Unit 49:            Company Law and Corporate Governance

Unit code         T/617/0739

Unit level         5

Credit value     15

Pre-requisite    Unit 7

Introduction

The aim of this unit is to provide students with a knowledge and understanding of the law with regard to how companies are formed, administered, financed and managed. It provides skills to applying the relevant rules particularly in business situations as this unit is linked with the general business law unit which has already been completed.

The students will be able to gain practical knowledge on the advantages and disadvantages of carrying out business through the medium of a company limited by shares, different types of shares and procedure for the issue of shares. In addition, they will be able to identify the rights of shareholders with a board of a company.

Student experience in the learning process will help them better understand the procedure required for company administration, along with the rights and liabilities of directors and companies to outsiders.

In this unit, student will look at the modern organisational requirement of governance leading to the evaluation of good practice relating to company affairs. Using examples of local and international companies, students will gain the knowledge and skills is identify the governance issues and the impact on directors’ behaviour and their duties and care. On successful completion of this unit, students will have the confidence to advise on the matters of company administration, the modern requirement of good governance and make positive contributions in the work place.

Learning Outcomes and Assessment Criteria

 Learning Outcomes

By the end of this unit students will be able to:

1.    Evaluate the nature and legal status of companies.

2.    Assess the importance of meetings and resolutions in corporate management.

3.    Analyse the process of raising and maintaining capital for a company.

4.    Evaluate the role and impact of corporate governance in the management of companies.

Essential content

LO1 Evaluate the nature and legal status of companies

Concept of corporate personality:

·         The different types of legal status.

·         Legal person and the capacity to be sued or prosecuted. Characteristics of different forms of business organisations.

·         Incorporation and corporate personality, advantages and disadvantages of incorporation, promoters, pre-incorporation contracts and commencement of trading.

Formation and constitution:

·         Memorandum and Articles of Association, public, private and community interest companies, purchasing ‘off the shelf’.

·         Community interest companies.

·         The capacity and ability of a company to contract and doctrine of ultra-vires.

LO2 Assess the importance of meetings and resolutions in corporate management

Corporate management:

·         The definition of corporate management, divisions and functions of corporate management.

·         Board of directors, appointment, retirement, disqualification and removal of directors, and their power and duties during office.

·         Personal liability of directors.

·         Qualifications, powers and duties of the company secretary. Rights of shareholders with the board of the company

Company administration:

·         Rules and procedure, on different types of meetings such as, board meetings, AGM and EGM.

·         Company resolutions and the use of different types of resolutions, rights attaching to different types of shares and the purpose and procedure for issuing shares.

·         The process of issuing shares, class rights and dividends. Audits and record keeping.

LO3 Analyse the process of raising and maintaining capital for a company

Raising of share capital:

·         The nature of shares, different rights, types of capital debt and equity, public subscription, issue of shares, authorised capital, pre-emption rights, payment of shares.

Maintenance of share capital:

·         General rule, reduction of capital, procedure, duties of directors, purchase of own shares, financial assistance by the company for acquisition of own shares, statutory restriction and distribution of profit.

Loan capital:

·         The advantages and disadvantages of raising loan capital. Fixed versus floating charges.

·         Nature of debenture, comparison of share and debenture, debenture trust deed, fixed and floating charges, registration of charges, debenture holders’ remedies.

LO4 Evaluate the role and impact of corporate governance in the management of companies

Role of corporate governance:

·         Definition of corporate governance.

·         The history of corporate governance, international requirement, Enron case, interaction of governance with business ethics and company law.

Impact of corporate governance:

·         The corporate governance code. The need for corporate governance.

·         Effect of corporate governance on directors’ behaviour and duties of care and skill.

·         Different board structures, role of the board on governance issues, types and policies and procedures leading to best practice, requirement under company law for governance framework within companies.

·         Conflicts of interest and policies e.g. bribery, compliance, data protection regulations.

·         Rules – based versus principles approach.

·         Corporate rescue and liquidations.

·         Rationale of corporate rescue, role of Administrator, voluntary winding up, creditors winding up, duties and functions of a liquidator, distribution of surplus assets, dissolution.