There were several basic legal provisions that gave direction to the formation of a company in the United Kingdom. It has its original foundation in 1844 when the Joint Stock Companies Act1 1844 was formulated. It has given regulations for facilitating the formation of companies by deed of settlement. Gradually, the shareholder concept was initiated in 1855 by the general incorporation procedure in the name of Limited Liability Act2 1855. This has offered limited liability to shareholders and provided identification to the company as a separate legal persona. The doctrine of limited liability postulates that a company shall be liable for the debts that it incurs, and even if it undergoes closure for any grounds, creditors cannot recourse to the personal assets of its members, unless limited by guarantee. As a result, in case the business venture fails, the individual member will have the risk of the amount, which he has invested in the shares of the company. In other words, the shareholder, in a company will be subjected to limited and determined risk whereas the creditor, has the real risk that in the event of closure of the company. Due to its major bottlenecks, the necessity of its modifications was highly felt. The major modifications for the terms of the formation of the company were witnessed in 1856 when the Joint Stock Companies Act3 1856 was brought in to operation. In this act, the earlier deed was modified and paved the way for the present style of the constitution in the form of the registration of the Memorandum of Association and the Articles of Association. These modifications have continued later in several acts. However, significant changes were made in 1985 when the Companies Act4 1985, came into effect. Especially section 14 of the Companies Act 1985 this act brought changes to the company formation procedures and terms between the members and the company. In addition, it also made remarkable modifications to the contractual nature of the company formation. It is also opined that the company act of 1985 has been mainly developed as an improved form of the Companies act 1908.
Analysis of the of Hickman v Kent or Romney Marsh Sheepbreeders Association Ltd