UK Company Law Topic Gateway Series No. 14
About Topic Gateways
Topic Gateways are intended as a refresher or introduction to topics of interest
to CIMA members. They include a basic definition, a brief overview and a fuller explanation of practical application. Finally they signpost some further resources for detailed understanding and rearch.
Topic Gateways are available electronically to CIMA members only in the CPD Centre on the CIMA website, along with a number of electronic resources.
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UK Company Law - updated
Definition and concept
Company Law (known as Corporate Law in some countries) refers to the formation and governance of corporate entities. In the UK, the responsible body is the Corporate Law and Governance Directorate of the Department for Business, Enterpri and Regulatory Reform (BERR), formerly the Department of Trade and Industry (DTI). This directorate also reprents UK interests in the develo
pment of EU company law. It is worth noting that some matters are dealt with in law while other aspects of corporate governance are dealt with in codes of best practice.
Context
In the current syllabus, CIMA students will learn and may be examined on this topic in paper C5 Business Law, Financial Analysis (paper P8) and Financial Accounting and Tax Principles (paper P7).
生如夏花原文
Overview
The main piece of legislation is the Companies Act 2006 (CA 06). This new Act is the largest single piece of legislation ever pasd by the UK Parliament, and is the product of eight years of consultation on company law reform. CA 06 is a consolidation of all the company law provisions of CA 85, CA 89 and the Companies (Audit, Investigations and Community Enterpri) Act 2004 or
C(AICE) 04.
The elements of tho acts which were not incorporated into CA 06 relate to community enterpri companies or to investigations which are wider in scope than just companies. The remnants are li
sted in paragraphs 9 and 10 of the explanatory notes to CA 06 which can be found on the BERR Companies Act web pages. Effectively CA 06 repeals and replaces about two-thirds of CA 85.
The Government’s motivation for CA 06 was to increa shareholder engagement and to promote a long-term view of investment, rather than decisions made on the basis of immediate returns. It also aimed to simplify regulation by ‘thinking small first’, recognising that the vast majority of UK companies are small, and to achieve cost savings for industry.
Other significant developments incorporated into CA 06 include:
• a statutory statement of directors’ duties
•encouragement for electronic communication with shareholders
•protection against liability for forward-looking statements.
See below for further detail.
BERR list the benefits of the CA 06 to companies, shareholders and others at: v.uk/bbf/co-act-2006/Major%20Benefits%20to%20Business/page35194.html [Accesd 25 April 2008]
Companies Act 2006
The Companies Act 2006 is available online at:
v.uk/acts/acts2006a.htm
[Accesd 25 April 2008]
The main ctions likely to be of interest to members are (but are not confined
to):
Directors’ duties (ctions 170 -177). CA 06 embedded in statute the concept
of Enlightened Shareholder Value, which introduced a statutory statement of directors’ duties. This clarified that directors must continue to promote the
success of the company for the benefit of its shareholders. However, they also
have to take into account wider factors such as the company’s impact on the environment and the need to foster relationships with customers, suppliers and
other stakeholders.
Contents of Directors’ Report and Business Review (ctions 416-417)
Electronic Communication with Shareholders (Schedule 5, Part 3). The goal
is to make it common practice for shareholders to vote electronically, and for companies to distribute annual reports and other communications electronically.
This is one of the biggest money (and tree) saving aspects of the Act, hence its
early implementation.
Forward looking statements (ction 463). Directors are protected against statements (including forward looking statements which didn’t subquently
come true) if they were made in good faith and carefully. A director can be held
liable for statements in the directors’ report only if the director knew they were
untrue or misleading (or was reckless as to whether they were untrue or
misleading) or if the director knew an omission was dishonestly concealing a
material fact.
Auditor liability (ctions 534 – 538). With the agreement of the company
and the approval of shareholders, auditors are allowed to limit their liability (using a specified monetary cap, a formula or other means). The limit must be no less than what is ‘fair and reasonable’, considering the nature of the auditors’ responsibilities and what is expected of them.
There is also a uful index of defined expressions at Schedule 8 of the Act, at: v.uk/acts/acts2006/ukpga_20060046_en_85
[Accesd 25 April 2008]
Phad implementation
CA 06 gained the Royal Asnt in late November 2006, at which point only a
small proportion of its provisions were implemented. Tho mainly related to the
EU Transparency Directive which had to be implemented by January 2007, and included the statutory basis for directors’ liability in respect of the Business
Review.
Other provisions will be implemented by a succession of Regulations over the following three years, with the aim that the entire Act will be in force by 1
October 2009. This reprents a slippage of the original timetable, to accommodate Companies Hou’ concerns about its readiness for an October
2008 implementation of certain provisions.队名和口号
BERR has published a final implementation timetable called the Table of Commencement Dates which is ufully colour-coded according to the different implementation dates. Annoyingly, BERR advis that this should not be en as
the definitive timetable, and it advis urs to refer to the individual commencement orders on the OPSI website. Unless advid otherwi, this is the timetable. Available from: v.uk/bbf/co-act-2006/index.html [Accesd 25 April 2008]
Other legislation: Limited liability partnerships
•The Limited Liability Partnerships Act 2000 created a new form of organisation for business, the Limited Liability Partnership (LLP). LLPs need
to be registered at Companies Hou, and are subject to the same rules as
private limited companies in respect of registration and audit. It has not been
significantly amended by CA 06. Available from:
v.uk/ACTS/acts2000/20000012.htm
[Accesd 25 April 2008]
•The Limited Liability Partnerships Regulations 2001 (Statutory Instrument 2001 No.1090) adds reference to LLPs to the then CA 85 and 89, Insolvency
Act 86 and Company Directors Disqualification Act 1986.
Other legislation: Regulatory matters
•The Companies (Audit, Investigations and Community Enterpri) Act 2004 at made the system of supervising auditors more independent, strengthened the
我的疯娘enforcement of accounting and reporting requirements (reflecting the new
role of the Financial Reporting Council) and introduced a new category of
company, the community interest company. CA 06 repealed some of CAICE,
plea e Schedule 16 of CA 06. Available from:
v.uk/acts/acts2004/ukpga_20040027_en_1腹轮
[Accesd 25 April 2008]
Other legislation: Directors’ responsibilities
•The Company Directors Disqualification Act 1986covers the various grounds on which a person can be disqualified from holding office as a director, and
has not been amended by CA 06. Guidance about the Act is available from
the Insolvency Service website. Available from:
v.uk/guidanceleaflets/Guides.htm#5
[Accesd 25 April 2008]
Other legislation: Insolvency
The main Acts (covering company liquidation, bankruptcy, receivership and administration) are the Insolvency Act 1986, as amended by Insolvency Acts 1994
(two Acts) and 2000. It has been amended only slightly by CA 06.
Other legislation: audit exemption limits
The Companies Act 2006 (Amendment) (Accounts and Reports) Regulations 2008 (SI
2008/393) has introduced new thresholds for audit exemption which apply for financial years beginning on or after 6 April 2008. The regulations can be found at:
v.uk/si/si200803
[Accesd 25 April 2008]
Briefly, the new limits to be considered a small company are £6.5m turnover and balance sheet totals of less than £3.26m. Plea read the full guidance for the medium sized company limits and the arrangements for companies hovering about the thresholds. Available from:
销售提成方案
v.uk/bbf/financial-reporting/small-companies/page45467.html [Accesd 25 April 2008]
