Chapter 5: basics of commercial/ corporate law

Question 1

which types of business organisations (:summa divisio) are there?

Answer 1

1) a natural person engaging in an economic activity business (=Sole trader/ Sole proprietor/ enterpreneur pur Sang)
2) a legal person engaging in an economic acitivity

Question 2

variables of a natural persosn engaging in an economic activity/ business

Answer 2

• entrepreneur is the ‘owner’ of the assets belonging to the business,; no legal distinction between private and business capital
• unlimited liability: entrepreneur bears all the risks

Question 3

variable of a legal person engaging in an economic activity/ business

Answer 3

• legal persson is the owner of teh assets belonging to the business; legal distinction between private and business capital
• unlimited or limited liability

Question 4

3 subtypes of a company business organisation

Answer 4

1) partnership or personal company: typically company without legal personality
2) company with legal personality (=corporation), but with unlimited liability of the shareholders
3) company with legal personality (=corporation), with limited liablility of the shareholders

Question 5

what is a “corporation” ?

Answer 5

A company with legal personality separate and distinct form its shareholders; exists independently of its shareholders and depends on capital resources.

Question 6

Unlimited liability

Answer 6

creditors of the company can seize the assets of the company; yet they can also - in a second instance - seize the personal assets of teh shareholders (who are persosnally liable for the debts of the company)

Question 7

limited liability

Answer 7

“take it one tep further”:creditors of the company can seize the assets of the company ; and they cannot seize the personal assets of the shareholders (who are NOT personally liable for the debts of the company)

Question 8

intuitu pecuniae

Answer 8

large number of shareholders + free transfer of shares to outsiders
(at public companies)

Question 9

intuitu personae

Answer 9

limited number of shareholders + transefer of shares to outsiders is barred or restriced

Question 10

subsidiarey

Answer 10

corporation owned/ controlled by another legal entity (parent company)

Question 11

branch or division

Answer 11

• it is simply an office located at a place other than the headquarters of the company
• has no separate legal personality

Question 12

what are the main obligations for a business organisation?

Answer 12

• register
• open a bank account
• take out insurances
• comply with social security law
• to register VAT authorities and to issue invoices
• keep (and publish) annual accounts
• pay income tax

(must mention id numbers of each on official docs)

Question 13

social security law

Answer 13

part of public law, because it governs legal relations between private persons and the government as such; however, important for companies and private persons!

• it establishes public social security system

Question 14

what is tax law?

Answer 14

part of public law, because it governs legal relations between private persons and the government as such however, important for companies and private persons!

• deals with taxes

Question 15

taxing power granted and limited by consitution and constitutional rights, namely

Answer 15

• legality: only the law may impose tax obligations and legislative act required
• equality: prohibits arbitrary taxation without reasonable foundation.
• balance of powers: ..

Question 16

What are the goals of tax law?

Answer 16

• Revenue; raising revenues through tax- transger of income or wealth to the state
• Redistribution; of income and wealth between the rich and poor
• Regulation; steering behavoir, ‘nudging’

Question 17

who pays VAT?

Answer 17

• only the final consumer pays the VAT (“consumption tax”)

- customers, however, can usually deduct the VAT paid to their suppliers from the VAT charged to their own customers

Question 18

value added tax

Answer 18

VAT= general transaction tax, as regards any supply of goods or services, is indirect tax of EU tax law.

Question 19

divided liability

Answer 19

refers to situations where more than one person is responsible for the plaintiff’s injuries

Question 20

solidary liability

Answer 20

refers to liability of any one debtor among two or more joint debtors to pay the entire debt if the creditor so chooses.

Question 21

meaning of the obligation to keep (an publish) annual accounts

Answer 21

keeping annual accounts enables a business to monitor the health of the business by keeping track of receipts and expenses.

Question 22

kinds of obligation to income tax

Answer 22

• personal income tax: income taxes also levied from private persons (workers and self-employed persons)
• corporation tax: income taxes also levied from companies.

Question 23

progressive taxation

Answer 23

• higher taxes imposed on more advantafed persons and no or lower taxes on less advantaged persons
• often combination with numerous specific deductions

Question 24

flat-rate taxation

Answer 24

• everyone pays the same tax rate regardless of income

- generally no specific deduction but generous basic allowance

Question 25

intermediary (meaning)

Answer 25

is a separate and independent business organisation (distinct form the supplier) using skills and efforts to bring another party’s (=supplier’s) products on the market.

Question 26

supplier and intermediary conclude a B2B contract

Answer 26

• commercial agency agreement: a commercial agent acts in the name and for the account of the principal
• franchising agreement: a franchisee acts in his own name and for his own account
• distribution agreement: a distributor acts in his own name and for his own account

Question 27

Silo approach (on commercial intermediaries)

Answer 27

• diversity of legal regimes aplicable to the various types of intermediaries, aspecially as regards termination
• often harsh legal battles on the qualification of the contract with a view to get as much indemnity for goodwill: compensation as possible

Question 28

main obligation of a commercial agent:

Answer 28

• make reasonable effort to negotiate and conclude contracts
• follow the principal’s reasonable instructions
• provide the principal with information
• maintain froper accounts

Question 29

main obligations of a principal

Answer 29

• provide the agent with information
• making payement of “commistion”
• inform the agent on acceptance, rejection and non-performance
• warn the agent of decreased volume of sales
• maintain proper accounts

Question 30

(meaning) indemnity for goodwill:

Answer 30

if the commercial agency has signigicantly increased the other party’s volume of business and the other party continues to derive substantial benefits from the business with such customers
- payment of indemnity should be reasonable + detailed rules for amount of indemnity for commercial agent

Question 31

franchising

Answer 31

is a joint venture between a franchisor and a franchisee. The franchisor is the original business. It sells the right to use its name and idea. The franchisee buys this right to sell the franchisor’s goods or services under an existing business model and trademark.

Question 32

PIL

Answer 32

“Private International Law”
or Conflicts of law”

includes all the rules applicable to the relations of natural or legal persons of different nationalities and aims to resolve conflicts of laws arising from their relations.

Question 33

substantive law

Answer 33

Law which governs the original rights and obligations of individuals.

Question 34

applicable national law

Answer 34

means the national law of the court having jurisdiction under the Convention including any rules of such national law relating to conflict of laws.

Question 35

conflict rule

Answer 35

a logical condition or a restriction to the value of a data item or a data group which must not be met if the data is to be considered correct.

Question 36

PIL 3 main issues

Answer 36

• wich court has jurisdiction
• what is the applicable national law
• what is the value of foreign judgments & other documents

Question 37

“choice of law clause

Answer 37

the law freely chosen by parties (but in consumer contracts, choice only relates to non-mandatory law)