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Introduction of Business And Corporate Law Assignment
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1. Explanation of the duty to promote the success of the company under s172 Company Act 2006 (‘CA 2006’)
The “Company Act 2006” is based upon the duty requirement for a director in order to act in good faith that is most likely to promote the success of the company. This act is based upon leading the directors for understanding about the decision making of an organisation in the long term along with taking interest in the company's employees so that they can feel motivated. It is also based upon making the directors to understand the impact of a company's operation on the community as well as the environment so that the strategic incorporation of the company can be improved further. The need is also associated with enhancing the business relationship of the company with customer suppliers and others according to “172 section of Company Act 2006”[1]. The disability of the company in maintaining the reputation for high standard of the business conduct along with understanding the need fairly between the company members are also included in the promotion of success of the company under “s172 Company Act 2006”[2].
It is also mentioned in this legislation to understand the purpose of the company along with including the benefit of its members. This has been observed to be focused on enhancing the goal of the company along with making a good relationship with the organisational members so that it can positively impact on the growth of the organisation. However, the promoting benefits of the member is also included in this legislation for the purpose of promoting success of the company[3]. This rule has been based upon making good relationships with the members of the company so that they can feel motivated. The motivation of the employees is considered as the most important part of the organisation in order to promote success. It is also mentioned that the duty of the director must be maintained by considering all the factors included in the section of law. This rule of law required the director to consider act as per the interest of creditors of the company [4].
It is also mentioned in 172 sections of the law that skilled employees can be involved from the society so that corporate social responsibility can be increased. It is also based upon reducing the environmental waste. The subsection 2 of the concerned law is based upon addressing the charitable section of the company along with understanding the community interest. It is also mentioned in this section to understand the benefit of the member in such a way that they can feel motivated towards the contribution of the company. This can be useful for the purpose of enhancing organisational sustainability. The duty of director is enlisted in CA 2006 which is also based upon exercising reasonable care and skill development within the organisation so that the organisational employees can feel themselves motivated. In this section, skills development is considered as one of the important part of the organizational success. However, the promotion of skill development among the employees is also considered as the most useful factor for the success of the company[5]. Under the subsection 3 the duty to promote success of the company is based upon involving the mechanism under which the liquidator can require the directors to contribute towards the fund for charitable foundation in order to contribute to the society. In this context, it can be useful for the purpose of enhancing the success of the company. However, the consideration of simplifying the corporate law is based upon the company Act 2006 under the section 172. This is illustrated as all the factors have been included in the law that are based upon enhancing the organisational sustainability and success factor[6].
2. Director’s demonstration that they have complied with s172 CA 2006
There are different duties for directors mentioned as per the section number 172 of the Company Act 2006. The guidelines need to be followed by all the directors of the UK company in such a way that all the components can be fulfilled appropriately. After the fulfilment of all the rules and regulation as for the rules mentioned under the section 172 of the company Act 2006 it can be considered by the directors that they have compiled with the concerned law. This is illustrated as the director’s duty is based on the six factors[7].
There are different factors such as understanding the consequences of any decision in the long term which means the directors should look over the decision-making process so that it can help to work strategically in the organisation. It is also mentioned that the director's duty is also associated with understanding the interest of employees within the organisation [8]. This factor is based upon meeting the need and requirement of the employees as the employee motivation is one of the most important factors for the development of organisational performance that can be developed by meeting their need and requirement.
However, directors also need to understand the impact of companies' operation on the environment and community so that environmental sustainability and corporate social responsibility can be managed. This has been illustrated as the corporate social responsibility is also the key factor for the purpose of organisational development. In this context, if these factors are implemented by the managers, it can be considered by them that all the legislation mentioned in Company Act 2006 have been fulfilled. It is also mentioned as per the duty of director that they should need to look on the company's business relationship with the customer, suppliers and other stakeholders. This factor is based upon making good relationships with all the organisational members that can be helpful for them to enhance the motivation factor among the organisational members that can lead the stakeholders of the organisation towards working appropriately within the organisation[9]. This can be useful for organisational development. It is also mentioned in the duty of the directors towards understanding the need to act fairly between the members of the company so that they can feel motivated and work towards achieving the long-term goal of the organisation along with maintaining the reputation of the organisation with proper standard maintenance of the business conduct. In this context, incorporating all the factors mentioned in the section can lead the directors to understand and demonstrate that they have compiled with the 172-section number of company Act 2006[10].
3. Proposal given by the BBA
As per the proposal given by the Better Business Act there are some amendments proposed in the 172 section of the Company Act 2006 in which the first amendment was based on different factors such as understanding the consequences of the decision making and long term and understanding the impact of operation in the company on its community. However, the first amendment was based on ensuring that the director of the company must act in such a way that they can consider good faith that can be most likely to make advancement in the company by covering the factors about the consequences of the decision-making process along with analysing the interest of the company employee [11]. The first amendment was also based upon maintaining a well-deserved reputation for the trustworthiness and high standard of the business conduct along with acting clearly between the members of the company so that they can feel motivated and work in the organisation for its successful growth and development.
The amendment is also based on the benefits provided to the society and environment in such a way that the size of the company and the nature of its operation can be maintained. The commitment was observed to be based upon reducing the harm on the environment along with including the elimination of such environmental harm with the operation of the company. In this context, the goal was also associated with maintaining a proper corporate social responsibility in the organisation so that the charitable organisations can also get benefit with the help of the companies. The first amendment has also included a point where the company can specify in its article about the purpose to provide a proper benefit to wider society and the environment than the purpose set out in the subsection[12]. The amendment was also based upon enhancing the rule of law required by the directors in certain circumstances in order to consider in the interest of creditors of the company.
The second amendment of the Better Business Act was also based upon including a strategic report for the financial year of a company so that the directors can have understanding regarding the development of the company. As per the performance in the concerned year, the directors can develop their understanding about the area that needs further development in the company. The second amendment was also based upon enhancing the component and subsection of “a to f of section 172”[13]. The amendment was also based upon at once in the duty of directors with proper demonstration of all the activities.
The third amendment of the concerned law was based on extending the act to the whole of the United Kingdom along with passing the act and making the business decision in a more appropriate manner.
4. The enhancement of operation of directors as per the proposal of BBA
The research has illustrated that the BBA has positively impacted the operation strategy of the directors. This is illustrated as the act is based upon empowering the directors to exercise their judgement in advance in the interest of all stakeholders. In this context, the director’s operation has been observed to be based upon understanding the interest of the employees within the organisation along with enhancing the area as per the requirement of the organisational members. This can be useful enough for the purpose of making directors understand about the need and requirement of the organisational members and meeting their needs so that a proper motivation can be provided to them on a regular basis[14].
It is also mentioned in the Better Business Act for the purpose of reflecting upon the reporting in which a proper report must be developed by the directors regarding several pieces of information in the organisation. The included information has been observed to be the balance of people, planet, profit in a strategic manner. The impact of all the strategies on the organisation has also been reflected in the reporting in such a way that the managers and directors of the organisation can understand the area of development in the organisation[15]. In this context, this has also helped to enhance the operation of the directors.
The concerned act is also based upon aligned interest in which the interest of shareholders has been considered as the major priority. According to this section of the act new principles have been designed for the purpose of fiduciary duty of the shareholders within the organisation. However, the director has also been provided with the responsibility to balance society and the environment so that the social corporate responsibility can be maintained in an appropriate manner. In this context, it can be visualised from the concerned section of development that the act has positively impacted on the operation of the directors with the help of providing a guiding material that can be used by the directors to work hard within the organisation[16].
The default change is also included in the Act which is based upon identifying the issues within the organisation followed by mitigating the issues with the help of a proper strategic implementation. It is also mentioned in this section of the act that wider stakeholders cannot be provided with the optional benefits beyond shareholders. In this context, it can be demonstrated that the concerned act has provided an opportunity to work appropriately by the directors along with focusing upon the relevant areas that has provided a proper operational strategic development for the directors[17].
5. Impact of BBA on shareholders
The shareholders have been observed to be one of the major priorities as per the guidelines provided by the battle business act. This is illustrated as it is clearly mentioned in the act to consider the interest of shareholders within the wider society and environment. In this context, it can be understood that shareholders have been provided with a chance to demonstrate their likes and dislikes so that it can be implemented by the organisational directors[18]. The shareholders have also been provided with an opportunity to demonstrate their requirement strategically which will be fulfilled by the director of the organisation. It is also mentioned in the concern that shareholders' decisions will be considered as the most important priority as they are the important part of the organisation. The aligning of the interest of shareholders has also been observed to be associated with the contribution to assets of enormous challenge within the society and environment. In this context, a proper responsibility has been provided to the directors of the organisation regarding shareholders. It is also mentioned in the Better Business Act to provide equal benefit to the shareholders as the benefit provided to the stakeholders of the organisation. In this context, it can also be demonstrated that the shareholders have been provided with a proper maintenance of priority. It can also be demonstrated that BBA has a positive significant impact on shareholders in terms of gaining opportunities[19].
6. Examining the impact of BBA
6.1 Evaluating the impact of proposed changes of BBA on shareholders and directors
The proposed changes for shareholders and directors of the organisation according to the Better Business Act can be useful enough for the purpose of providing equal chance to the shareholders of the organisation. This has been illustrated as the shareholders are also one of the major parts of the organisation that needs to be considered by the directors along with understanding their interest and the area of development within the organisation as per their requirement. The guidelines have also been provided within the Better Business Act that can also be useful for the directors in terms of using all of the proposals along with enhancing the success in the organisation[20]. The proposals have been designed in such a way that the directors can understand the requirements of all the stakeholders along with contributing to the corporate social responsibilities so that the environment can also be reduced. This can also be useful for the purpose of providing an equal opportunity to all the stakeholder of the organisation as well as the organisational members. It is also mentioned in the proposal that the shareholders should be considered as one of the top most priority in the organisation. In this context, it can have a positive impact on organisational performance. This has been illustrated as the guidelines mentioned in the Better Business Act can be implemented by the director for the purpose of enhancing their performance in the organisation by meeting all the needs and requirements that will lead towards the organisational development.
6.2 Analysing the balance between achieving higher levels of corporate social responsibility and the need for businesses to focus on their profit-making objectives by BBA
The amendment provided in the Better Business Act is based upon balancing between the higher levels of corporate social responsibility. This has been illustrated as proper rules and regulations are provided for the purpose of taking care of the environmental contribution as well as the social contribution within the organisation that can have a positive significant impact in terms of maintaining the corporate social responsibility of the organisation. It is also clearly mentioned in the amendment of Better Business Act that a proper contribution can be provided within the society by including some charitable amount so that the social welfare can be developed. However, a proper implementation of such products can be done within the organisation that can be useful to reduce the amount of carbon footprint and the waste product and in such a way that it can positively impact environmental sustainability[21].
However, demonstration of the motivation provided within the organisation as well as other factors are also involved in the Better Business Act that can also positively impact within the organisation to achieve the profit-making objectives. This is illustrated as a proper guideline has been provided to the directors by using the better business as proposal in which a guideline has a mentioned that needs to be used for them as well as maintaining the higher performance within the organisation. It can be demonstrated by considering this factor, that all the organisation objectives can be fulfilled by maintaining a higher level of standards in the concerned organisation (Mayer, 2022). It is also identified that the profit-making objective can be developed within the organisation by including all the rules and regulation provided within the Act that are based upon taking the business activities to the higher level along with making a report within the organisation in such a way that it can include a proper information about the balance of planet, people and profit in strategic way. In this context, it can be useful to understand the area of improvement with the help of which further improvement can be made by the directors of the organisation. It is also effectively mentioned to empower the directors by exercising their judgement in the advancement of stakeholder interest as well as analysing the decision making in a long term so that it can positively impact organisational sustainability.
The Better Business Act is based upon ensuring that every company in the UK aligns their interests with those of wider society and the environment by enhancing organisational sustainability. It is also focused on making a change in the world that can help to create a fear and greener future for everyone[22]. Based upon the above discussion it can be demonstrated that there is a proper balance maintained by the battle business act in terms of managing the corporate social responsibility and need for the business to focus on their profit-making objectives.
References
Bates Wells ‘The Better Business Act’ (29 September 2022)< https://bateswells.co.uk/about/being-a-better-business/better-business-act/ > accessed 29 September 2022
Better Business Act ‘About the Act’ (29 September 2022)< https://betterbusinessact.org/about-the-act/ > accessed 29 September 2022
Better Business Act ‘About The Better Business Act’ (29 September 2022)< https://betterbusinessact.org/about/> accessed 29 September 2022
Better Business Act ‘THE Better Business Act’ (29 September 2022)< https://betterbusinessact.org/wp-content/uploads/2021/04/The-Better-Business-Act-2021.pdf > accessed 29 September 2022
Institute of Directors ‘Corporate governance reporting under Section 172 of the Company Act 2006’ (29 September 2022)<https://www.iod.com/news/governance/corporate-governance-reporting-under-section-172-of-the-companies-act-2006/ > accessed 29 September 2022
Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/section/172 > accessed 29 September 2022
Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 > accessed 29 September 2022
Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 > accessed 29 September 2022
Mayer, Colin. Prosperity: Better business makes the greater good. (Oxford University Press, 2018)
Reid, Euan B, ‘The Better Business Act: Putting the 'Enlightened' in Enlightened Shareholder Value? [2022] PL 55.
Sharma, Ritik, and Arpit Sharma. ‘Competition Act-Impact on Retail Industry and Its Overview.’ [2019] PL 211.
Solve.co.uk ‘Why we support the Better Business Act’ <https://solve.co.uk/ethical-business/why-we-support-the-better-business-act/> accessed 29 September 2022
[1] Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 > accessed 29 September 2022
[2] Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 > accessed 29 September 2022
[3] Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 > accessed 29 September 2022
[4] Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 > accessed 29 September 2022
[5] Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/notes/division/6/2 > accessed 29 September 2022
[6] Legislation.gov.uk ‘Company Act 2006’ (29 September 2022)< https://www.legislation.gov.uk/ukpga/2006/46/section/172 > accessed 29 September 2022
[7] Institute of Directors ‘Corporate governance reporting under Section 172 of the Company Act 2006’ (29 September 2022)<https://www.iod.com/news/governance/corporate-governance-reporting-under-section-172-of-the-companies-act-2006/ > accessed 29 September 2022
[8] Institute of Directors ‘Corporate governance reporting under Section 172 of the Company Act 2006’ (29 September 2022)<https://www.iod.com/news/governance/corporate-governance-reporting-under-section-172-of-the-companies-act-2006/ > accessed 29 September 2022
[9] Institute of Directors ‘Corporate governance reporting under Section 172 of the Company Act 2006’ (29 September 2022)<https://www.iod.com/news/governance/corporate-governance-reporting-under-section-172-of-the-companies-act-2006/ > accessed 29 September 2022
[10] Institute of Directors ‘Corporate governance reporting under Section 172 of the Company Act 2006’ (29 September 2022)<https://www.iod.com/news/governance/corporate-governance-reporting-under-section-172-of-the-companies-act-2006/ > accessed 29 September 2022
[11] Reid, Euan B, ‘The Better Business Act: Putting the'Enlightened'in Enlightened Shareholder Value? [2022] PL 55.
[12] Better Business Act ‘About The Better Business Act’ (29 September 2022)< https://betterbusinessact.org/about/> accessed 29 September 2022
[13] Better Business Act ‘THE Better Business Act’ (29 September 2022)< https://betterbusinessact.org/wp-content/uploads/2021/04/The-Better-Business-Act-2021.pdf > accessed 29 September 2022
[14] Bates Wells ‘The Better Business Act’ (29 September 2022)< https://bateswells.co.uk/about/being-a-better-business/better-business-act/ > accessed 29 September 2022
[15] Bates Wells ‘The Better Business Act’ (29 September 2022)< https://bateswells.co.uk/about/being-a-better-business/better-business-act/ > accessed 29 September 2022
[16] Better Business Act ‘About the Act’ (29 September 2022)< https://betterbusinessact.org/about-the-act/ > accessed 29 September 2022
[17] Solve.co.uk ‘Why we support the Better Business Act’ <https://solve.co.uk/ethical-business/why-we-support-the-better-business-act/> accessed 29 September 2022
[18] Solve.co.uk ‘Why we support the Better Business Act’ <https://solve.co.uk/ethical-business/why-we-support-the-better-business-act/> accessed 29 September 2022
[19] Sharma, Ritik, and Arpit Sharma. ‘Competition Act-Impact on Retail Industry and Its Overview.’ [2019] PL 211.
[20] Bates Wells ‘The Better Business Act’ (29 September 2022)< https://bateswells.co.uk/about/being-a-better-business/better-business-act/ > accessed 29 September 2022
[21] Bates Wells ‘The Better Business Act’ (29 September 2022)< https://bateswells.co.uk/about/being-a-better-business/better-business-act/ > accessed 29 September 2022
[22] Better Business Act ‘THE Better Business Act’ (29 September 2022)< https://betterbusinessact.org/wp-content/uploads/2021/04/The-Better-Business-Act-2021.pdf > accessed 29 September 2022