Company Must Follow Rules
23rd January, 2012
When a company is in financial difficulties, the details of its internal regulations tend to be near the bottom of the list of considerations when directors are making decisions. Regrettably, company law does not make allowances for this, which led to a recent case in which the validity of the appointment of an administrator was challenged.
The decision to appoint the administrator was supported by a majority of the directors, but no board meeting had been convened and no notice had been given to the members of the board. The appointment was challenged by a director who had not been present at the meeting.
The first question the court dealt with was ‘Can a majority of the board of directors ratify a decision which was not taken in accordance with the company’s articles of association?’
The second question was ‘Can the company dispense with issuing notices to “concerned persons” regarding the intention to appoint an administrator?’
The High Court ruled that the answer to both questions was ‘no’ and therefore the appointment of the administrator was invalidated by each of the failures.
This case shows that no matter how far down one’s list of priorities abiding by the internal regulations of the company may seem to be, failure to do so, or to comply with company law in general, can cause far more problems than one might think.
For advice on all company law contact Nick Clarke in the Corporate and Commercial Department.
You might also be interested in...
17th July, 2018
Helen Watson, Head of Employment Law at Aaron & Partners LLP, has taken up an invitation to become a Trustee of both the Trust Board and the Main Board Theatr Clwyd has bolstered its senior leadership team with the appointment of an experienced employment law solicitor to support its vision of being at the forefront of theatre making... Read More »
6th July, 2018
When a business invests in its community it deserves praise – but it must go beyond that, writes Helen Watson, a trustee at Claire House and partner at Aaron and Partners Solicitors. Corporate social responsibility (CSR) is the link between a company and the community in which it operates. As a trustee on charity boards including Claire House... Read More »
4th July, 2018
Stuart Haynes, Corporate & Commercial Partner and IAG Global Board Member, reports on IAG Global – Wiesbaden held 14th to 17th June 2018 Stuart Haynes (IAG Global Board Member) Stuart Scott-Goldstone and Nick Clarke attended the recent IAG Global meeting in Wiesbaden which was held at the Grand Hotel Nassauer Hof from 14th – and 17th July 2018 The meeting... Read More »