LWELA2-11 PS.2022.S6J0B8 Bcom Law Assignment Hlumelo Sompondo Potchefstroom Campus

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Cover page:
LWELA2-11
PS.2022.S6J0B8
BCOM LAW ASSIGNMENT
Hlumelo Sompondo
Potchefstroom campus
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Table of contents
Contents
Cover page:..................................................................................................................1
Table of contents..........................................................................................................2
Aim and Scope.............................................................................................................3
Common law: Understanding.......................................................................................3
Own perspective...........................................................................................................4
Bibliography..................................................................................................................5
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Aim and Scope

The abuse of company resources and power has been one of the most significant
problems facing businesses across the globe. One notable example of such a
scandal is the Enron scandal, which is widely regarded as one of the most prominent
cases of corporate abuse in recent history. According to (Hayes, 2022) Enron was
an American energy company that used fraudulent accounting practices to hide
debts and exaggerate earnings, manipulating its financial statements to project
financial stability to its shareholders and investors. The scandal led to the bankruptcy
of the company and the loss of jobs for thousands of employees. In this essay, I will
be discussing the common law and legislative controls put in place against the abuse
of the company and whether they are enough to curb the high number of scandals.
Common law: Understanding

Common law is a body of law based on precedent, created by judges who have
interpreted prior law. Common law controls related to the abuse of company power
include fiduciary duties, the duty of care, and principles of corporate governance.
Fiduciary duties require directors of a company to act in the best interests of the
company and to avoid conflicts of interest between their own interests and those of
the company. The duty of care requires directors to exercise reasonable care and
diligence when making decisions and managing the company and to ensure that the
interests of all stakeholders are taken into consideration. Finally, principles of
corporate governance provide the framework for a company’s operations and set out
the roles and responsibilities of the company’s management and board of directors.
In addition to common law controls, there are several statutory controls to protect
companies from abuse. These include both federal and state legislation, such as the
(Securities Exchange act , 1934), which regulates the trading of securities, and the
(Sarbanes - Oxley Act, 2022), which introduced strict regulations for public
companies and imposes penalties for fraudulent accounting practices. However,
despite the existence of these controls, there have been several similar scandals
where companies have used fraudulent accounting practices to deceive
shareholders and investors, such as the collapse of Carillion in 2018.
In the case of (Carillion PLC, 2018), the insolvency was caused by a combination of
mismanagement and corporate abuse. The company was found to have been
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operating an unsustainable business model, with its directors engaging in aggressive

accounting practices and failing to make appropriate disclosures. In addition, the
company was also accused of failing to recognize potential risks and controls in
place to prevent the abuse of the company. Despite the common law and legislative
controls put in place to protect against the abuse of companies, it is clear that these
controls are not enough to prevent such abuse. Therefore, it is important for
companies to have effective corporate governance frameworks in place that go
beyond the common law and legislative controls.
Own perspective
In conclusion, while common law and legislative controls have been put in place to
try to prevent the abuse of companies, they are not enough to prevent all scandals.
Companies should ensure that they have strong corporate governance frameworks
in place and that they are able to identify any potential misconduct or fraud. The
Enron scandal is a sobering reminder of the dangers of corporate abuse and the
need for more stringent legal controls.
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Bibliography
Carillion PLC (higher court july 18, 2018).
Hayes, A. (2022, October 01). www.investopedia.com. Retrieved from Investopedia:

www.google.co.za
Sarbanes - Oxley Act (2022).
Securities Exchange act (1934).
Companies Act of 2008

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BCOM LAW ASSIGNMENT

Aim and Scope.............................................................................................................3

Common law: Understanding.......................................................................................3

Aim and Scope

Common law: Understanding

operating an unsustainable business model, with its directors engaging in aggressive

Hayes, A. (2022, October 01). www.investopedia.com. Retrieved from Investopedia:

Sarbanes - Oxley Act (2022).

Securities Exchange act (1934).

Companies Act of 2008

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