chapter 11

Question 1

unincorporated company

Answer 1

composed of natural persons and has no separate legal identity. these natural persons are the company. they have personal liability.

Question 2

incorporated company

Answer 2

composed of shares owned by natural or legal persons but has its own legal identity. people or other companies may own an incorporated company by obtaining shares. the company has a legal identity of its own.

Question 3

personal liability

Answer 3

means that the individuals of which the company is composed are unrestrictedly liable for any company debts.

Question 4

sole proprietorship

Answer 4

a legal form of an unincorporated business that is composed of one individual who is personally liable for the company’s debts. it is easy to set up because there are few prerequisites for registration. it is not considered a separate legal entity and thus all income is considered income tax. the owner is fully liable for the business and all its debts.

Question 5

partnership

Answer 5

a legal form of an unincorporated business that is composed of more than one individual who are personally liable for the company’s debts. companies can combine their strengths in terms of funding, talent, and capabilities.

Question 6

general partnership/Hapmyung Hoesa

Answer 6

legal form used for medium and small companies in which the partners play a very active role in the organisation of the company.

Question 7

limited partnership/Hapja Hoesa

Answer 7

the same rules apply as in a general partnership, but next to normal partners, there may be partners with limited liability. these are not involved with management but merely contribute financially.

Question 8

professional partnership

Answer 8

partnerships for professionals, eg. lawyers, medical experts, etc.

Question 9

commercial partnership

Answer 9

partnership for commercial activities.

Question 10

private limited company/limited liability company

Answer 10

shares are privately owned by a particular group of shareholders.

Question 11

public limited company

Answer 11

company that is financed by public means. used for bigger companies. the shareholders could be anyone or any organisation. it may sell shares on the stock exchange.

Question 12

husband-and-wife-sole proprietorship

Answer 12

co-owning a business.

Question 13

Yuhan Hoesa

Answer 13

in south korea, it is a hybrid company form that is between partnership and a limited company. it has characteristics of a partnership, but the partners are limitedly liable. the shares of partners cannot be transfered unless 75% of other partners agrees. max. 50 partners.

Question 14

Sociedad de Responsabilidad Limitada (S.R.L.)

Answer 14

shareholders are not necessarily involved in the daily affairs of the company. they appoint a management board, which consists of at least 1 director and max 12 board members. there are legal restraints to transfer shares between shareholders. it is suitable for small and medium enterprises or family businesses. requirements are not as complex and minimum capital is lower, so it is used by foreign entrepreneurs.

Question 15

Chusik Hoesa

Answer 15

clear distinction between management and ownership. the shareholders are not involved in day-to-day decision-making processes and have appointed a management board on their behalf to do so.

Question 16

‘articles of incorporation’

Answer 16

founding document used in Chusik Hoesa in which general ideas, principles, and rules are written down. the exact relationship between shareholders and management board is specified.

Question 17

‘ordinary meetings’

Answer 17

shareholders adopt the annual financial statement and make decisions about their share, such as payment of dividend or increase of the amount of shares.

Question 18

‘extraordinary meetings’

Answer 18

shareholders are authorised to discuss whatever is in the articles of cooperation. this might lead to an amendment to these articles. these decisions do not relate to day-to-day functioning, but rather the more general direction.

Question 19

statutory auditor

Answer 19

an auditor that checks the performance of the management and reports to the shareholders. he may attend board meetings and request that the management reports to the auditor about certain decisions. it is required by Korean law to appoint at least one to each public limited company.

Question 20

Spanish Sociedad Anónima

Answer 20

needs a minimum capital of 60,000 euros. however, only 25% of this is needed at the moment of incorporation. shareholders exercise power through ordinary and extraordinary meetings. at least 25% should participate in voting. for decisions regarding an amendment to the articles, 50% should vote (2/3 agree).

Question 21

foundation

Answer 21

a legal form to pursue a social goal. the concept has different meanings throughout the world.

Question 22

company limited by guarantee

Answer 22

a variation of a limited company. shareholders do not necessarily need to invest in the form of stocks, but instead promise to be liable for a certain amount of money in case of bankruptcy. it is mostly used for companies outside the trading profession and non-profit organisations.

Question 23

Societas Europeae (SE)

Answer 23

the European legislature created the possibility to establish a European public limited company. companies in different legal systems can run their affairs under the wings of one single European company form.

Question 24

joint venture

Answer 24

a temporary cooperation between companies to share a certain expertise or resources in the expectation of joint profit. it can be used for research or doing business abroad. companies could use a legal form, most likely a limited company in which companies own the shares. it is not always necessary to create a new legal entity.

Question 25

shareholder

Answer 25

can be a natural person, another company, bank, state, or investment fund. thus, companies can own companies.

Question 26

holding company

Answer 26

a company owning more companies.

Question 27

regulatory competition

Question 28

concern

Answer 28

a chain of companies that relate to one another in terms of ownership.

Question 29

mailbox companies

Answer 29

companies who are registered in a country but do not necessarily employ business activities in that country. eg. the Netherlands is considered a tax haven for multinationals.

Question 30

overseas company

Answer 30

when a company sets up an establishment in another country.

Question 31

off-shore company

Answer 31

limit your business activities by doing business without a permanent physical establishment, but be represented in a country to facilitate business.