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81 Cards in this Set
- Front
- Back
- 3rd side (hint)
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Name 3 of the first International Trade organisations |
- Western world, Colonies - East Indian Co. - Dutch VOC |
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Why is industrialisation an important era for the development of corporate law? |
Because the demand of mass production required the start up of many business operations. |
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Explain the difference between Corporate law and Business law |
- Corporate law is concerned with the formation of business forms. Such as the functions and the rights and duties of key actors. - Business law is concerned with all the areas that relate to how to do business. Such as employment law and tax law. |
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What is the relevance of national legislation on corporations? |
Registered companies can only be created because national legislation permits them to be created. |
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Name the main primary source on how companies are operated? |
National legislation |
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What is hard law? |
Hard law is a rule of law which is legally binding |
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How does EU Law influence national rules of Corporate Law? And what are their objectives? |
- There are several directives pursuant to the Treaty of Rome which are relevant to the MS. - The EU has three main objectives: - Equality - Freedom of establishment of businesses throughout Community - Harmonisation of domestic company laws |
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Name 3 distinct types of businesses |
- Sole proprietorship/tradership. - Partnership - Company |
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Name 4 characteristics of a Sole proprietorship/tradership |
- There are no formalities - There are no assigned roles to persons - The controller is you - The owner (of property) is you |
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Name 4 characteristics of a partnership |
- There are some formalities attached before the start of the partnership - No assigned roles to persons, only agreements between partners - The controller is you and your partner - The owner (of property) is you and your partner |
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Name the 2 different types of partnerships |
- General Partnership - Limited Partnership |
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Explain what a General Partnership is |
Each partner participates in business activities and they have their own freedom (to a certain extent) |
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Explain what a Limited Partnership is |
A limited partnership is a special form of partnership in which not every partner participates in business activities, they are invisible partners. |
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Name 3 characteristics of a Corporation |
- It is incorporated - Special formalities are fulfilled which result in legal consequences - There are two key actors: director and shareholder. |
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What is a shareholder? |
A shareholder is an investor who has put money in the corporation and has taken shares in return. |
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What case established the character of legal relationship? (US state law) |
Latta v. Kilbourn |
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What is a fiduciary relationship? (In a common law system) |
A fiduciary relationship is a trust or loyalty relationship |
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What is the corporate seat? |
The corporate seat is the state where the company was established. |
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What are the legal advantages of a Sole tradership? |
- You're the sole decision maker - You're the sole owner of assets - There are few formalities |
There are 3 advantages which are in the L2 pp |
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Name disadvantages of a Sole tradership |
- No legal personality - No entity shielding - Personal liability |
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Name a legal advantage of a partnership |
- Shared responsibilities - Few formalities |
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Name the legal disadvantages of a partnership |
- No legal personality - Weak entity shielding - Personal liabilities |
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Name a practical advantage of a Sole tradership |
The start up is easy |
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Name a practical disadventage of a Sole tradership |
It is difficult to maintain |
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Name a legal advantages of a company |
- It has a legal personality - Limited liability for shareholder |
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What are the consqeuences of legal personality? |
- External parties can regard the company or legal persons as a separate entity - Carries it's own debts and obligations - risks only relate to the company (entity shielding) |
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What is entity shielding? |
It refers to rules that protect a company's assets from the personal creditors of its owner |
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Explain weak entity shielding |
The company creditors have priority over personal creditors |
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Explain strong entity shielding |
Liquidation protection effected for owners |
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What are the benefits of entity shielding? |
- Lower creditor monitoring costs - Going-concern value protected - Capital accumulation (diversification of investors) - Transferable shares |
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Does a Sole tradership have entity shielding? |
No |
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Does a partnership have entity shielding? |
It has weak entity shielding |
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How is a legal personality operated? |
It is operated through delegated management |
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Name 4 elements in the rule that provides how to register a company (according to the UK Companies Act) |
- An application for Registration - A statement of Capital and Initial Shareholdings - A statement of Proposed Officers - A statement of Compliance |
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When and by whom can de Certificate of Incorporation be revoked? |
The Certificate of Incorporation can be revoked by the application of the Attorney General in case of unlawful objectives. |
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Name 5 theories on corporations |
- Legal theory - Fiction theory - Real Entity theory - Concession theory - Contract theory |
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Explain the Legal Theory |
The industrial revolution in Europe and America coupled with increased legal facilities in some of the world's major legal systems fuelled a jurisdiction interest in the phenomenon of the corporation. |
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Explain the Fiction Theory |
A corporation has no mind, it only exists in law. |
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Explain the Real Entity Theory |
A corporation is a social fact, it's a living organism. (Said by: Gierke) |
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Explain the Concession Theory |
There is state involvement, a corporations legal power derives from the state. |
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Explain the Contract Theory |
There is no reason for the state to intervene with corporations. |
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Do all the decisions made come from the same source? |
No, different decision types could be given to different organs or persons. |
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Name 2 types of decision rights |
- Instruction right - Veto / approval right |
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What determines the position/number of directors in the company? |
Statutory provisions or case law and the company's underlying constitutional acts. |
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What do directors do? |
They manage the company |
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What is the relationship between directors and shareholders? |
This partially depends on the size of the company. Shareholders shall not manage the company; they are the company's members and they own the company. |
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Why should we understand what agency is? |
Because it is essential to the existence and operation of a company. A company cannot act by itself, for this you have legal persons. It can only function via agents which make use of agency relationships. |
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Define agency |
A consensual relationship created by contract or by law where one party, the principal, grants authority for another party, the agent, to act on behalf of anders under the control of the principal to deal with a third party. |
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Name 3 characteristics of Agency |
- Relationship - One person acts on behalf of anders under control of the other - Authority |
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What is a legal consequence of Agency |
An agency relationship is fiduciary in nature, and the actions and words of an agent exchanged with a third party bind the principal. |
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Why should the agents actual authority be limited? |
To make sure the agent creates only the legal relationships that the principal envisages to be created. |
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How do you limit an agents authority? |
- Actively: corporation specifically instructs the agent what she may or may not do. - Automatically: by the corporation's constitutional documents or by other norms deriving from laws. |
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What duties does an agent owe to the principal? |
- To act in the principals best interests and within the authority of the agency - To discharge his duties with due diligence - To avoid conflict of interest. |
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Who can act as an agent? |
- Persons who represent the company - Any person who is instructed by the company to do so |
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Is the director an agent? |
He represents the company but is a special type of agent. |
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Could other persons but the director be an agent? |
Yes. |
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What is the function of a shareholder at the initial stage (when starting a company)? |
capital - Contribute to share capital- receive dividend in return - receive dividend in return |
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What is the function of a shareholder at a developed stage? |
- Take shareholder resolutions |
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What is a duty of a shareholder at the initial stage? |
- Contribute to share capital |
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What is a right of a shareholder at the initial stage? |
- to receive dividend |
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What are the duties of shareholder at developed stage? |
- To take resolutions |
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What is a right of the shareholder at developed stage? |
The right to vote during shareholder meetings. |
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How does a shareholder take resolutions? |
In a shareholder meeting where they may vote collectively |
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How can you find out in a country which exact rights and duties a shareholder has? |
It is laid down in the constitution and statutes . |
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What was the traditional view on enforcing the right to dividend? |
You could enforce the right because directors of a company must consider the companies interest first and pay the shareholders first before anyone else. |
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What is the changed view on enforcing the right to dividend? |
Company's director must take into account all stakeholders interests |
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What is a stakeholder? |
A stakeholder is everyone who interacts with the company or is affected by it. |
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What is the difference between shareholders and the bank? |
- A shareholder is willing to take risks - Banks want to ensure that it will be paid back and asks for repayment in installments. |
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Who is in charge of actual decision-making? |
The management is delegated, but some management decisions require shareholder resolutions in advance. You can check which ones in the statute. |
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What is GMS? |
General meeting of shareholders. |
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Name 2 important shareholder resolutions |
- To appoint and remove directors - To amend articles of association |
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Why is power delegated to the board of directors? |
Because; - practically: concentration of authority - shareholders do not have any expertise in managing, directors do. |
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What is a problem with dispersed ownership? |
- ownership is splintered which may cause problems because every shareholder has different interests. |
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Who can be a shareholder? |
- Any person - Parent company |
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How does GMS voting work? |
Democratically |
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Name the three types of majority votes |
- Ordinary majority - Special or super majority - Unanimity |
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Does every share and attached vote weigh the same? |
That depends on whether the constitution of the company uses proportionate weight or assigned weight. |
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Why are the directors duties codified? |
Because; - it lays down rules imposing obligations on directors which sets limits within which they must exercise their power. - These formalised duties are easier to understand. - The rules on duties provide guidance for directors. |
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To whom are the directors duties owed? |
To both the shareholders and stakeholders. |
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What happens when a director breaches his duties? |
- The company may bring a claim against the director - the contracts entered into by the director may become voidable - Shareholders have the right to remove a director by ordinary resolution |
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Name 3 reasons for the dismissal/removal/termination of the director |
- Voluntarily - Lapse of time - Forced removal |
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