COMPANIES Flashcards
COMPANY
large-scale business organizations and smaller companies
MAIN FEATURES OF A COMPANY
- legal personality
- limited liability
- transferable shares
- delegated management over a board structure
- investor ownership
ADVANTAGES OF A COMPANY
- lower costs
- creation of a well-structured org
- more people0more money & funds&ideas
- opportunism because of company law
- unlimited life
TYPES OF LEGAL RULES THAT REGULATE COMPANIES
mandatory vs. default rules
each jurisdiction decides which are mandatory (basic principles and laws which are default) and what aspects are not regulated
DIFFERENT LEGAL SYSTEMS: COMPANIES
EU: each member state has its own principles but a lot of similar ones stemming from EU directives
US: each state has its own corporate law but is very similar because of the Modern business corporation act. listed co have also laws regulated by fed gov: same for all us
ELEMENTS THAT MAKE THE DIFFERENCE IN LAW
- dispersed ownership us
- control shareholding blocks (g,i,,f)
- presence of state as shareholders (f, I)
- characteristics of non controlling shareholders: private investors/professional investors
PROBLEM OF COMPANIES
agency problem: the agent is expected to act in the interests of principal (principal depends on the agent)
- -> conflict of interests
- ->opportunistic behaviour
AIM OF COMPANY LAW
regulate behaviours to reduce opportunistic behaviour among constituencies
AGENTS IN COMPANIES
a–>p
directors –> shareholders
majority shareholders–> minority shareholders
shareholders–> creditors and employees
LEGAL PERSONALITY OF COMPANIES
• company set out by contracts: carries out business activity by entering into other contracts
• company is a single contracting entity
• provided with personal assets (=contributions of sh)
–> entity shielding: creditors are granted a claim on co assets prior to claims of sh & sh can not withdraw form co at will, creditors can not attack sh asstes
• representation& decision of actions= director
LIMITED LIABILITY IN COMPANIES
• owner shielding: complete asset segregation
•sh liable for debt of co only to the amount of their contribution, not mandatory to pay debts with additional contrib
risk: from sh to cred
TRANSFERABLE SHARES OF COMPANIES
- fully transferable form one sh to other unless charter says differently
- companys whose shares are in financial market are freely transferable
DELEGATED MANAGEMENT OF COMPANIES
- BOARD OF DIRECTORS: one tier board(all top mngmnt in one board) two tier vertical board and board of supervisors, two tier horizonatal board( board of directors, board of statuatory auditors) bot appointed by sh
- executive directors(day2day) vs non executive directors(must participate in more important business decisions)
INVESTOR OWNERSHIP IN COMPANIES
Sh rights: pie sstructure: 10% tot contrib=10% peso in voting=10% profits
DISADVANTAGES OF A COMPANY
- double taxation:profits and earnings
- gov reg
- more difficult to form
- operations controled by sh and bod
WHAT DOES A SHAREHOLDER DO IN A COMPANY
- act as a group and take decisions jointly on:
- appointment or removal of direcotrs
- fundamantal corporate changes
- corporate accounts approval and distributions
- power to recieve info
- us: suit against director, application of bylaws, reccomandations to the board
- italy: give auth to the board,suit against directors
DIRECTORS
management and supervision
officers:delegated bu executive d for day to day op
STRUCTURE OF MANAGEMENT
boards of supervisors
bod
executive d
officers
PUBLIC COMPANIES
- SH:1-inf.
- single member company
- mandatory min capital (ue second derivative)(us: NO)
- classes of shares: normal+special
- shares freely transferable and can be tradedon fin mrkt
- shareholders appoin directors (not directly involved in mngmnt
- supervisioin of mngmnt carried out by specific body FGI or by some directors fiu
PRIVATE COMPANIES
- SH:1-inf (f nto more than 100
- mandatory min capital: only germany and italy; italy exceptions
- not always special shares
- shares freely transferable but fr and some us can limit
- supervision of mngmnt carried out by sh
