UK LAW OF BUSINESS

Q#1What are the duties of Directors of the company?

ANS: In UK companies’ directors are appointed to the board form the central authority.
In carrying out their functions, directors owe a series of duties to the company. There are
presently seven key duties codified under the Companies Act 2006 sections 171 to 177.
Under section 171 a director of company is to follow the company's constitution, but
also only exercise powers for implied "proper purposes". A director of a company must
act in accordance with the company's constitution, and only exercise powers for the
purposes for which they are conferred.
Another duty of the directors is to promote the success of the company section 172.
The desirability of the company for maintaining a reputation for high standards of
business conduct, they need to act fairly as between members of the company. The all-
important duty of care is found in section 174. Directors must display the care, skill and
competence that are reasonable for somebody carrying out the functions of the office,
and if a director has any special qualifications an even higher standard will be expected.
Section 175 specifies that directors may not use business opportunities that the
company could without approval.
The law requires directors accept no benefits from third parties under section 176. Under
section 177, when directors are on both sides of a proposed contract, for example where
a person owns a business selling iron chairs to the company in which he is a director
(Legislation.Gov, 2006).
Q#2What are the rights of the Directors of the company?
ANS: Employees provide the investment of labour that is indispensable to make
companies function. However UK Company law, in heavy contrast to most European
jurisdictions, promotes little formal participatory role for workers. Businesses are free in
UK law to voluntarily grant employees participation rights as members in the general
meeting, or the right to elect specific board members, though orthodox companies do not
do this. It is the right of a director that his opinion and decision is sought whenever the
board is going to take some important decision in the business. Moreover, it is the right
of directors to receive reasonable notice of meeting. Director of a company may also
take independent advice at the expense of company. He also have right to check and
inspect company’s accounting records. They also have the rights to discharge their
personal duties without interference of co-directors (Legislation.Gov,2006).
The exceptions to lack of worker participation are entities that are wholly managed and
owned by the workforce. Some companies take advantage of tax breaks to implement
employee share schemes, however this typically makes employees ordinary
shareholders but at the cost of heavily under-diversifying risk. New workplace
participation practices have been emerging for larger companies. Under the Information
and Consultation of Employees Regulations 2004, companies with more than fifty
employees must inform their workforce about major economic issues in their enterprise,
and should consult about major changes, particularly redundancies (Legislation.Gov,
2006).
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Q#3What are the liabilities of the Directors of the company?
ANS: Section 232 to 238 explains the liabilities of the Directors of the company.
As per section 232 (1) any provision that purports to exempt a director of a company (to
any extent) from any liability that would otherwise attach to him in connection with any
negligence, default, breach of duty or breach of trust in relation to the company is void.
Further section 232 (2) explains that any provision by which a company directly or
indirectly provides an indemnity (to any extent) for a director of the company, or of an
associated company, against any liability attaching to him in connection with any
negligence, default, breach of duty or breach of trust in relation to the company of which
he is a director is, void. However, following cases are permitted
(a)section 233 (provision of insurance),
(b)section 234 (qualifying third party indemnity provision), or
(c)section 235 (qualifying pension scheme indemnity provision).
(3)This section applies to any provision, whether contained in a company's articles or in
any contract with the company or otherwise.
(4)Nothing in this section prevents a company's articles from making such provision as
has previously been lawful for dealing with conflicts of interest.
Section 236 explains that qualifying indemnity provision to be disclosed in directors'
report Copy of qualifying indemnity provision to be available for inspection as per section
237. The Right of member to inspect and request copy is also the liability of the director
as per section 238 (companyLawclub, n.d).
Q#4What is the duties of partners?
ANS: The partners have the fiduciary duties that include the following:
Section 28 explains that the partners are bound to render true accounts and full
information of all things affecting the partnership to any partner or his legal
representatives. Section 29 provides (1) Every partner must account to the firm for any
benefit derived by him without the consent of the other partners from any transaction
concerning the partnership, or from any use by him of the partnership property name or
business connection. (2) This section applies also to transactions undertaken after a
partnership has been dissolved by the death of a partner, and before the affairs thereof
have been completely wound up, either by any surviving partner or by the
representatives of the deceased partner. Section 30 provides that where a partner
competes with the partnership business without the consent of the other partners, then
that person shall be liable to account to the partnership for any profits made in the
course of that business. It is the duty of each partner to fully disclose all information
relating the business undertaken. Moreover, if a partner gets any benefits from the
partnership, he or she must share them with other partners as per agreed term in the
agreement.
Q#5What are the rights of the partners?
ANS: Subject to express provision to the contrary in the partnership agreement, s 24 of
the PA sets out the rights of partners:
The interests of partners in the partnership property and their rights and duties in relation
to the partnership shall be determined, subject to any agreement express or implied
between the partners by the following rules-
All the partners are entitled to share equally in the capital and profits of the business,
and must contribute equally towards the losses whether of capital or otherwise sustained
by the firm. The firm must indemnify every partner in respect of payments made and
personal liabilities incurred by him.
A partner making, for the purpose of the partnership, any actual payment or advance
beyond the amount of capital that he has agreed to subscribe is entitled to interest. A
partner is not entitled, before the estimation of profits, to interest on the capital
subscribed by him.
Every partner may take part in the management of the partnership business. No partner
shall be entitled to remuneration for acting in the partnership business. No person may
be introduced as a partner without the consent of all existing partners. Any difference
arising as to ordinary matters connected with the partnership business may be decided
by a majority of the partners, but no change may be made in the nature of the
partnership business without the consent of all existing partners (Legal-Advice Centre.
n.d).
Q#6What is the liabilities of the partners?
ANS: The liabilities of the partners are explained as follows:
Every partner is responsible for the full amount of the firm’s liability . Partners may be
liable for debts, contracts and for torts. As per section 14 (1) Every one who by words
spoken or written or by conduct represents himself, or who knowingly suffers himself to
be represented, as a partner in a particular firm, is liable as a partner to any one who
has on the faith of any such representation given credit to the firm, whether the
representation has or has not been made or communicated to the person so giving
credit by or with the knowledge of the apparent partner making the representation or
suffering it to be made.
(2) Provided that where after a partner's death the partnership business is continued in
the old firm-name, the continued use of that name or of the deceased partner's name as
part thereof shall not of itself make his executors or administrators estate or effects liable
for any partnership debts contracted after his death
As per section 17, (1) A person who is admitted as a partner into an existing firm does
not thereby become liable to the creditors of the firm for anything done before he
became a partner.
(2) A partner who retires from a firm does not thereby cease to be liable for partnership
debts or obligations incurred before his retirement.
(3) A retiring partner may be discharged from any existing liabilities, by an agreement to
that effect between himself and the members of the firm as newly constituted and the
creditors and this agreement may be either express or inferred as a fact from the course
of dealing between the creditors and the firm as newly constituted (Legal-Advice Centre.
n.d).
References:
Legislation.Gov, ( 2006), ‘Companies Act 2006’, viewed December 10, 2011 from
http://www.legislation.gov.uk/ukpga/2006/46/contents
companyLawclub, (n.d), Directors' powers’, viewed December 10, 2011 from
http://www.companylawclub.co.uk/topics/directors_powers.shtml
Legal-Advice Centre, (n.d), ‘Partnership Agreement Help And Advice’ viewed
December 10, 2011 fromhttp://www.legal-advice-centre.co.uk/partnership-
agreement.html
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