UK Company Law – The Essentials
Michael Tait sets out some general information about what basics the chairman of a company should know about UK company law.
Firstly, the chairman must understand the legal requirements for operating a UK company, outlined in the Companies Act 2006. This act establishes the legal framework for company formation, management, and operation, covering obligations such as maintaining accurate financial records, conducting annual general meetings, and submitting filings to Companies House.
The chairman should also grasp their responsibilities and duties as a company director, encompassing fiduciary duties to prioritise the company and shareholders’ best interests, along with the obligation to exercise reasonable care, skill, and diligence.
Additionally, awareness of potential legal liabilities and risks tied to company management, including personal liability for breaches of company law, is crucial.
To stay fully informed and compliant, it is advisable for the chairman to seek professional legal advice as needed.
Key Points in UK Company Law:
Legal Status: A company is a distinct legal entity from its shareholders and directors.
Formation: Registration with Companies House and having a memorandum of association and articles of association are mandatory.
Directors: Directors, appointed by shareholders, owe a fiduciary duty to the company.
Shareholders: Shareholders own the company and have voting power on major decisions.
Share Capital: Companies can issue shares to raise capital; shareholders are liable only for their invested amount.
Accounts and Auditing: Proper accounting records maintenance and annual auditing are obligatory.
Shareholder Meetings: Annual general meetings where shareholders vote on crucial matters are mandatory.
Directors’ Duties: Directors must act in the company’s best interests, exercising reasonable care, skill, and diligence.
Insolvency: In insolvency, assets are used to settle debts, risking the loss of shareholders’ investments.
Corporate Governance: Adherence to good corporate governance practices promotes transparency, accountability, and responsible business conduct.