What is the companies act?

The Companies Act has been rewritten numerous times within the UK, with the latest version being the Companies Act 2006. This act is part of the UK Company Law and makes up the primary legislations within the law.

The act has been created in order to provide a comprehensive code of conduct in relation to company law for companies operating within the UK. The law stated numerous common law principles and outlines the responsibilities of directors of companies. The act also stated the European Union Takeover and Transparency Obligations Directives. The act stated the provisions that are compulsory for both private and public companies.

Historically the law governing directors duties was based largely upon the common law of negligence and the equitable principle of fiduciary duty. The term fiduciary refers to someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. This duty of loyalty was further defined to be a duty not to utilise ones position in such a way which is adverse to the interests of the principal. Some relationships including that of director and company have been held to always be fiduciary in nature and so this duty is imposed upon directors by the very virtue of the office they hold. The principle of fiduciary duty has been encapsulated within the seven general duties which now apply to directors following the Companies Act 2006.

Numerous cases make up the companies act and this is one of the most governed acts within UK legislation. Public Limited Companies must abide by the regulations and these are strongly monitored by external organisations.

The role of directors is one of the main focuses within the act and this has been created to ensure that their roles are for the sole purpose of promoting the wellbeing of an organisation. Breaching regulations as a company director can have severe consequences. In certain circumstances it can see individuals being struck off and being stopped from being a director of a company ever again. This legislation covers both public and private limited companies. This act also relates to individuals that have been made bankrupt as this often leads to the individual being prevented from being a business director for a number of years. If an individual is found to be running a business behind the cover of an alliance they could face prosecution.