to set up and manage undertakings, including companies.

Question 9

Why has the EU process of company law harmonisation been largely carried out via directives?

Answer 9

Because they provide member states with considerable flexibility. This is because directive set out the goals or aims of the directive and then allow member states discretion in terms of how those aims are implemented.

Question 10

Name five areas of UK company law that have been heavily influenced by EU law.

Answer 10

1. Cross-border mergers and insolvencies;
2. The Listing Regime;
3. The regulation sand independence of auditors;
4. The market abuse regime;
5. The capital maintenance regime;
6. Shareholders’ rights; and
7. Corporate transparency.