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2.2.1 The United Kingdom
The common law system which originates from the United Kingdom is a case-based
system of law in which judges use analogical reasoning to make law. 9 Hence, case
law makes up an integral part of the common law system and lower courts are bound
by precedent to follow the decisions of the courts higher in the hierarchy.
Nevertheless, the lower courts can depart from the principle of stare decisis by
distinguishing the facts of the case. In addition to cases, statutes are also one of the
important sources of law. 10 Traditionally, a judge’s role is to interpret the legislation
and leave the function of making law to Parliament. However, if there is any lacuna
in the legislation, it will be supplemented by case law. Since becoming a member of
the European Union, European law has also become an influential source of law in
the UK.
The UK company law is based on case law as well as legislation. The relevant
statutes on modern company law were found in the Companies Acts 1948, 1967,
1980, and 1985 until the recent amendments in 2006. The European Communities
Act 1972 also contains provisions on company law and is applicable in the UK as a
result of the harmonization of law. The governing principles and rules of statutes are
interpreted by judges through cases brought before the courts.
The company laws in the UK are founded on two basic principles: limited liability
and separate legal entity. The English Courts have been very strict in the application
of these principles and are reluctant to depart from them unless an exceptional
circumstance, such as fraud, is involved. Parliament prefers that the development of
the law in this area is left to the courts and only provides for the statutory exceptions
in limited circumstances. One of the exceptions expressed in the statute can be
9 De Cruz above n6 at 103.
10 Ibid.
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