Introduction to business law and practice
Over the next few posts, I am going to focus on the LPC module on Business Law and Practice (BLP). The BLP module covers a number of areas of legislation, the primary of which is the CA 2006. The CA 2006 represented the biggest overhaul of UK company law since the Companies Act 1985.
The Government’s aim was to simplify, and to introduce more flexibility into, the law. The CA 2006 is intended to make it easier to set up and run a private company. In addition, the Government intended that the CA 2006 should “promote shareholder engagement and a long-term investment culture”.
The key areas of reform in the CA 2006 include:
- statutory statement of directors’ duties;
- statutory control of directors;
- widening of shareholder remedies;
- simplification of shareholder meetings and resolutions;
- greater use of electronic communications; and
- simplification of the rules concerning share capital and its maintenance.
Another key area of reform was company constitution, by which I mean the company’s rule book. CA 2006 sets out the minimum rules and the constitution of a company can then apply more rigid or detailed systems of management. An integral part of a company’s constitution is its Articles of Association (‘Articles’). The Articles form a contract between the company and the shareholders (and, to an extent, between the shareholders themselves). The Articles govern the rules of their relationship and determine the company’s internal management. Essentially, the Articles set out how the company must be run. The CA 2006 provides a precedent set of Articles called the Model Articles (the CA 1985 equivalent was called Table A). A company can choose its Articles but a company incorporated under the CA 2006 will automatically have the Model Articles unless it chooses otherwise.
Company Procedure
Decisions are made on behalf of a company by its directors (board resolutions taken at board meetings) and shareholders (ordinary or special resolutions taken by shareholders at general meetings or passed by written resolution). Company procedure is a fundamental part of the BLP module and an area that we will focus on the law relating to.