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UK Company Law - Essay Example

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As the Institutional shareholders and the public grow angrier and angrier over the almost unimaginable riches that FTSE bosses are ranking in…it felt like the ‘shareholder spring’ had finally sprung’ Introduction Despite the fact that action of a director cannot be interfered by the shareholder, under UK Companies Act, a minority shareholder can initiate prejudice action where he can sue the majority shareholders who manage the company or can initiate a derivative action where the shareholder can sue the directors on behalf of the company…
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UK Company Law
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Download file to see previous pages However, the section 172 of CA 2006 is itself a novelty which includes an explicit duty to promote the growth of the company successfully. Further, it also contains a new notion of “open-minded or enlightened shareholder value”. Whether a director of a company can be held accountable for any fiscal losses to the company due to their wrong decisions by the shareholders of the company? Under the UK Companies Act, shareholders including minority and institutional shareholders can now initiate legal action against erring directors or directors to whom hefty pay packages are being offered without relevance to their performance through derivative actions or through unfair prejudice clause. As the Institutional shareholders and the public grow angrier and angrier over the almost unimaginable riches that FTSE bosses are ranking in, the sudden spurt in shareholders’ activism in UK in recent days is being felt like the ‘shareholder spring’ had finally sprung’. ...
Institutional Investors and Minority Shareholder’s Activism in UK-An Analysis Under section 173 & 174 of the Companies Act 2006, though the directors of a company are appointed and ousted by shareholders, but the directors do not have any duty of care to any individual shareholder. It is to be observed that the duty of care by the directors is to the whole of the company’s stakeholders and is not applicable to a shareholder only to the magnitude of their investment held in the company, and thus the director’s duty of care is confined to the capital and not to any individual per se. Further, earlier, the shareholders are having every right to pass resolutions at a general meeting to restraint directors of a company but such resolutions are not binding on company directors, and it is advisory in nature only. For company directors, maximising the wealth of the shareholders is not a legal mandate but only an idealised norm of conduct. The directors are not expected to answer only to the shareholders but also accountable for other stakeholders of the company like creditors, customers, employees, local community and suppliers. (Haynes, Murray & Dillard: 57). Under UK corporate law, there exist no explicit defence or business judgment rule as a safe harbour provision for commercial decisions taken by the directors of a company. However, the absence of any explicit provision in this regard does not leave the corporate directors in UK in the lurch. Thus, as per Justice Austin, in the absence of any explicit provisions under the UK Companies Act as regards to the business judgement rule, but the shareholders may avail safe harbour provisions through the ratification of director’s decisions by the ...Download file to see next pagesRead More
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