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Company Law in Business in the United Kingdom

Introduction

The government may have a significant impact on the business sphere in the country. Restrictions and fines may present an ordeal for enterprises for achieving the desired result, while lack of regulations may lead to a range of economic crimes and betrayals. Consequently, the mission of the government is to elaborate appropriate laws, which will benefit the business environment in the country. Being a developed country, the United Kingdom has strong legislation in the sphere of business, which includes a number of details, depending on the specifics of different companies’ operations (Elliott and Quinn, 2015). The purpose of this paper is to highlight the importance of Company law in the United Kingdom, analyzing its key points.

Companies Act 2006

In order to regulate the activity of enterprises and supply them with an honest and healthy working environment, in 2006, the Companies Act was introduced. It is the major piece of legislation, which comprises Company law (Elliott and Quinn, 2015). The primary objectives of these regulations imply making company law easier and more up-to-date, correcting shareholders’ rights, and relive the administrative burden for businesses in the UK (Elliott and Quinn, 2015). It contains a range of points, as it is the longest piece of legislation in the UK. In general, it simplifies the incorporation process for new enterprises and provides possibilities for fulfilling some company duties online, which regarded contacting shareholders as well (Adama, 2016). Therefore, the Companies Act published in 2006 provided entrepreneurs with decent conditions for running a business and releasing their innovative ideas (Elliott and Quinn, 2015). Furthermore, it contributed to the regulation of professional relationships between directors, shareholders, and employees, helping to avoid conflicts and legislation violence.

Definition of a Company

In order to provide an honest legislation base for business development, the government had to establish precise rules and criteria. The first one regards the definition of a company in general. According to Company Law, it involves a body corporate or incorporating a business, which has completed registration under the Companies Act (Adama, 2016). There are no restrictions on the type of companies in the United Kingdom (Adrews, 2011). This definition appears to be useful in order to guarantee certain legal rights and obligations.

Shareholders

As large enterprises frequently apply for the help of shareholders in order to expand their business or propose a start-up, there is a necessity to define the professional relationships between directors and shareholders. Shareholders may occupy the position of directors in the company they funded (Elliott and Quinn, 2015). In case it is the same person, their powers and requirements are different to some extent, and shareholders may be removed as a director (Elliott and Quinn, 2015). The Company Law provides shareholders with a range of rights, which may be defined by their shares. However, in general, all of them should be warned about shareholders’ meetings, vote at them, and be in the company’s Register of Members. Shareholders should receive a special certificate, proving their contribution (Elliott and Quinn, 2015). All the mentioned possibilities should be delivered free of charge (Elliott and Quinn, 2015). These requirements, fixed by Company Law, are vital for supplying shareholders with all information about the company’s operation and establishing honest professional relationships with directors, avoiding possible conflicts.

Administrative burdens

Administrative burdens may present a considerable ordeal for companies, including huge ones, which had a range of branches around the globe. The government has attempted to address this issue in Company law. Therefore, the legislation clarified requirements on reports and documentation for different types of companies, depending on the specific of their operating model. In addition, some documentation may be fulfilled electronically (Honeyball, 2016; Elliott and Quinn, 2015). Therefore, the Company law is beneficial for reliving and clarifying administrative burdens for business in the United Kingdom.

Company Formation to the Director’s Duties

Director and his or her duties are crucial for a proper operation of an enterprise, and, for this reason, a candidate is required to match some criteria and perform essential duties. A director is a person or a corporate body, who is responsible for running the whole company (Adrews, 2011). There are businesses, which are run by a single director, and there are businesses, which have a range of directors. In order to occupy this position, it is vital to match the fundamental criteria. The minimum age for a candidate is 16 years old, and the potential director cannot be an undischarged bankrupt (Adrews, 2011). One person cannot be both a director and a company auditor or be on Disqualified Directors Register (Adrews, 2011). These fundamental requirements prevent running people, who are highly likely not to manage with the responsibilities due to lack of experience and knowledge or law background.

As the role of a director is key for supplying a proper operation of the company and decent performance of employees, it is essential to fulfilling appropriate duties. First of all, directors are expected not to act in their interest, as all their actions and decisions are supposed to provide the benefit to the business (Adrews, 2011). In addition, candidates should not underestimate the importance of the following legislation in the field of company operation and employment. They are required to adhere to the Companies Act and the articles of association and follow reporting standards. The latter includes registering enterprises for taxes, supplying confirmation statements, annual accounts, and tax returns, and following accurate accounting (Adrews, 2011). Moreover, directors should make the aforementioned records available for public inspection, warn Companies House and HMRC of changes, and manage payroll (Honeyball, 2016). In case these requirements are not met, a company may receive fines and disqualification, which may affect its operation significantly (Honeyball, 2016). Therefore, according to Company Law, directors should perform essential duties for maintaining the successful development of a business without failures.

Company Law and Limited Companies

A limited company is the most widespread type of business in the UK, and for this reason, there is a need to regulate the relationships between directors and members and registration and report issues. In general, a limited company implies an organization, which provides its members with limited liability. An enterprise is liable for its debts, while directors and members are not. The liability of members is limited by the number of shares they pay (Elliott and Quinn, 2015). The operation of a business should correspond to the Companies Act 2006 and its articles of association, which regulate the internal affairs of the company (Elliott and Quinn, 2015). Furthermore, a limited company should have its memorandum, which contains rules forming a legal basis for the behavior of third parties, directors, and shareholders (Elliott and Quinn, 2015). The memorandum should include the name of an organization, the address of a registered office with the territories of the United Kingdom, and the number of registered shares.

In addition, some information about an organization should be disclosed, namely, the name of an enterprise, the place of incorporation, office address, and registration number. Customers should have access to this data, and it is supposed to be displayed in places of operation (Marson and Ferris, 2015). A private limited company should have at least one director, who does not perform the duties of a secretary (Marson and Ferris, 2015). From October 2008, such organizations should have a minimum of one natural person, who fulfills the director’s responsibilities (Elliott and Quinn, 2015). As for public limited companies, they should have at least two directors. A qualified secretary should be employed, who is obliged to ensure that all the reports are up-to-date, and the returns and statutory requirements are fulfilled (Marson and Ferris, 2015). Therefore, legal requirements for a limited company stated by Company law ensure their operation without law violations and regulates the professional relationships between directors, shareholders, secretary, and members.

Company Law and Partnerships

Partnerships may be an excellent opportunity for starting or expanding a business, though there is the necessity to define the roles and boundaries in order to avoid possible conflicts and misunderstandings. Company law fixed a minimum of 2 participants for forming a partnership and includes necessary documentation (Honeyball, 2016). The vital document for establishing such a kind of cooperation is a partnership agreement. It involves expectations of both sides from each other, defines the decision-making process, and the rules for dividing the profit. It should include the names of partners, their rights and duties, and the percentage of ownership (Marson and Ferris, 2015). In order to take into consideration possible failures, the dissolution of the partnership deed should be concluded (Honeyball, 2016). The agreement defines the process of closing a business and dividing liability. A confidentiality agreement is also signed for minimizing the risks of misusing information and told to third parties.

As partnerships may involve employing other people, it is essential to conclude an employment contract, which fixes the expectations from both sides and a worker. It regulates the probation period, working hours, pay, perks, and other important issues on fulfilling professional duties (Adrews, 2011). The sale of goods agreement or supply of services agreement is a crucial document for partnerships, as it provides the customers with awareness of the obligations of parties and their rights (Honeyball, 2016). These days, a predominant number of businesses create their own website, which also requires defining website terms of use. It helps to adhere to all legal obligations regarding using the Internet. In this context, the Website Privacy Policy is essential for managing personal data (Honeyball, 2016). Therefore, legal requirements for partnerships and necessary documents are helpful for avoiding conflicts and betrayal by precisely defining the terms, obligations of each party, and the rights of customers.

Company Law and Non-Profitable Organizations

These days, a range of charity companies are established, and there is a need to provide appropriate legislation requirements in order not to admit cheating. Companies Act 2006 and Charities Act 2006 are created to fulfill this aim by supplying an essential legislative base (Marson and Ferris, 2015). First of all, thee define a charity organization as a company, which does not involve any profit for personal aims (Adrews, 2011). The activity of a charity organization should involve benefiting a number of people. In order to match these criteria, 12 categories for establishing such an organization are fixed (Marson and Ferris, 2015). They include poverty relief, education, religion, health, community development, art and science, amateur sport, human rights and equality, ecology, animal welfare, the efficiency of rescue services of different types, and helping people with disadvantages.

Non-profit organizations are obliged to be registered with Charity Commission and pay essential administration costs. However, the Acts published in 2006 allowed companies, which turnover is under 5000 pounds, not to follow this rule in order to spend more money on their beneficial purposes (Marson and Ferris, 2015). Therefore, legal requirements for charity organizations are helping to ensure the honest motives of the directors and trace the money within the company (Adrews, 2011; Marson and Ferris, 2015). In addition, it implies some support for small non-profitable organizations. Both Company law and the Charity act contribute to creating a codified statutory form and include all the modern tendencies in this sphere.

Conclusion

The importance of governmental regulation in the field of business cannot be underestimated. It contributed to establishing a healthy working environment by elaborating relevant legislative requirements and adapting to modern tendencies. Therefore, Company law is helpful for defining the obligations of directors, shareholders, and employees, and regulating professional relationships between them. In addition, it is useful for avoiding betrayals and economic crimes by providing control measures. For this reason, it may be considered relevant and significant for the development of business in the United Kingdom.

Reference List

Adama, A. (2016) Business Law for Students. 9th Edition. London: Pearson.

Adrews, N. (2011) Contract Law. Cambridge: Cambridge University Press.

Elliott, C and Quinn, F. (2015). The English Legal System. 16th Edition. London: Pearson

Honeyball, S. (2016) Honeyball and Bowers Text to Employment Law. 14th Edition. Oxford: Oxford University Press.

Marson, J. and Ferris, M. (2015) Business Law. 4th Edition. Oxford: Oxford University Press.

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