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ContentsEssay questionsTest your knowledgeSuggested further reading18 Financial arrangements with, and fair dealing by,directorsRemunerationThe power to pay directorsCompensation for loss of officeFair dealing by directorsEssay questionsTest your knowledge19 The duties of directorsThe CA 2006 codifies the general duties of directorsScope and nature of general dutiesDuty to act within powersDuty to promote the success of the companyDuty to exercise independent judgmentDuty to exercise reasonable care, skill and diligenceDuty to avoid conflicts of interestDuty not to accept benefits from third partiesDuty to declare interest in proposed transaction or arrangementEffects of a breach of dutyMinisterial ‘eight-point guidance’Essay questionsTest your knowledge20 Vacation of office, disqualification and personal liabilityExpiration of the period of officeRemoval – under statuteRemoval under the articlesStatutory removal – restrictionsResignationWinding-upAppointment of an administrator/administrative receiverDisqualification – generallyDisqualification by the court and personal liabilityDisqualification onlyDisqualification and personal liabilityPersonal liability onlyHuman rights and directorsEssay questionsTest your knowledge21 Meetings and resolutionsGeneral meetings of the companyNotice of 6417418419419424430432434436438439443xi

ContentsProcedure at meetings – legal aspectsThe chairmanVotingProxiesAdjournment of the meetingMinutesClass meetingsCompany meetings and the disabledBoard meetingsResolutions – generallyOrdinary resolutions requiring special noticeAmendmentsWritten resolutions for private companies (s 288, CA 2006 et seq.)Meetings of single-member companiesElectronic communications – CA 2006Essay questionsTest your knowledge22 Debentures and chargesPower to borrowDebentures – generallyTypes of debenturesAcquisition of debenturesThe trust deedCompany chargesCrystallisation of floating chargesPostponement of floating chargesValidity of chargesRegistration of chargesCompany’s registerAvoidance of floating chargesPreferenceRemedies of secured debenture holdersBIS consultationEssay questionsTest your knowledge23 Accounts and auditSmall and medium-sized companiesAccounting recordsAnnual accountsGroup accountsThe directors’ reportPublication of accounts and reportsFiling of accounts and reportsAuditorsDuties of auditorsRights of 6498499499500501503504506507510511513514516519519

ContentsInformation and the Companies (Audit, Investigations and CommunityEnterprise) Act 2004Duty of care of the auditorAuditors’ liabilityEssay questionsTest your knowledge24 Amalgamations, reconstructions and takeoversGenerallyAmalgamations and reconstructionsAmalgamation (or reconstruction) under the Insolvency Act 1986, s 110Amalgamation (or reconstruction) under the CA 2006, s 895TakeoversEssay questionsTest your knowledge25 Corporate insolvency – company rescueVoluntary arrangementsAdministrationEssay questionsTest your knowledge26 Corporate insolvency – procedures other than rescueReceivershipsWinding-up or striking offCompulsory winding-upVoluntary winding-upMembers’ voluntary winding-upCreditors’ voluntary winding-upAlternatives to winding-up27 Corporate insolvency – winding-up in contextWinding-up by the courtVoluntary winding-upThe duties of a liquidatorCompulsory winding-up by a company in voluntary liquidationEssay questionsTest your knowledgeAnswers to test your knowledge questionsAppendix 1 – Companies (Model Articles) Regulations 2008, SI 2008/3229Appendix 2 – Companies (Tables A to F) Regulations 1985 (SI 1985/805)as amended by SI 2007/2541 and SI 9601612612614616618664682xiii

Your complete learning packageVisit www.mylawchamber.co.uk/keenancompany to access a wealth of resourcesto support your studies and teaching.Self study resources Practice exam questions with guidance to hone your exam techniqueWeblinks to help you read more widely around the subject and really impressyour lecturersLegal newsfeed to help you read more widely, stay right up to date with the lawand impress examinersAnswers to questions in the book to compare with your own responsesLegal updates to help you stay up to date with the law and impress examinersFurther reading to help you read more widely around the subject and impress yourlecturersAlso: The regularly maintained mylawchamber site provides the following features: Search tool to help locate specific items of content. Online help and support to assist with website usage and troubleshooting.xiv

Guided tourTopic maps – at the start of eachchapter topic maps are used toillustrate complex legal structures andprocesses.Marginal cross references – Clearin-text cross-references come inhandy to help you identify where todiscover more information on keytopics.See p. 162See p. 334(g) As regards distribution of profits and assets. Where interim accounts are used tproposed distribution these accounts must, in the case of a public company, bthe Registrar of Companies, whereas there is no filing requirement for privatePrivate companies need only fulfil the basic requirement of profits available ftion. Public companies must also comply with the capital maintenance ruprivate companies need not (see further Chapters 8 and 9 ).(h) As regards loans to directors, etc. Quasi-loans and credit transactions, etc. for dithe directors of the company’s holding company are prohibited with certainin the case of public companies, as are loans, etc. to persons connected with thand the directors of any holding company. Quasi-loans and credit are not so rprivate companies nor are, in general, such dealings with connected personsChapter 17 ).(i) An essential feature of more recent company legislation has been the move tderegulation of private companies. In particular, company legislation now pwritten resolutions of private companies which can be passed by members wneed to call or hold a meeting. Private companies may also opt out of the aument. These matters are considered in more detail in appropriate parts of theLa Société Anonyme des Anciens Etablissements Panhard et Lavassor vPanhard Levassor Motor Co Ltd [1901] 2 Ch 513In this case, which we can call the Panhard case, the claimant was a French company and itwere sold in England. The French company wished to set up an English company to actagent in England to improve the sales of its cars there. To try to stop this the defendant Ecompany was registered, its promoters hoping that the French company would not be aregister its name for its English corporate agent, there being a company of ‘too like’ name oregister already, and that this would prevent increased competition in the car market. It wasthat the members of the English company must change the name of their company or windor the company would be taken off the register.xviCase summaries – throughout thechapters essential case summariesdetail key decisions in companylaw clearly explaining the decision.

Guided tourEssay questions1 ‘There are occasions when the courts will look behind the formality of legal personality and wiappear to disregard it, but it is impossible to find any consistent principle upon which they wido so.’Discuss.(Kingston University2 In 2005 Archie, Bert, Colin and David, as shareholders and directors, set up a company toacquire a disused mill to renovate into single-person flats. David had bought the mill in 2004and sold it to the company once it was formed. Bert has now become concerned that this deahas caused the company to suffer a loss. Advise Bert on what the common law position isregarding the company, the transaction and the protection of his interests.(University of the West of ScotlandEssay questions – end of chapteressay questions allow you to honeyour essay writing skills while askingyou to reflect on and consider whatyou have learnt from the chapter.Answer guidance may be foundon the website.3 Eric and Stanley have been carrying on business in partnership as building contractors in aTest your knowledgeFour alternative answers are given. Select ONE only. Circle the answer which you consider to bcorrect. Check your answers by referring back to the information given in the chapter and againsthe answers at the back of the book.1 When a private company wants to re-register as a public company it must file a balance sheewith the Registrar. The balance sheet must be one which is not more than:Test your knowledge – end ofchapter test your knowledge sectionschallenge you to check that youunderstand each topic fully. Answerscan be found at the back of the book.Fifteen months old at the date of re-registration.Seven months old at the date of re-registration.Fifteen months old at the date of application.D Seven months old at the date of application.ABC2 Thames was re-registered from a limited to an unlimited company. It wishes to re-register asYour complete learning packageVisit www.mylawchamber.co.uk/keenancompany to access a wealth ofresources to support your studies: Practice exam questions withguidance to hone your examtechniqueWeblinks to help you read morewidely around the subject and reallyimpress your lecturersLegal newsfeed to help you readmore widely, stay right up to datewith the law and impress examinersAnswers to questions in the book tocompare with your own responsesLegal updates to help you stay up todate with the law and impressexaminersFurther reading to help you readmore widely around the subject andimpress your lecturersxvii

Preface to the fifteenth editionThe major feature of this edition has been the continued exploration and analysis of theimpact of the Companies Act 2006. The introduction of the 2006 Act has, quite literally, represented a ‘wholesale rethink’ of modern company law and, as such, had a significant impacton every aspect of the subject area. While this represents an exciting and challenging periodfor practitioners, academics and students alike, it has nonetheless meant that our considerable reworking of the fourteenth edition has been continued in order to keep pace with thechanges brought about by the new Act.By now the majority of readers will be sufficiently familiar with the new section numbering of the 2006 Act or, as in the case of the majority of students, will be approaching this areafor the first time since continued references to the 1985 Act have become redundant.Consequently, details of the Companies Act 1985 have either been removed entirely or, inspecific chapters, been retained only where a comparison with the previous wording is absolutely necessary.In addition, we have sought to continue our analysis of the fundamental change inapproach to corporate regulation at the small and medium-sized company level, which theCompanies Act 2006 has represented. This has not only impacted on the chapters dealingwith shares and the capital of companies but also the internal management and operations ofcompanies. In this regard, the new Model Articles that accompany the 2006 Act, and whichhave replaced Table A as the template for corporate constitutions from 1 October 2009, represent a dramatic shift away from the ‘one size fits all’ mentality to that of a ‘think small first’approach, providing bespoke model articles for private companies limited by shares, privatecompanies limited by guarantee, and public companies limited by shares. However, Table Aremains an important consideration when dealing with any company incorporated beforethis date. Consequently, we have sought to introduce the new Model Articles, together withtheir impact on the day-to-day management and running of both public and private companies while, at the same time, maintaining a thorough analysis of Table A with respect to acompany’s constitution. Given the complexity of this issue, the natural overlap between thevarious Model Articles, as well as the obvious need to compare and contrast Table A with thenew Model Articles, we have inserted Appendices which contain copies of these documents.Readers are referred to them throughout the text to help them to familarise themselves withthese key provisions.We have continued to expand and enrich reference to case law throughout. This includescurrent cases relating to the new statutory derivative action and the unfair prejudice head, aswell as a broader analysis of traditional common law and equitable duties imposed on directors, which underpin the statutory duties introduced by the 2006 Act. As with the previousedition, this is supported by reference to an increased selection of academic articles at the endof certain chapters, in order to ensure that the text is as current and relevant as possible forreaders.Finally, this edition includes an extended analysis of the constitution of a company, in thelight of the new Model Articles, as well as a significant reworking of the section dealing withxviii

Preface to the fifteenth editiondirectors’ duties and management of the company. We have also reworked the chapter focusing on meetings and resolutions so as to set down a comprehensive, yet easily accessible,account of the procedures and processes introduced by the Companies Act 2006 and whichare at the heart of this subject area. In addition, the chapters on minority protection and thestatutory derivative action have been reworked to provide the reader with greater detail andinsight into the processes involved as well as current case law.We would like to thank those members of staff at Pearson Education who have helped toproduce this edition, particularly Zoe Botterill, Acquisitions Editor – Law, and GabriellaPlayford. We would also like to thank Mary Keenan for her continued support with the ongoing development of this book. Our thanks are also due to those who designed, set, printed andbound the book.We would also like to thank our respective families who have shown considerable patienceand understanding over the past few months. The production of any text requires a significantsupport network and for that we are both truly grateful.Any errors and omissions at the level at which the text is aimed are down to the authors.Charles Wild and Stuart WeinsteinSt Albans, March 2011xix

Law report abbreviationsThe following table sets out the abbreviations used when citing the various series of certainlaw reports which are in common use, together with the periods over which they extend.ACATCAll ERAll ER (D)All ER RepApp CasBCCBCLCB & CRCLCLJCLYCMLRChCom CasFamICRIRLBIRLRITRKBLGRLloyd LR or(from 1951)Lloyd’s RepLRRPLSGNLJPP & CRPIQRQBSJSTCTax Cas(or TC)TLRWLRxxLaw Reports, Appeal Cases, 1891–(current)Annotated Tax Cases, 1922–75All England Law Reports, 1936–(current)All England Direct (an online service)All England Law Reports Reprint, 36 vols 1558–1935Law Reports, Appeal Cases, 15 vols 1875–90British Company Law and Practice (CCH editions)–(current)Butterworths Company Law Cases, 1983–(current)Reports of Bankruptcy and Companies Winding-up Cases, 1918–(current)Current Law Monthly Digest, 1947–(current)Cambridge Law JournalCurrent Law Yearbook, 1947–(current)Common Market Law Reports, 1962–(current)Law Reports Chancery Division, 1891–(current)Commercial Cases, 1895–1941Law Reports Family Division, 1972–(current)Industrial Court Reports, 1972–74; Industrial Cases Reports, 1974–(current)Industrial Relations Law Bulletin, 1993–(current)Industrial Relations Law Reports, 1971–(current)Reports of decisions of the Industrial Tribunals, 1966–(current)Law Reports, King’s Bench Division, 1901–52Local Government Reports, 1902–(current)Lloyd’s List Law Reports, 1919–(current)Law Reports Restrictive Practices, 1957–(current)Law Society Gazette ReportsNew Law JournalLaw Reports, Probate, Divorce and Admiralty Division, 1891–1971Planning and Compensation Reports, 1949–(current)Personal Injuries and Quantum ReportsLaw Reports Queen’s Bench Division, 1891–1901; 1953–(current)Solicitors’ Journal, 1856–(current)Simon’s Tax Cases, 1973–(current)Tax Cases, 1875–(current)Times Law Reports, 1884–1952Weekly Law Reports, 1953–(current)

Table of casesA & BC Chewing Gum Ltd, re [1975] 1 AllER 1017 338ABC Coupler & Engineering Ltd, re [1961]1 All ER 354 595ASRS Establishment Ltd, re (1999) TheTimes, 17 November 484Abbott v Strong (1998) The Times, 9 July524Accidental Death Insurance Co, Allin’s Case,re (1873) LR 16 Eq 449 251Adair v Old Bushmills Distillery [1908] WN24 148Adams v Cape Industries [1990] Ch 433, CA1, 13, 30Adelaide Electric Co v Prudential Assurance[1934] AC 122, HL 151Advantage Healthcare (T10) Ltd, re [1999]All ER (D) 1294 494Aerators Ltd v Tollitt [1902] 2 Ch 319 81Agnew v Inland Revenue (The BrumarkCase) [2001] All ER (D) 21 485, 486Airey v Cordell [2006] EWHC 2728 (Ch)303Al Saudi Banque v Clarke Pixley [1989] 3 AllER 361 524Albacruz (Cargo Owners) v Albazero(Owners), The Albazero [1977] AC 77431Alexander v Automatic Telephone Co[1900] 2 Ch 56 234Allen v Gold Reefs of West Africa Ltd [1900]1 Ch 656 114–117, 120, 146Allen v Hyatt (1914) 30 TLR 444 386Allied Carpets Group plc v Nethercott[2001] BCC 81 205Allin’s Case see Accidental Death InsuranceCo, Allin’s Case, reAl-Nakib Investments (Jersey) Ltd vLongcroft [1990] 3 All ER 321 217Aluminium Industrie Vaassen BV vRomalpa Aluminium [1976] 2 All ER 552489, 490American Cyanamid Co v Ethicon [1975]AC 396 490Andrews v Gas Metre Co [1897] 1 Ch 361144Anglesey Colliery Co, re (1886) 1 Ch App555 594Anglo-American Insurance Ltd [2001]1 BCLC 755 536Antal International Ltd [2003] EWHC 1339(Ch), [2003] 2 BCLC 406 573Arab Bank plc v Mercantile Holdings Ltd[1994] 1 All ER 74 186Arthur Rathbone Kitchens Ltd, re [1997]2 BCLC 280 557Ashbury v Watson (1885) 30 Ch D 376 145Ashbury Railway

v Guided tour xvi Preface to the fifteenth edition xviii Law report abbreviations xx Table of cases xxi Table of statutes xxxvi 1 The nature of a company 1 2 Promotion and incorporation 55 3 The constitution of the company – the memorandum of association 78 4 The constitution of the company – the articles of associat