Corporate & Company Law

A private company is governed by two things at once. The Companies Act 2006 applies across the United Kingdom and sets the outer limits.

Inside those limits sits the company's own constitution, being its articles and in most cases a shareholders' agreement, and that constitution is a contract to be read and enforced under the law of the place in which it was made. For a company operated from Scotland that law is Scots law, which differs from the law of England and Wales on the valid execution of documents, on the period within which a claim survives, on the remedies available and on the court in which a matter is heard.

Formation and constitution

The model articles are a serviceable default and a poor fit for almost any company with more than one owner. We prepare the constitutional documents as a single exercise, covering the share classes and what each class carries, the appointment and removal of directors, the matters requiring unanimity, the position if the board is deadlocked, the basis on which shares are to be valued, and the events on which they must be offered back to the company or to the other shareholders.

Execution is a more substantial issue in Scotland than clients generally expect. The formal validity of a document, and whether it is self-proving, is governed by the Requirements of Writing (Scotland) Act 1995, and signing in counterpart and delivery by electronic means are dealt with separately.

A document that would be effective in England can be vulnerable in Scotland if it was executed on an English style.

Governance and filings

Directors owe their duties to the company, and the statutory statement of those duties is the same throughout the United Kingdom. What varies between companies is how well those duties are recorded. We advise on board procedure, on conflicts and their authorisation, on distributions and the lawfulness of dividends, on the statutory registers and the register of persons with significant control, and on the routine Companies House filings that are inexpensive to make and costly to have missed.

Shareholder remedies

The statutory remedies are United Kingdom remedies, but the procedure is not. A petition alleging that the company's affairs are being conducted in a manner unfairly prejudicial to some of its members is presented to the Court of Session. Derivative proceedings, in which a member sues on the company's behalf, are governed by a chapter of the Companies Act 2006 written specifically for Scotland, and the tests and procedure are not interchangeable with those that apply in England and Wales.

Advice drawn from English authority on this point should be checked before it is relied upon.