Week 1
What is a company?
A company has a distinct legal personality from its members, allow-
ing it to own property, enter contracts, and sue or be sued in its own
name.
An artificial being, invisible, intangible,
Their capital is divided into shares.
existing only in contemplation of law.
Being a mere creature of law, it pos-
sesses only those properties which the
The existence of companies is entirely dependent on the law, as they
charter of its creation confers upon it, would not exist without legal recognition.
either expressly, or as an incidental to
its very existence. The company's existence is not affected by changes in membership,
ensuring continuity.
Trustees of Darthmouth College v
Woodward (1819) Shareholders' liability is typically limited to their investment, protect-
(US Supreme Court) ing personal assets.
While not human, a company can perform many legal functions of a
natural person.
Differing Terminology
- US Corporation vs. British Company -
In the US, a "corporation" (commonly denoted as In the UK, the term "company" broadly encompasses
"Inc.") refers to a specific type of legal entity that is various types of incorporated entities, including pub-
distinct from other business forms like partnerships or lic and private limited companies.
sole proprietorships.
In the US, "company" is a more generic term that can A "company" in the UK is analogous to a US corpora-
refer to any business entity, including partnerships tion in terms of being a separate legal entity with
and sole proprietorships. limited liability for its members.
In the US, corporations are primarily governed by The UK's company law is more centralized, governed
state laws. This means: primarily by the Companies Act 2006. This act:
• Each state has its own corporate code. • Differentiates between private and public compa-
• Delaware is a popular state for incorporation due to nies.
its business-friendly laws and specialized court sys- • Provides a unified framework for company regula-
tem. tion across the UK.
Corporation (Inc.)
US
Limited Liability Company (LLC)
Public Limited Company (PLC)
Terms for companies UK
Private Limited Company (Ltd)
Aktiengesellschaft (AG)
Germany
Gesellschaft mit beschränkter haftung (GmbH)
, Société Anonyme (SA)
France
Société à responsabilité limité (SARL)
Naamloze Vennootschap (NV)
Netherlands
Besloten vennootschap (BV)
Società per Azioni (SPA)
Italy
Società a Responsabilità Limitata (SRL)
Sociedad Anónima (SA)
Spain
Sociedad Limitada (SL)
Sweden Aktiebolag (AB)
Kabushiki-kaisha (KK)
Japan
Gōdō-kaisha (GK)
Business Forms
Corporations
1.
- US -
Profits and losses pass through to shareholders' personal tax returns. (pass-through taxation)
S Corporation Limited to 100 shareholders.
- US - Only one class of stock allowed.
Shareholders must be US citizens or residents.
Taxed at the corporate level (leading to potential double taxation: corporate profits taxed, then divi-
C Corporation dends taxed at shareholder level).
- US - No limit on the number of shareholders.
(most referred to) Can issue multiple classes of stock.
Preferred by larger businesses and those seeking outside investors.
2. Companies
Typically, smaller businesses. Shares not publicly traded. At least one director required.
E.g., Sweet Treats Bakery Ltd. has 5 friends as owners, each owning 20% of the company. They
make decisions together about running the bakery. If the bakery gets into debt, you only lose
Private the money you put in, not your personal savings or house.
Company
(Ltd) A hybrid US structure combining elements of partnerships and corpora-
Limited Liability tions. Offers flexibility in management (can be member-managed or manag-
- UK -
Company (LLC) er-managed) and taxation. (pass-through taxation by default, but can elect to
be taxed as a corporation)
- US - Members have limited personal liability for business debts.
Multiple members can specialize in different tasks.
Public Larger entities. Shares can be offered/traded on public stock exchanges.
Company Minimum of two directors and a qualified company secretary.
(PLC) E.g., Tesco PLC has millions of shareholders. Anyone can buy shares in Tesco on the stock market.
- UK - If you buy shares, you own a tiny part of Tesco. Tesco can raise money by selling more shares
(most referred to) to the public.
2. Partnerships
, A traditional business form where partners share profits, equal responsibility and liabilities.
(General) Partners are personally liable for business debts and obligations. (pass-through taxation)
Partnership E.g., Tom and Jerry, who start a dog-walking business. They both put in money and effort. They
share all profits and losses equally. If a dog they're walking bites someone and their business
- UK & US -
gets sued, both Tom and Jerry could lose their personal savings to pay for it (as they are per-
sonally responsible).
Includes both general partners (with unlimited liability) and limited partners (liability restrict-
Limited ed to their investment). Limited partners (with limited liability) don't participate in manage-
Partnership ment.
(LP) E.g., Imagine a small movie production company. There's a famous director who runs things
(general partner) and some investors who just put in money (limited partners). The director
- UK & US -
(general partner) makes all decisions and has unlimited liability. The investors (limited part-
ners) can only lose what they invested.
Limited Offers limited personal liability for all partners while allowing them to participate in manage-
Liability ment. Common in professional services. (e.g., law firms, accounting firms)
Partnership
E.g., a group of doctors starting a medical practice together. All doctors are partners and can
(LLP) make decisions. If one doctor makes a mistake, only that doctor is personally liable, not the
- UK & US - whole practice.
Sole Proprietorship
3.
- UK & US -
Known as a sole trader in the UK, this is a business owned and operated by one individual who bears unlimited
personal liability for business debts.
• In both US and UK, this is the simplest form of business. This structure is popular among small business owners,
individual contractors, and consultants.
• The owner has complete control (operating the business under their own name or a trade name) but also bears
all liabilities.
• No separation between personal and business assets. (Business income reported on personal tax return)
• Must obtain the necessary licenses and permits
E.g., Mrs. Smith bakes and sells cookies from her home. Mrs. Smith owns and runs the entire business herself. All prof-
its go directly to her, but she's also responsible for all debts. If her business fails, she could lose her personal sav-
ings or even her house.
E.g., In France, a sole proprietorship is known as entreprise individuelle or enterprise individuelle à responsabilité lim-
itée (EIRL). Registration is required with the appropriate authority based on the business type (e.g., Chamber of
Commerce for traders). The business is not a separate legal entity from the owner. There is no maximum turnover
limit, unlike micro-enterprises. Sole proprietors can hire employees. VAT registration is required if turnover exceeds
certain thresholds.
What is company law/corporate law?
Company law is a branch of private law, the body of legal principles governing the creation, operation, and
dissolution of companies. It provides the framework within which businesses operate, defining their rights,
obligations, and relationships with stakeholders.
Companies exist as "creatures of law." Their existence is sanctioned by common Acts of Parliament or similar
legislative bodies.
Allows companies to bear rights and obligations, own assets, enter contracts, and engage in
Role of 1.
legal proceedings.
Company
Law Reduces organizational costs and addresses agency problems within the company structure.
2.
, 3. Establishes who can represent the company and make various corporate decisions.
Jurisdictional Nuances
Most countries have their own company laws
National Level
E.g., UK, France, Germany, Netherlands.
Some states have their own corporate codes.
State Level E.g., California Corporation Code, Texas Business Corporation Act.
- US - E.g., Delaware is renowned for its corporate-friendly laws and specialized court system,
making it a popular choice for company incorporation.
Company Law Directives harmonize certain aspects of company
European law across member states.
Union
E.g., Directive 2017/1132 on certain aspects of company law.
Supranational
United States While company law is primarily state-based, federal securities
Level
Federal Level regulations create a degree of harmonization across states.
International
UN Guiding Principles on Business and Human Rights (soft law)
Guidelines
Other Influential
Insolvency law, public law, and contract law often intersect with company law.
Legal Areas
Court decisions shape corporate behavior and interpret legislation.
Case Law E.g., Common law jurisdictions, such as the UK and US, rely heavily on case law and the
principle of stare decisis (meaning to stand by things decided)
Soft law providing principles and best practices.
Corporate Refers to the internal system by which companies are directed and controlled.
Governance Emphasizes transparency and stakeholder relationships.
(codes) Comply-or-Explain principle for listed companies in many jurisdictions. (allowing com-
panies to deviate from the rules with explanation)
Companies are governed by two primary sources:
• Company law
• Corporate charter (fundamental contract governing the company)
Mandatory Rules
Cannot be changed by the corporate charter or any corporate actor.
Provide a non-negotiable framework for company operations.
1. E.g., Section 14 of the UK Companies Act 2006 (UK CA 2006) requests the regis-
tration of the documents of a UK company resulting in the certification that
the company is incorporated and minimum capital requirements for EU public
Types of Corporate companies
Rules
Default Rules
Allow founders and other company actors to organize the company accord-
2. ing to their preferences.
Apply only if companies do not specify otherwise in their charter.
Provide flexibility while ensuring a basic structure.
What is a company?
A company has a distinct legal personality from its members, allow-
ing it to own property, enter contracts, and sue or be sued in its own
name.
An artificial being, invisible, intangible,
Their capital is divided into shares.
existing only in contemplation of law.
Being a mere creature of law, it pos-
sesses only those properties which the
The existence of companies is entirely dependent on the law, as they
charter of its creation confers upon it, would not exist without legal recognition.
either expressly, or as an incidental to
its very existence. The company's existence is not affected by changes in membership,
ensuring continuity.
Trustees of Darthmouth College v
Woodward (1819) Shareholders' liability is typically limited to their investment, protect-
(US Supreme Court) ing personal assets.
While not human, a company can perform many legal functions of a
natural person.
Differing Terminology
- US Corporation vs. British Company -
In the US, a "corporation" (commonly denoted as In the UK, the term "company" broadly encompasses
"Inc.") refers to a specific type of legal entity that is various types of incorporated entities, including pub-
distinct from other business forms like partnerships or lic and private limited companies.
sole proprietorships.
In the US, "company" is a more generic term that can A "company" in the UK is analogous to a US corpora-
refer to any business entity, including partnerships tion in terms of being a separate legal entity with
and sole proprietorships. limited liability for its members.
In the US, corporations are primarily governed by The UK's company law is more centralized, governed
state laws. This means: primarily by the Companies Act 2006. This act:
• Each state has its own corporate code. • Differentiates between private and public compa-
• Delaware is a popular state for incorporation due to nies.
its business-friendly laws and specialized court sys- • Provides a unified framework for company regula-
tem. tion across the UK.
Corporation (Inc.)
US
Limited Liability Company (LLC)
Public Limited Company (PLC)
Terms for companies UK
Private Limited Company (Ltd)
Aktiengesellschaft (AG)
Germany
Gesellschaft mit beschränkter haftung (GmbH)
, Société Anonyme (SA)
France
Société à responsabilité limité (SARL)
Naamloze Vennootschap (NV)
Netherlands
Besloten vennootschap (BV)
Società per Azioni (SPA)
Italy
Società a Responsabilità Limitata (SRL)
Sociedad Anónima (SA)
Spain
Sociedad Limitada (SL)
Sweden Aktiebolag (AB)
Kabushiki-kaisha (KK)
Japan
Gōdō-kaisha (GK)
Business Forms
Corporations
1.
- US -
Profits and losses pass through to shareholders' personal tax returns. (pass-through taxation)
S Corporation Limited to 100 shareholders.
- US - Only one class of stock allowed.
Shareholders must be US citizens or residents.
Taxed at the corporate level (leading to potential double taxation: corporate profits taxed, then divi-
C Corporation dends taxed at shareholder level).
- US - No limit on the number of shareholders.
(most referred to) Can issue multiple classes of stock.
Preferred by larger businesses and those seeking outside investors.
2. Companies
Typically, smaller businesses. Shares not publicly traded. At least one director required.
E.g., Sweet Treats Bakery Ltd. has 5 friends as owners, each owning 20% of the company. They
make decisions together about running the bakery. If the bakery gets into debt, you only lose
Private the money you put in, not your personal savings or house.
Company
(Ltd) A hybrid US structure combining elements of partnerships and corpora-
Limited Liability tions. Offers flexibility in management (can be member-managed or manag-
- UK -
Company (LLC) er-managed) and taxation. (pass-through taxation by default, but can elect to
be taxed as a corporation)
- US - Members have limited personal liability for business debts.
Multiple members can specialize in different tasks.
Public Larger entities. Shares can be offered/traded on public stock exchanges.
Company Minimum of two directors and a qualified company secretary.
(PLC) E.g., Tesco PLC has millions of shareholders. Anyone can buy shares in Tesco on the stock market.
- UK - If you buy shares, you own a tiny part of Tesco. Tesco can raise money by selling more shares
(most referred to) to the public.
2. Partnerships
, A traditional business form where partners share profits, equal responsibility and liabilities.
(General) Partners are personally liable for business debts and obligations. (pass-through taxation)
Partnership E.g., Tom and Jerry, who start a dog-walking business. They both put in money and effort. They
share all profits and losses equally. If a dog they're walking bites someone and their business
- UK & US -
gets sued, both Tom and Jerry could lose their personal savings to pay for it (as they are per-
sonally responsible).
Includes both general partners (with unlimited liability) and limited partners (liability restrict-
Limited ed to their investment). Limited partners (with limited liability) don't participate in manage-
Partnership ment.
(LP) E.g., Imagine a small movie production company. There's a famous director who runs things
(general partner) and some investors who just put in money (limited partners). The director
- UK & US -
(general partner) makes all decisions and has unlimited liability. The investors (limited part-
ners) can only lose what they invested.
Limited Offers limited personal liability for all partners while allowing them to participate in manage-
Liability ment. Common in professional services. (e.g., law firms, accounting firms)
Partnership
E.g., a group of doctors starting a medical practice together. All doctors are partners and can
(LLP) make decisions. If one doctor makes a mistake, only that doctor is personally liable, not the
- UK & US - whole practice.
Sole Proprietorship
3.
- UK & US -
Known as a sole trader in the UK, this is a business owned and operated by one individual who bears unlimited
personal liability for business debts.
• In both US and UK, this is the simplest form of business. This structure is popular among small business owners,
individual contractors, and consultants.
• The owner has complete control (operating the business under their own name or a trade name) but also bears
all liabilities.
• No separation between personal and business assets. (Business income reported on personal tax return)
• Must obtain the necessary licenses and permits
E.g., Mrs. Smith bakes and sells cookies from her home. Mrs. Smith owns and runs the entire business herself. All prof-
its go directly to her, but she's also responsible for all debts. If her business fails, she could lose her personal sav-
ings or even her house.
E.g., In France, a sole proprietorship is known as entreprise individuelle or enterprise individuelle à responsabilité lim-
itée (EIRL). Registration is required with the appropriate authority based on the business type (e.g., Chamber of
Commerce for traders). The business is not a separate legal entity from the owner. There is no maximum turnover
limit, unlike micro-enterprises. Sole proprietors can hire employees. VAT registration is required if turnover exceeds
certain thresholds.
What is company law/corporate law?
Company law is a branch of private law, the body of legal principles governing the creation, operation, and
dissolution of companies. It provides the framework within which businesses operate, defining their rights,
obligations, and relationships with stakeholders.
Companies exist as "creatures of law." Their existence is sanctioned by common Acts of Parliament or similar
legislative bodies.
Allows companies to bear rights and obligations, own assets, enter contracts, and engage in
Role of 1.
legal proceedings.
Company
Law Reduces organizational costs and addresses agency problems within the company structure.
2.
, 3. Establishes who can represent the company and make various corporate decisions.
Jurisdictional Nuances
Most countries have their own company laws
National Level
E.g., UK, France, Germany, Netherlands.
Some states have their own corporate codes.
State Level E.g., California Corporation Code, Texas Business Corporation Act.
- US - E.g., Delaware is renowned for its corporate-friendly laws and specialized court system,
making it a popular choice for company incorporation.
Company Law Directives harmonize certain aspects of company
European law across member states.
Union
E.g., Directive 2017/1132 on certain aspects of company law.
Supranational
United States While company law is primarily state-based, federal securities
Level
Federal Level regulations create a degree of harmonization across states.
International
UN Guiding Principles on Business and Human Rights (soft law)
Guidelines
Other Influential
Insolvency law, public law, and contract law often intersect with company law.
Legal Areas
Court decisions shape corporate behavior and interpret legislation.
Case Law E.g., Common law jurisdictions, such as the UK and US, rely heavily on case law and the
principle of stare decisis (meaning to stand by things decided)
Soft law providing principles and best practices.
Corporate Refers to the internal system by which companies are directed and controlled.
Governance Emphasizes transparency and stakeholder relationships.
(codes) Comply-or-Explain principle for listed companies in many jurisdictions. (allowing com-
panies to deviate from the rules with explanation)
Companies are governed by two primary sources:
• Company law
• Corporate charter (fundamental contract governing the company)
Mandatory Rules
Cannot be changed by the corporate charter or any corporate actor.
Provide a non-negotiable framework for company operations.
1. E.g., Section 14 of the UK Companies Act 2006 (UK CA 2006) requests the regis-
tration of the documents of a UK company resulting in the certification that
the company is incorporated and minimum capital requirements for EU public
Types of Corporate companies
Rules
Default Rules
Allow founders and other company actors to organize the company accord-
2. ing to their preferences.
Apply only if companies do not specify otherwise in their charter.
Provide flexibility while ensuring a basic structure.
