Re: Your possible breach of the Companies Act 2006
I am writing to you concerning your company's spurring of palm oil. As you may or may not be aware, the activities of many palm-oil suppliers have been causing environmental degradation in South-East Asia. The establishment of palm-oil plantations has resulted in deforestation, the destruction of the habitat of orang-utans, human rights abuses and violent conflict. Palm oil is used in approximately 10% of all of your food products.
The Companies Act 2006 (the Act) stipulates (in sections 172 and 417 respectively) that you have a duty to take such issues into consideration and to report on them.
I do not believe that your company is doing enough to ensure that your palm oil comes from sustainable, non-destructive sources. I am therefore concerned about whether this may consequently be a breach of the Act. This letter has been copied to the Secretary of State for Business, Enterprise and Regulatory Reform, who has responsibility to enforce the Act.
I look forward to hearing from you as soon as possible as to how you plan to manage these significant issues and ensure that your shareholders are made aware of them.
14 Read the letter again and answer these questions.
1 What environmental issue is Pippa Solloway concerned about in her letter?
2 Which sections of the Companies Act 2006 might Baggers pic be in breach of?
3 Who else has been sent a copy of the letter?
15 Explain these phrases from the letter in your own words.
2 a duty to take such issues into consideration
4 responsibility to enforce
16 Discuss the directors' possible responses to the letter. What would you advise them to do?
Listening 2: Directors' meeting
Baggers' Executive Committee is responsible for formulating and implementing company strategy, and consists of Zoe Cook (CEO], David Wright (Marketing Director) and Simon Travis (Public Relations Director). It has called a meeting with Sara Ball (Baggers' corporate counsel) to discuss the company's response to Pippa Solloway's letter.
17 465.3 Listen to the first part of the recording. What does Simon want to send to Pippa Solloway? Why?
18 4z5A Listen to the second part of the recording. When does Baggers have to publish its first business review under section 417 of the Act?
19 465.3,5.4 Listen to both parts of the recording again. Decide whether these statements are true (T) or false (F).
1 Baggers issued a policy statement on environmental issues before the enactment of the Companies Act 2006.
2 Baggers is a carbon-neutral company.
3 The Executive Committee have detailed information on the local impact of Baggers' sourcing of palm oil.
4 Baggers' competitors have not yet responded to all the provisions of the Companies Act 2006.
5 Baggers plan to publish a business review within the next three weeks.
Key terms 2: Public relations
The advice given by corporate lawyers can have a strong influence on the way a company is viewed by the public. Good media relations are essential. Listening 2 includes some of the terms used when discussing the public face of a corporation.
20 Match the terms and phrases in italics (1-7) from Listening 2 with their definitions (a-g).
1 How much more proactive can you get?
2 ... you've seen the press release we put out in March 2005 ...
3 We all agreed on the policy statement concerning the environment, employment and our role in the community.
4 ... the bottom line is that just about all the palm oil used in our own-brand products is sourced from South-East Asia.
5 I want people to see us as setting the agenda ...
6 ... we're prepared to stand by our own policy initiatives ...
7 We're on track as far as the rest of the Act is concerned ...
a the most important fact in a situation
b deciding what subjects other people should discuss and deal with
c a document outlining a set of agreed ideas concerning a particular issue
d making progress and likely to succeed
e taking action by causing change and not only reacting to change when it
happens f new actions often intended to solve a problem g a public statement given to the media to publish if they wish
Text analysis: Reading a statute
During the meeting, the CEO of Baggers distributed copies of sections 172 and 417 of the Companies Act 2006.
21 Quickly read section 172 of the Companies Act 2006 and choose the best heading.
a Duty to consider social and environmental issues b Duty to promote the success of the company c Duty to respect the rule of law
(1) A director of a company must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole, and in doing so have regard (amongst other matters) toŚ
(a) the likely consequences of any decision in the long term;
(b) the interests of the company's employees;
(c) the need to foster the company's business relationships with suppliers, customers and others;
(d) the impact of the company's operations on the community and the environment;
(e) the desirability of the company maintaining a reputation for high standards of business conduct; and
(f) the need to act fairly as between members of the company.
(2) Where or to the extent that the purposes of the company consist of or include purposes other than the benefit of its members, subsection (1) has effect as if the reference to promoting the success of the company for the benefit of its members were to achieving those purposes.
(3) The duty imposed by this section has effect subject to any enactment or rule of law requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.
Read the statute a second time. Which subsection is the easiest to understand? Which seems most difficult? Why?
a Statutes are drafted in general terms to cover all foreseeable circumstances. Their meaning must be interpreted by lawyers and judges. What strategies can you think of to make sure that you interpret a statute correctly, e.g. pay attention to the punctuation, assume each word has been carefully chosen by the drafter, etc.?
b Compare your ideas with those in the box on the next page.
Unit 5 Company law ( 57
Some statutes are clearly written, meaning that you can easily understand exactly what the legislature intended. Unfortunately, many statutes are very difficult to understand. Here are some rules to follow when interpreting a statute: C Make sure you understand the statute. Begin by reading the key sections quickly
to get a general idea of what the statute says, then read it again for detail. O Pay close attention to all the ands and ors. The use of and to end a series
means that all elements of the series are included, or necessary; an or at the
end of a series means that only one of the elements need be included. o Assume all words and punctuation in the statute have meaning. It's tempting
to skip words you don't quite understand and ignore awkward punctuation. Try
not to do this. C If the statute is only one of several you are studying, interpret it to be
consistent with the other statutes if at all possible. 0 Interpret a statute so that it makes sense rather than leading to some absurd
or improbable result. C Track down all cross-references to other statutes and sections and read those
statutes and sections.
24 Read the letter from Pippa Solloway to Baggers pic again. Which of the provisions of s. 172(1) might Baggers be in breach of?
25 Explain the meaning of s.172(2) to a partner. What kind of situations might it cover? Prepare by rewriting s.172(2) in your own words.
26 Read s.172(3). In what way is the duty it imposes limited?
Speaking 2: Role-play: lawyer-client interview
The meeting of the Executive Committee was called to discuss Baggers' response to Pippa Solloway's letter. By the end of the meeting, four possible options had been suggested:
1 Write a short response with the company's view of the issue.
2 Write an explanation of why Baggers failed to disclose the issue and/or considered it to be immaterial to report to shareholders.
3 Outline Baggers' plan to mitigate the issue.
4 Promise to write a full response after a reasonable period.
The CEO must now discuss the advantages and disadvantages of each of these with Baggers' lawyer and decide which would be in the best interests of the company.
27 Work with a partner. One of you plays the role of the lawyer, the other is the CEO of Baggers. Use the WASP approach from Unit 3.
Prepare for the meeting by considering the advantages and disadvantages of each option. Which do you think is in the company's best interests? Why? What questions must you ask your lawyer in order to get the most out of your meeting and to ensure the best result for Baggers? Make sure that the lawyer explains everything clearly,
Prepare for your meeting with the CEO by considering the advantages and disadvantages of each option. Which do you think is in the company's best interests? Why? Advise the CEO with reference to section 172 of the Companies Act 2006, and explain your reasoning clearly.
""*■ Now turn to Case Study 2: Company lawon page 120.
1 Word formationComplete this table by filling in the correct forms.
2 Collocations with company All of the verbs in Exercise 1 collocate with the word company except one. Which one is it?