Corporate law Essay Example | Topics and Well Written Essays - 2250 words

Corporate law - Essay Example (d) To what extent, if any, could Peter or Amanda or both incur personal liability for the company`s debts if the business fails? (e) Assume that there is one additional member of the board of directors, John, to whom the actual day-to-day running of the business has been left and who simply reports back to the board on the business he had transacted. John refers to himself as the managing director of Kent Cars Ltd, although he has never been officially appointed as such. A month ago John entered into a contract on Kent Cars Ltd behalf with James to create a company website, however, Kent Cars Ltd did not wish to order the actual website produced by James. The board of directors had refused to pay James, claiming that John did not have the necessary authority to enter into the contract with him. Analyse the situation with regard to the authority of John to make contracts on behalf of Kent Cars Ltd and in particular advise whether or not Kent Cars Ltd is liable to James. Answers a. In accordance with the section 18 of Companies Act 2006, in order for a company to exist, as a legal entity, it needs to have articles of association, which will ‘prescribe regulations for the company,’ (18.1 Companies Act 2006). Peter and Amanda are free to regulate the terms under which their partnership will be developed – with the restrictions set by the specific Act; this means that Amanda and Peter can add any term in the articles of association but this term should not be in clear opposition with the rules of Companies Act 2006. If either of the partners leaves the business, then the partnership would be eliminated; the business would have to be terminated, unless an arrangement has been made in advance, with relevant terms included in the articles of association, that in such case the company will continue to exist being transformed to a single member company – in the context of the article 123 (part 2 of Companies Act 2006). However, the shareholdin g of the leaving partner should be secured; this target can be achieved through specific terms in the articles of association, as for example the following ones: (part 2, part 9): a) a term defining that the leaving member would have the right to exit the firm anytime after a relevant notice, without his right to ask for his share on the company’s property to be influenced, b) a term defining that the leaving member would ask for his share from the firm’s profits within the particular financial year – referring to the period beginning in the first day of the current year and ending the day when the particular member decides to leave the company, c) a term defining that the share of the particular member would not be affected (reduced) by potential limitations in the company’s wealth because of the decisions of the other member – referring to the period beginning the day that the leaving member leaves the firm up to the day that his share is given t o him, d) a term should be also included stated that any right of the members/ shareholders on the company’s assets would be kept – in case that the assets will be not sold or, in other way, distributed between the