Corporate governance and administrative law
Corporate Governance
What is Corporate Governance?
Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled. It balances the interests of a company’s many stakeholders, such as shareholders, management, customers, suppliers, financiers, government, and the community.
Good corporate governance helps companies build trust with investors and the public, ensures accountability, transparency, and promotes long-term business success.
Important Case Laws in Corporate Governance
1. Salomon v. A. Salomon & Co. Ltd (1897) AC 22 (House of Lords)
Facts:
Mr. Salomon formed a company and sold his business to it, holding the majority of shares. When the company went insolvent, creditors wanted to hold Mr. Salomon personally liable for the company’s debts.
Principle:
The court held that the company is a separate legal entity distinct from its shareholders, even if one person owns all the shares.
Significance:
This case established the principle of corporate personality and limited liability, which are fundamental to corporate governance. Directors and shareholders are generally not personally liable for company debts beyond their investment in shares.
2. Foss v. Harbottle (1843) 2 Hare 461
Facts:
Minority shareholders sued directors for mismanagement and fraud. The question was whether the court should intervene or the company itself should take action.
Principle:
The court ruled that the company itself is the proper plaintiff in lawsuits related to wrongs against the company, and minority shareholders cannot sue on behalf of the company unless exceptions apply.
Significance:
This established the “proper plaintiff rule” and protects corporate decision-making from unnecessary litigation by minority shareholders, promoting internal governance mechanisms.
3. Regal (Hastings) Ltd v. Gulliver (1942) UKHL 1
Facts:
Directors bought shares for a subsidiary company without disclosing their interest and made a profit when the shares were sold.
Principle:
The directors were held accountable for profits made through their position without disclosure.
Significance:
This case established fiduciary duties of directors, emphasizing honesty, full disclosure, and acting in the company’s best interests.
4. Percival v. Wright (1902) 2 Ch 421
Facts:
A director sold shares to a shareholder without disclosing an impending sale of the company.
Principle:
The court ruled directors owe their duties to the company as a whole, not individual shareholders.
Significance:
Clarifies directors' duties focus on the company, reinforcing the importance of collective interest in governance decisions.
5. Howard Smith Ltd v. Ampol Petroleum Ltd (1974) AC 821
Facts:
Directors issued shares to a friendly party to dilute a takeover bid.
Principle:
The court ruled that directors must exercise their powers for proper purposes only.
Significance:
Reinforces that directors must act bona fide in the best interest of the company and not misuse their powers for personal or improper purposes.
Administrative Law
What is Administrative Law?
Administrative law governs the activities of administrative agencies of government. It ensures that government actions are lawful, reasonable, and follow fair procedures.
It includes judicial review of government decisions, focusing on legality, procedural fairness, and reasonableness.
Important Case Laws in Administrative Law
1. Associated Provincial Picture Houses Ltd v. Wednesbury Corporation (1948) 1 KB 223
Facts:
A local authority imposed a condition that no children under 15 be admitted on Sundays to a cinema. The cinema company challenged the decision as unreasonable.
Principle:
The court introduced the concept of “Wednesbury unreasonableness”, ruling a decision is unreasonable if it is so irrational that no reasonable authority could have made it.
Significance:
This set the standard for judicial review on reasonableness grounds.
2. Council of Civil Service Unions v. Minister for the Civil Service (1985) AC 374 (the GCHQ case)
Facts:
The government banned civil servants at GCHQ from joining trade unions for national security reasons without consultation.
Principle:
The court held that while some government decisions are non-justiciable (not reviewable by courts) due to national security, others can be reviewed for fairness.
Significance:
Introduced the concept of legitimate expectation and clarified the scope of judicial review over government actions.
3. Ridge v. Baldwin (1964) AC 40
Facts:
A police officer was dismissed without a fair hearing.
Principle:
The court ruled dismissal without a fair hearing violated the principle of natural justice (procedural fairness).
Significance:
Reaffirmed the requirement of procedural fairness in administrative decisions affecting rights.
4. Anisminic Ltd v. Foreign Compensation Commission (1969) 2 AC 147
Facts:
Anisminic challenged a decision of the Foreign Compensation Commission claiming it made an error of law.
Principle:
The House of Lords held that errors of law made by public bodies can be reviewed by courts, even if statutes try to exclude such review.
Significance:
Established that jurisdictional errors can invalidate administrative decisions, broadening judicial review.
5. Padfield v. Minister of Agriculture (1968) AC 997
Facts:
The Minister refused to refer a complaint to a committee despite a statutory provision requiring him to do so when requested.
Principle:
The court held that discretion given to public officials must be exercised to promote the policy and purpose of the statute.
Significance:
Clarified that discretion must be exercised in accordance with the purpose of the law, preventing abuse of power.
RELATED Blog
0 comments