Section 51 Companies Act 2006

Section 51 Companies Act 2006

Introduction

The main purpose of this paper is to make an analysis on the section 51 of Companies Act 2006. The paper discusses that to what extent the section 51 of Companies Act has clarified the law relating to pre-incorporation contracts. The Companies Act 2006 introduced separate and more straightforward model Articles of Association for private companies. It has been presented as a clear framework for the Limited Companies that must be followed by the directors to avoid any kind of problem during the decision making and making strategies for the company. The major duty of the directors is to act responsibly and must not indulge them in any wrongful act. They must not look to gain individual benefit by making personal profits at the company's expense. It is an unethical act that directors need to avoid because of the negative consequences it can create for the organisation and for them. The company law requires directors to refrain them from any sort of unethical activity that can lead to disastrous consequences for the organisation. The directors must be loyal to their stakeholders and shareholders. They must also communicate right information to the employees. It is the right of the employees to have an access to the vital information of the company. They play a huge role in the success of the company. Therefore, this is the rationale behind the duty of the directors in the organisation.

Discussion

The new Companies Act preserves the integrity of the whole range of varieties of companies that can be created in the UK. First of all, companies are divided into a limited liability company and a company with unlimited liability (participants). Responsibility of the participants may be limited or shares or a guarantee of the participants (Article 3) (hereinafter unmarked links - to the Act). Further, the company can be either private or public. The fact that the company is public is reflected in its registration certificate (Certificate of Incorporation). For a private company the minimum capital is not set, and for the public of 50 thousand pounds. Private limited companies can be identified by words «limited» or the abbreviation «ltd. » At the end of their name, and public limited companies - in the words «public limited company» or the abbreviation «plc». For companies registered in Wales, the Welsh equivalents are permitted. In the UK, it is also possible the creation of various partnerships (general partnership, limited partnership, limited liability partnership), but they are not governed by the Companies Act. There are different sections of the Companies Act 2006, and the section to be discussed in this paper is the section 51 of the company's act which is about the Pre-incorporation contracts, deeds and obligations. Following the decision in Salomon v Salomon (1897), a company upon formal registration, becomes a separate legal person. That is to say upon incorporation, the company is distinct from its members and has its own rights and ...