LIMITED COMPANY

Liability of Promoters, Directors and Agents of Limited Companies

Table of Contents

Introduction1

Company law in the UK1

The Companies Act 20062

Directors' liabilities under the Companies Act UK4

Responsibilities of Directors4

Directors' liabilities4

Corporate personality and liability5

Lifting the veil of incorporation6

Liabilities of a promoter7

Liability for misstatements in prospectus7

Issuer's absolute responsibility7

Liabilities of an agent8

Conclusion9

References10

Liability of Promoters, Directors and Agents of Limited Companies

Introduction

Companies limited by shares are governed under the Company Law in the UK. A company limited by share can be a public limited company as well as a private limited company. A company limited by shares means that the liability is the function of the shareholding. Hence, every member of the company is liable only for the nominal value of the shares they hold (Adams 2005, p. 76).

The paper discusses the liabilities of Promoters, Directors and Agents critically with relation to the Companies limited by shares.

Company law in the UK

Any corporation that is formed under the Companies Act 2006 is regulated by the United Kingdom Company Law. The company formed under the Act is a legal entity and follows the Corporate Governance Code. Limited companies now make a major proportion of the UK economy. They employ more people and have a bigger scope of operations than a non-limited company (Parkinson 2008, p. 86). The modern corporate statutes that are followed by the world today were an innovation of the United Kingdom. The registration process in the UK for a limited company is very simple and gives the board of directors an advantage of limited liability. The commonwealth model became the standard setter whereby the companies were given a lot of leeway to design the internal rules as per their own requirements. The rules inside the company have to comply with the investor rights as given in the Company Act 2006 (Cheffins 2007, p. 45).

The company law has two parts to it, one deals with affairs pertaining to corporate governance while the other deals with matters pertaining to corporate finance. The Company Law is very shareholder friendly. The Law aims at ensuring the accountability of the board of directors who have a tendency to manage the business as per the company constitution. Under the law, it is only the shareholders who have the right to vote at the general meeting. The company constitution can be changed by the general meeting. In addition, the general meeting can also change any of the members of the board of directors and issue resolutions. Since every right is married to a duty, the board of directors, against al their rights have the obligation to carry out their responsibilities as given in the Company Law. The loyalty of the Board of Directors should remain with the limited company to which they are a member of the Board of Directors and whatever decision they make should be made in good faith (Dean 2008, p. 27).

The corporate finance deals with laws pertaining to the company's ability to raise funds for ...