Corporate Law
Lecture 1 – Introduction to Corporate Law
Company v Corporation; Differences *
o UK; company (public or private)
o US; corporation
o EU; undertaking (public or private)
o NL; corporation (open or closed)
o Germany; corporation (private limited/public stock)
Corporate Law is a formation of business forms (companies), legal operation of business for MS
(functions, rights and duties of key actors). *
It’s also a body of law that regulates companies and the environment in which they move (capital
markets); it encompasses different business forms and their characteristics, as well as legal rights,
duties and liabilities. *
Dominant jurisdictions for developing Corporate Law; *
- Germany; Civil law tradition and MS (EU), NL; similar
- UK; Common law tradition and MS (EU) (UKCA 2006 is the basic act in UK)
- US: Common law tradition (each US State has its own statute)
The concept of “partnership” and “company”; laid down and defined in each relevant jurisdiction
i. Legislation – National
Relevance of national legislation on corporations;
o Registered companies can only be created because national legislation permits them to be
created (legal status and legal consequences are established by law)
o Primary source on how companies are operated (legal actions of a company are determined
by law)
ii. Legislation – Relationship national & EU Law
How does EU Law influence MS national rules of Corporate Law?
o In case of membership of EU; several Directives pursuant to Treaty of Rome are relevant *
o Objectives of;
Equality
, Freedom of establishment of businesses throughout Community
Harmonization of domestic company laws
Business Forms *
To ‘be in business’, there is a combination of three aspects to be applied;
a. Capital
First key question to evaluation business form; does it facilitate investment in the business?
b. Risk mitigation
No form is without risk, second key question; does it mitigate risks?
c. Clear organizational structure
Where money, risk and people meet there is a potential for disagreement, third key question;
does the form provide a clear structure?
Businesses come in many forms…
Sole Proprietorship or Sole Tradership *
The sole proprietor is the owner and the controller of the property
No formalities (no license or permit); in some jurisdictions: registration of the name of your
sole tradership
Partnership (General or Limited) *
People doing business together on the basis of an agreement between each other
The partners are the controllers and owners
Some formalities attached before start; in chosen jurisdictions: this form is regulated
US; “independent entity”
i. General Partnership (GP)
- Each partner participates in business activities, have their own “freedom to a certain extent”
- General Partners: each can make business decisions
- Each have personal liability for business debts
ii. Limited Partnership (LP)
- Special form of General partnership
- Not every partner participates; there can be “silent partners” (without a say)
- There are general partners too and those have a say; similar to those in a GP
iii. Limited Liability Partnership (LLP)
- Law firms, accountancy firms,…
- Partners have limited liability
Company or Corporation
Incorporated
Special formalities fulfilled
Resulting in legal consequences
Certain key role actors;
- director (requirement to appoint directors based on (corporate) law)
- shareholder (investor who has put money in corporation and has taken share(s) in return)
, Lecture 2 – The Company and Its Core Characteristics
The Limitations of Sole Trading / Partnerships
i. Personal Liability; personal wealth and lifestyle would be threatened if the business fails
- If the business’ assets wouldn’t be enough to satisfy the creditors/claimants
- Why? If the business’ assets are insufficient; claims could be satisfied against his personal
assets (house, car,…)
- Barriers to raising finance for the business (priority when insolvency)
- Bank interested in having security interests in the business’ assets - a secured creditor (paid
first)
ii. Unknown Liabilities; who would be subject to possible lawsuits?
iii. Strategy; personal liability – risk averse decisions
iv. Continuation; problems if/when trader dies; inheritance?
Can your personal liability be protected through a Contract?
In each and every contract one can require other party to agree to have recourse to the business’
assets only, not to his personal assets.
- But; will other parties agree to this?
- And; they are unfair contract terms (sometimes exclusion of liability is not possible)
- Insurance covers (third party claims); however costs can be very high
Having a (Legal) Personality; Introduction
Natural Persons
Can undertake actions with legal effect;
- Meaning; enter into legal relationships; contract
- Prerequisite; power to contract, age of majority,…
Have ‘legal standing’ in court;
- Can file a claim; admissible as a claimant
- Can be filed a claim against
A Company *
The five core characteristics of a company are; *
Has legal personality
Lecture 1 – Introduction to Corporate Law
Company v Corporation; Differences *
o UK; company (public or private)
o US; corporation
o EU; undertaking (public or private)
o NL; corporation (open or closed)
o Germany; corporation (private limited/public stock)
Corporate Law is a formation of business forms (companies), legal operation of business for MS
(functions, rights and duties of key actors). *
It’s also a body of law that regulates companies and the environment in which they move (capital
markets); it encompasses different business forms and their characteristics, as well as legal rights,
duties and liabilities. *
Dominant jurisdictions for developing Corporate Law; *
- Germany; Civil law tradition and MS (EU), NL; similar
- UK; Common law tradition and MS (EU) (UKCA 2006 is the basic act in UK)
- US: Common law tradition (each US State has its own statute)
The concept of “partnership” and “company”; laid down and defined in each relevant jurisdiction
i. Legislation – National
Relevance of national legislation on corporations;
o Registered companies can only be created because national legislation permits them to be
created (legal status and legal consequences are established by law)
o Primary source on how companies are operated (legal actions of a company are determined
by law)
ii. Legislation – Relationship national & EU Law
How does EU Law influence MS national rules of Corporate Law?
o In case of membership of EU; several Directives pursuant to Treaty of Rome are relevant *
o Objectives of;
Equality
, Freedom of establishment of businesses throughout Community
Harmonization of domestic company laws
Business Forms *
To ‘be in business’, there is a combination of three aspects to be applied;
a. Capital
First key question to evaluation business form; does it facilitate investment in the business?
b. Risk mitigation
No form is without risk, second key question; does it mitigate risks?
c. Clear organizational structure
Where money, risk and people meet there is a potential for disagreement, third key question;
does the form provide a clear structure?
Businesses come in many forms…
Sole Proprietorship or Sole Tradership *
The sole proprietor is the owner and the controller of the property
No formalities (no license or permit); in some jurisdictions: registration of the name of your
sole tradership
Partnership (General or Limited) *
People doing business together on the basis of an agreement between each other
The partners are the controllers and owners
Some formalities attached before start; in chosen jurisdictions: this form is regulated
US; “independent entity”
i. General Partnership (GP)
- Each partner participates in business activities, have their own “freedom to a certain extent”
- General Partners: each can make business decisions
- Each have personal liability for business debts
ii. Limited Partnership (LP)
- Special form of General partnership
- Not every partner participates; there can be “silent partners” (without a say)
- There are general partners too and those have a say; similar to those in a GP
iii. Limited Liability Partnership (LLP)
- Law firms, accountancy firms,…
- Partners have limited liability
Company or Corporation
Incorporated
Special formalities fulfilled
Resulting in legal consequences
Certain key role actors;
- director (requirement to appoint directors based on (corporate) law)
- shareholder (investor who has put money in corporation and has taken share(s) in return)
, Lecture 2 – The Company and Its Core Characteristics
The Limitations of Sole Trading / Partnerships
i. Personal Liability; personal wealth and lifestyle would be threatened if the business fails
- If the business’ assets wouldn’t be enough to satisfy the creditors/claimants
- Why? If the business’ assets are insufficient; claims could be satisfied against his personal
assets (house, car,…)
- Barriers to raising finance for the business (priority when insolvency)
- Bank interested in having security interests in the business’ assets - a secured creditor (paid
first)
ii. Unknown Liabilities; who would be subject to possible lawsuits?
iii. Strategy; personal liability – risk averse decisions
iv. Continuation; problems if/when trader dies; inheritance?
Can your personal liability be protected through a Contract?
In each and every contract one can require other party to agree to have recourse to the business’
assets only, not to his personal assets.
- But; will other parties agree to this?
- And; they are unfair contract terms (sometimes exclusion of liability is not possible)
- Insurance covers (third party claims); however costs can be very high
Having a (Legal) Personality; Introduction
Natural Persons
Can undertake actions with legal effect;
- Meaning; enter into legal relationships; contract
- Prerequisite; power to contract, age of majority,…
Have ‘legal standing’ in court;
- Can file a claim; admissible as a claimant
- Can be filed a claim against
A Company *
The five core characteristics of a company are; *
Has legal personality
