Termination

Internal management

The internal management of the company is regulated by a document called the articles of association. Although these need not be registered (except for companies limited by guarantee), they must conform to an authorized pattern. They detail rules about such matters as when and at what notice meetings must be held; members' voting rights, and the size of majority required to pass resolutions; issuing of shares; and the appointment, powers, and, removal of directors. Under the Companies Act every public company must have at least two directors, and every private company, at least one. A director need not be a member (that is, a shareholder), but details of any shares he holds must be registered. He is not an employee of the company, but may be paid for his work as long as the members of the company agree to this. He has a duty to exercise a reasonable standard of care and not to make secret profits from company business. If he holds an interest in another firm which the company is doing business, the law requires him to declare interest at a board meeting (meeting of the directors).

Another possible cause of criminal prosecution is insider trading. This means using inside knowledge to gain private profit when buying and selling the shares of the company. Directors and employees of companies are often in a position to know if a company’s shares are likely to rise or fall long before ordinary shareholders. As a result, they could make profits by buying or selling before everybody else, or by selling their special information. In 1990, a New York stockbroker was imprisoned for this offence. The crime was not even recognized in English law until 1967. The 1985 Company Securities (Insider Dealing) Act lays down a maximum penalty of two year imprisonment, but the recent discovery of how widespread this practice is means the penalty is likely to be increased as a deterrent.

1. What are possible causes of criminal prosecution according to the text? Do you know any other causes? Name them and give examples.

2. Do you share the opinion that people accused of insider trading should be imprisoned? Give your pros and cons.

TEXT 6

Winding-up or liquidation of a company is the process by which the life of a company is brought to an end.

There are several ways in which a company may be terminated (dissolved): its registration may be cancelled; it may be removed from the registrar if it has simply ceased to function as a company; or, it may be liquidated, or wound up. This means that its resources will be used to pay creditors in an established order of priority. It is likely that the reason the company is being wound up is that it is bankrupt — that is, it cannot pay you its debts. This means that creditors may only get a proportion of what they are owed. As mentioned above, shareholders may be liable for up to the value of shares they hold but have not yet paid for. Sometimes liquidation is voluntary, at the insistence of most of the shareholders, though the company is solvent, and sometimes winding-up (dissolution) is compulsory ordered by the court when the company is insolvent.

There are also laws regulating transactions in the years before liquidation. These laws prevent companies from transferring funds to third parties whom the creditors cannot touch before the firm goes bankrupt or from giving unauthorized preference to certain creditors.

Setting up, running, and winding down a company are not the only legal matters businessmen have to deal with. At some stage, most of them employ the services of lawyers for advice on how to minimize their tax liabilities and to make sure their business does not exceed noise or pollution regulations. Company directors, partners and sole traders alike have to consider the legal implications of making contracts to buy and supply goods and services, and the torts they face if a product injures a consumer.

1. In what ways may a company be terminated?

2. What is the difference between voluntary liquidation and compulsory winding-up?

3. What are the main legal matters businessmen have to deal with?

4. Would you employ a lawyer if you were a manager? Why, why not?

Read the text and divide it into logical parts. Think of the title to it.

TEXT 7

Competition law concerns itself with the regulation of business activities which are anticompetitive. This area of the law is very complex, as it combines economics and law. The legal English used is also complex and is made even more so by the differences in the language and law employed by the two major actors in competition regulation, the European Union and the United States. EC competition law is rooted in the creation of the single European market and, as such, prohibiting private undertakings from partitioning the Community market along national lines is a fundamental goal. The origins of competition law in the United States, on the other hand, can be found in the term “ antitrust ”. In the late 19^th century, enormous amounts of wealth were amassed in some important national industries such as railways, steel and coal. The “barons” who controlled these industries artfully created trusts to shield their fortunes and business empires. Their effort culminated in the Sherman Act, which was enacted to put an end to these practices. The overall purposes of competition law are often the subject of debate and differ from jurisdiction to jurisdiction. However, on the whole, it is accepted that competitive markets enhance economic efficiency because they maximize consumer benefit and optimise the allocation of resources, which is good for market economies. Competition law regulates cartels, monopolies, oligopolies and mergers. A cartel is a type of agreement among undertakings which would normally compete with each other to reduce their output to agreed levels or sell at an agreed price. One of the key ingredients in sustaining a cartel is a relevant market with high barriers to entry so that new undertakings cannot penetrate the market. The classic tool used by the cartel to gain monopoly profits is price-fixing. In broad terms, a monopoly is an undertaking or inter-related group of undertakings which either control the supply (and therefore the price) of a product or service or exclude competition for that product or service. An oligopoly is a market with only a small number of market actors, who are able to adopt parallel behaviour in relation to price-setting or output decisions. Common aspects of enactments aimed at preventing anti-competitive activities include restrictions on abuse of a dominant position through such instruments as predatory pricing and tie-in arrangements, among others. The United States even prohibits behaviour which attempts to gain a monopoly position. Merger regulation is another common aspect of legislation aimed at limiting anti-competitive concentration of market power. In this context, it is also important to discuss the terms horizontal and vertical. “Horizontal” denotes the joining of undertakings which are at the same level in the economic supply chain; “vertical” denotes the joining of undertakings at different levels in the economic supply chain.

1. Look through the text again and explain the words in italics. Give their Russian variants.

2. Explain why the area of competition law has grown increasingly complex.

3. Speak on the origins of competition law in the EC and the USA.

4. Give your reasons why the overall purposes of competition law differ from jurisdiction to jurisdiction.

5. Differentiate between the main types of undertakings mentioned in the text.

6. Match these terms with the examples of anti-competitive activity they describe.

barriers to entry, price-fixing, predatory pricing, tie-in arrangements

1. A manufacturer of computer components requires that consumers purchase other equipment made by the firm in order to keep the warranty valid.

2. The major petroleum corporations in a country all agree to raise the prices of petrol and petroleum products.

3. A company interested in entering the telecommunications market in a particular country has to deal with restrictive government licensing practices and complex bureaucratic procedures which inappropriately favour domestic suppliers before it can offer its services.

4. A new Internet provider enters the market, and the main provider in the region temporarily lowers the cost of its services dramatically.

Ex. 11. Decide if the following statements are true or false.

1. In order to engage in business activities, you need to have some knowledge of basic legal principles.

2. Very few areas of the law are relevant to running a business.

3. The company's liability itself is limited.

4. A partnership is a business association which is not considered to be a legal entity.

5. Creditors cannot sue the members as individuals beyond their stated limits.

6. Shareholders can insist on the payment of a dividend every year.

7. Under English Law, there must be a minimum of 3 people, and they must sign a memorandum of association.

8. The memorandum of association contains provisions for the internal management of the company.

9. Articles of association need not be registered.

10. Insider trading has not been recognized as a crime yet.

11. Every company must have a company secretary if there is more than one director.

12. A company may alter its capital structure, provided that the articles of association grant such power.

13. Liquidation is always ordered by the court.

14. Laws do not prevent companies from transferring funds to third parties.

15. Setting up, running, and winding down a company are not the only legal matters businessmen have to deal with.

16. EC competition law is rooted in the Sherman Act.

17. Competition law regulates cartels, monopolies, oligopolies and mergers.

Ex. 12. Match the following definitions with the key terms from the texts above.

1. a market situation in which a small number of firms compete with each other ____________

2. the liquidation of a company after a petition to the court, usually by a creditor ____________

3. the combining of two companies to form an entirely new company ____________

4. the joining of undertakings which are at the same level in the economic supply chain ____________

5. a document containing provisions for the internal management of the company ____________

6. liquidation proceedings that are supported by a company’s shareholders ____________

7. a company which is merged into another company ____________

8. a group of similar independent companies who agree to join together to control prices and limit competition ____________

9. a change in a company’s name, capital or objects ____________

10. a form of acquisition which is supported by management ____________

11. the purchase of shares owned by shareholders who have a controlling interest ____________

12. a document which must be filed with the national registrar of companies ____________

13. the acquisition of one company by another, resulting in the survival of one of them and dissolution of the other ____________

14. an organisation or group that has complete control of an area of business so that others have no share ____________

15. a form of acquisition whereby all or almost all assets and liabilities of a company are sold ____________

Ex. 13. Choose the correct word or phrase in italics to complete the sentences.

1. The constitution of a company comprises / consists / contains of two documents.

2. The memorandum of association states / provides for / sets up the objects of the company and details its authorized capital.

3. The articles of association contain arguments / provisions / directives for the internal management of a company.

4. The company is governed by the board of directors, whilst the day-to-day management is delegated upon / to / for the managing director.

5. In some companies, the articles of association make / give / allow provision for rotation of directors, whereby only a certain portion of the board must retire and present itself for re-election before the AGM.

6. Many small shareholders do not bother to attend shareholders’ meetings and will often receive proxy circulars from the board, seeking authorisation to vote on the basis of / in respect of / on behalf of the shareholder.

7. In the course of / by way of / in terms of choosing the name of the company, a number of matters must be considered.

Ex. 14. Some of the important roles in company management are discussed in Text 2 above. Recollect which roles are mentioned. What other roles can you name?

Here is a more comprehensive list of roles in company management. Match the roles with their definitions.

auditor, company secretary, director, liquidator, managing director, official receiver, promoter, proxy, receiver, shareholder

1. Person appointed by a shareholder to attend and vote at a meeting in his/her place when the shareholder is unable to attend.

2. Company director responsible for the day-to-day operation of the company.

3. Person elected by the shareholders to manage the company and decide the general policy.

4. Person engaged in developing or taking the initiative to form a company (arranging capital, obtaining personnel, making arrangements for filing corporate documentation).

5. Person appointed by the company to examine the company’s accounts and to report to the shareholders annually on the accounts.

6. Company’s chief administrative officer, whose responsibilities include accounting and finance duties, personnel administration and compliance with employment legislation, security of documentation, insurance and intellectual property rights.

7. Member of the company by virtue of an acquisition of shares in a company.

8. Officer of the court who commonly acts as a liquidator of a company being wound up by the court.

9. Person appointed by creditors to oversee the repayment of debts.

10. Person appointed by a court, the company or its creditors to wind up the company’s affairs.

Ex. 15. The directors of a company are responsible for its governance. Their duties are clearly set out and, if they do not carry them out, not only may they be held liable under the law, but they may also be banned from acting as director of any company for a certain period of time.

Read through the duties and then answer the questions.

Except with the prior sanction of the holders of more than 50 per cent of the issued share capital of the company from time to time the Directors shall procure that the Company shall not:

1. sell, transfer or otherwise dispose of the whole of its undertaking, property or (save in the ordinary course of trading) assets or a part thereof being substantial in relation to its total undertaking, property and assets;

2. issue shares, loan stock, debentures or any other form of security of the Company including for this purpose any issue of redeemable shares;

3. purchase any of its own shares;

4. incur or agree to incur any capital commitments in excess of $ 100,000;

5. engage or dismiss any person as a Director;

6. increase by more than 20 per cent the remuneration payable to any of its Directors, officers, employees, consultants or agents;

7. dismiss any employee;

8. purchase or sell, take or let on lease or tenancy or otherwise acquire or dispose of any real or leasehold property for any estate or interest;

9. institute any litigation save in respect of the debts owing to it in the ordinary course of business;

10. acquire or dispose or any shares, debentures, debenture stock or other securities in any other company.

Which clause states that the director shall, unless agreed by others, ensure that the company does not:

a) buy its own shares;

b) appoint or fire another director;

c) buy land;

d) bring a case to court except to collect money owed;

e) increase the pay to staff above a certain percentage;

f) issue equities;

g) spend more that a stated amount;

h) buy shares in another company;

i) sell the company or part of it;

j) fire an employee?

Ex. 16. Supply the sentences with the missing words given in the box.

records, liabilities, copy, require, account, regulations, payments, inspection, auditor, meeting, register, memorandum, public, obtain, prosecution

The law also ¹⁾ ______ a limited company to keep accounting ²⁾ ______ at its registered office, including entries of receipts and ³⁾ ______ and a record of assets and ⁴⁾ ______. These records must be open to ⁵⁾ ______ at any time by the company’s directors and secretary, and a ⁶⁾ ______ must be sent to the registrar each year. A profit and loss ⁷⁾ ______, together with a financial report by the directors and a report from an independent ⁸⁾ ______ (inspector), must be put before a general ⁹⁾ ______ of the company’s members every year. Breaking these ¹⁰⁾ ______ may result in criminal ¹¹⁾ ______.

As well as the ¹²⁾ ______ there are several other documents a new company has to ¹³⁾ ______. When this has been done it receives a number and a certificate of incorporation and is ready to do business (unless it is a ¹⁴⁾ ______ limited company, in which case it must first ¹⁵⁾ ______ a trading certificate).

Ex. 17. Complete the phrases below using the nouns in the box.Translate them into Russian and use them in the sentences of your own.

access, bids, cartel, complaint, fines, petition, position, practices, proceedings

1. to initiate ______ against a company

2. to suspect a company of abusive pricing ______

3. to abuse its dominant ______

4. to collude on ______

5. to participate in an illegal ______

6. to file a fine ______

7. to limit ______ to a market

8. to impose ______ on a company

9. to lodge a ______ against a company

Ex. 18. Below in the box are some key terms from the area of bankruptcy and insolvency. Match each word to its definition.

administration order, bankrupt, composition, compulsory liquidation, disqualification of directors, fraudulent trading, going concern, insolvent, liquidator, official receiver (OR), petition, secured creditor, undischarged bankrupt, winding-up

1. A director found to have conducted the affairs of an insolvent company in an “unfit” manner may be disqualified from holding any management position in a company for between 2 and 15 years.

2. A written application to the court for relief or remedy.

3. Someone against whom a bankruptcy order has been made.

4. The procedure whereby the assets of a company (or partnership) are gathered in and realized, the liabilities met and the surplus, if any, distributed to members.

5. The basis on which insolvency practitioners prefer to sell a business. Effectively it means the business continues, jobs area saved, and a higher price is obtained.

6. An agreement between a debtor and his creditors whereby the creditors agree with the debtor between themselves to accept from the debtor payment of less than the amounts due to them in full satisfaction of their claim.

7. The person appointed to deal with the assets and liabilities of the company or partnership once the resolution to wind up has been passed or a compulsory winding-up order has been made.

8. Someone against whom a bankruptcy order has been made and who has not been discharged from bankruptcy.

9I. The placing of a company into liquidation as a result of an application the court, usually by a creditor.

10. A court order placing a company that is, or is likely to become, insolvent under the control of an administrator.

11. Where a company has carried on business with intent to defraud creditors, or for any fraudulent purpose.

12. The state of not being able to pay one’s debts as they fall due or having an excess of liabilities over assets.

13. The civil servant employed to head the regional offices whose responsibilities cover bankruptcies and compulsory liquidations.

14. The first to be paid from the secured assets.

Ex. 19. Read the following text and translate it into English (in writing).

Статья “О несостоятельности (банкротстве)” предусматривает возможность продажи предприятия (бизнеса) на стадии внешнего управления.

Одной из функций внешнего управляющего является поиск и изучение потенциального покупателя, который предложит наилучшую перспективу как для кредиторов, так и для участников компании — последнее особенно важно, поскольку кредиторы могут настаивать на продаже предприятия по низкой цене, чтобы как можно быстрее удовлетворить свои требования, что, очевидно, не в интересах должника. В случае появления покупателя арбитражный управляющий должен сделать выводы о необходимости продолжения осуществления процедур внешнего управления либо о целесообразности продажи предприятия.

Продажа бизнеса как одно из мероприятий внешнего управления может быть предусмотрена планом внешнего управления.

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