17. Decision-making and company meetings

Shareholders typically exercise what powers they possess during the general meeting of the company, in the form of resolutions passed at such meetings. This chapter considers the mechanisms for meetings. The chapter also discusses voting entitlement, resolutions, meeting procedures, and the Duomatic principle.

16. Membership and the incidents of membership

This chapter discusses the law on membership and incidents of membership. Membership of a company is governed by Companies Act 2006 (CA 2006), The discussion in this chapter covers classes of shares, class rights, share transfer and transmission, and the register of members.

12. Duty to avoid a conflict of interest

This chapter discusses the director's duty to avoid conflict of interest. Central to a director's duties is the long-established equitable rule precluding a fiduciary from entering, without consent, into engagements in which he has, or can have, a personal interest conflicting, or which possibly may conflict, with the interests of those whom he is bound to protect (the no-conflict rule); and the equally inflexible rule that, without consent, a person in a fiduciary position is not entitled to profit from that position (the no-profit rule or, more accurately no secret profit rule).

11. Duty of care, skill, and independent judgement

In addition to their fiduciary obligations, directors are subject to duties of care and skill. This chapter discusses the statutory standard of care, skill, and diligence; the content of the duty; and the duty to exercise independent judgement.

6. Corporate governance—board structure and shareholder engagement

This chapter discusses corporate governance in publicly traded companies with widely dispersed shareholdings. Most shareholders are not involved in the management and control of a company's affairs. Thus, a separation usually develops between those who collectively own the company through their combined shareholdings (the shareholders) and those who manage it (the directors). Problems can arise from this separation of ownership and control as distance from the day-to-day running of the business makes it difficult for shareholders to restrain any managerial excesses. The starting point of good corporate governance is internal mechanisms (such as shareholders' rights and board structures). The discussions cover the UK corporate governance code, corporate governance requirement, board committees, and shareholder engagement.

4. Rules of attribution—corporate acts and liabilities

This chapter looks at an issue linked to the concept of the company as a separate legal entity, that is, how to identify which acts of the human agents involved in the separate legal entity are the acts of the company for the purposes of determining the rights and liabilities of the company. There are several distinct sets of rules which may assist in this context. The chapter focuses on the rules of attribution which determine whose acts are the acts of the company for which the company should be liable. It discusses corporate acts and liabilities, corporate liability in contract, corporate liability in tort, and criminal liability of the company.

3. Corporate personality

This chapter discusses the concept of personality. This fundamental principle of company law was established by the House of Lords in Salomon v Salomon & Co Ltd. However, there is a discretionary jurisdiction whereby, in a variety of circumstances, the court may disregard or pierce or lift the corporate veil and look to those controlling the entity.

24. Liquidation and dissolution—winding up the insolvent company

Winding up or liquidation is the process by which the assets of the company are collected in and realised, its liabilities discharged, and the net surplus, if there is one, distributed to the persons entitled to it. This chapter concentrates on the winding up of insolvent companies. The discussions cover: voluntary winding up; compulsory winding up; consequences of the winding-up order; the role and powers of a liquidator; the anti-deprivation rule, proof of debts, and set-off; the order of distribution; and dissolution of the company.

23. Loan capital—secured creditors and company charges

The majority of companies on the register of companies are private companies with very limited amounts of share capital. Thus, if those companies are carrying on business to any significant level, it must be on the basis of other forms of funding, typically in the form of straightforward commercial borrowing from high street banks and financial institutions. When lending to a limited liability company, the lender is conscious of the need for security to cover the amount lent. This chapter discusses: company charges; fixed and floating charges; the approach to categorisation; registration of charges; and enforcement of a floating charge.

18. Informed shareholders and stakeholders—disclosure and the limited company

The purposes of disclosure include to assist creditors in risk assessment, to assist shareholders and others make appropriate resource allocations and hold management to account, and to facilitate the operation of capital markets. Most disclosure comes in the form of accounts and reports focusing on the financial position and the activities of the company, but mandated disclosure can extend in all directions to include health and safety issues, political donations, environmental concerns, and general corporate social responsibility. The chapter discusses: the statutory provisions governing company accounts; accounting requirements by class of entity; narrative reporting requirements; the regulatory framework for audit; the auditors' report; and auditors' liability and limitation of liability.