Company Law Vocab Flashcards
Adjudication order
Adjudication order (or bankruptcy order): order by which the court declares a person bankrupt.
Administrative receiver
Administrative receiver: a qualified insolvency practitioner appointed to take control of the assets, such as those subject to a floating charge, for the benefit of creditors with these assets as security.
Administrator
Administrator: this is a qualified insolvency practitioner appointed by an administration order in an attempt to save the company as a going concern rather than wind it up.
Administrative receiver
Administrative receiver: a qualified insolvency practitioner appointed to take control of the assets, such as those subject to a floating charge, for the benefit of creditors with these assets as security.
Agent
Agent: a person given the authority by a principal to enter into contracts on his behalf.
Alternative director
Alternative director: this is a person appointed by a director to act in his place.
Annual accounts
Annual accounts: a detailed record of a company’s financial situation that must be produced each year.
Annual general meeting (AGM)
Annual general meeting (AGM): meeting of the shareholders of a company which takes place once a year.
Application for registration
Application for registration: document in the English system which must be registered in order to incorporate a company. It must state such matters as the company name, its registered office and address, whether it is limited by shares and whether it is a
public or private company. Certain other documents must accompany the application. These include a statement of capital and initial shareholding, a statement of the company’s proposed officers and a statement of compliance.
Articles of association
Articles of association: constitutional document which regulates the way a company’s affairs are managed. It consists of regulations governing the rights of the members and the structure of the company.
Articles of incorporation
Articles of incorporation: document filed in the United States to incorporate a company. It is sometimes referred to as the corporate charter.
Articles or deed of partnership
Articles or deed of partnership: written agreement setting out the structure of a partnership. It is not a legal requirement.
Assets
Assets: property owned by a person or company that has monetary value.
Auditor
Auditor: a member of a recognised body of accountants who examines (or audits) company accounts. Auditing is the process by which the financial situation of the company is examined in order to draw up the annual accounts.
Authorised share capital
Authorised share capital: this is the amount of capital a company can raise by selling its shares. A company cannot issue more shares than is authorised by its constitution.
Bankruptcy
Bankruptcy: where an individual is unable to pay his debts.
Board of directors
Board of directors: this board comprises the individual directors. It is the ultimate decision-making body of a company and determines the delegation of power.
Bond
Bond: a certificate issued by the government or public company promising to repay borrowed money at a fixed rate of interest at a specified time and to repay the original sum in full after a specified term. In the United Kingdom, the term debenture is used to denote a domestic secured bond.
Breach of directors’ duties
Breach of directors’ duties: where a director has acted in a way inconsistent with the general duties of care and skill and fiduciary duties owed to the company.
Business judgment rule
Business judgment rule: see under Duty of care.
Duty of care: in the United States, a duty of care is also referred to as the business judgment rule. It means that a director must not be negligent in the management of his company, but he will not be liable for mere errors of judgment. The US business judgment rule will protect managers from liability if they have made an informed decision after a reasonable investigation, there is no conflict of interest and the managers have a rational basis for believing that the decision is in the best interest
of the corporation.
Bylaws
Bylaws: in the United States, the structural aspects of the corporation are set out in bylaws, which do not have to be filed. These bylaws supplement the articles of incorporation by defining more precisely the powers, rights and responsibilities of the corporation, managers and shareholders.
Called up share capital
Called up share capital (paid-up capital): the sum that shareholders have already paid in return for shares.
Capital
Capital: the net worth of a company; money, property and any other assets.
Certificate of incorporation
Certificate of incorporation: this is issued on incorporation. In England, it states the name and registration number of the company, the date of incorporation, whether it is limited (by shares or guarantee) or unlimited, whether it is a private or public company and the location of the registered office.
Chairman
Chairman: an appointed director who presides over meetings of the board of directors and general meetings.
Charge
Charge: a charge on property means that the property is not free, but it has a certain liability attached to it.
Charitable Incorporated Organisation (CIO)
Charitable Incorporated Organisation (CIO): under English law, a new optional legal structure for charities. It gives trustees the benefit of limited liability and separate legal identity outside the company law framework. It is a corporate body with a constitution, registered with and regulated by the Charity Commission.
Class meeting
Class meeting: is where a class of shareholders meet to decide matters which affect their particular class of shares.
Class rights
Class rights: rights attaching to different classes of shares.
Close corporation
Close corporation: a form of corporation found in the United States consisting of a single individual or a very small group of individuals. It is typically managed by the stockholders themselves.
Company
Company: in English law, an association of persons formed for the purposes of an undertaking or business carried on in the name of the association. It is legally incorporated and is a legal person, separate from its individual members. In the United States, the word applies to a wide range of activities and can be used to describe private corporations as well as partnerships.
Company constitution
Company constitution: in English law, the constitution of a company is primarily governed by the articles of association.
Company secretary
Company secretary: in England, every public company must have a company secretary who is responsible for the administration of the company’s affairs. A company secretary is optional for private companies.
Conflict of interest
Conflict of interest: where there is a conflict of interests between a director’s personal interests and those of the company, those of the company must prevail.
Contributory
Contributory: is someone who is liable to contribute to the assets of a company on a winding up.
Corporate governance
Corporate governance: term often used to describe the way in which companies are directed and controlled.
Corporate veil
Corporate veil: the legal recognition of the company’s independence from its owners: the shareholders.
Corporation
Corporation: in English law, a legal body, such as a limited company or public authority, which has been incorporated. It is often used to indicate a large company. Likewise, in the United States, the term also means an association of shareholders that has a legal identity entirely separate and distinct from those who compose it.
Creditor
Creditor: one to whom a debt is owed. A debenture holder is a creditor, whereas a shareholder is a member of the company.
Crystallise
Crystallise: a floating charge is said to crystallise, in other words, be triggered, if the debtor is in default.
Debenture
Debenture: a document acknowledging a debt for a capital sum that is to be repaid on a certain date, with interest payable at a fixed rate. In the London financial markets, the word debenture is used primarily to denote a secured loan. Reference may be made to a naked debenture, which is a debt without security. In the United States, a debenture is usually an unsecured loan.
Debenture holder
Debenture holder: is a creditor of the company.
Debenture stock
Debenture stock: credit certificates issued in a similar way to an issue of shares.
Debenture trust (or indenture)
Debenture trust (or indenture): a deed setting out the terms of the loan. For example, it sets out what constitutes default on the part of the company, what the rights of the debenture holders are upon default and it may place restrictions on the ability of the company to issue other debt securities.
Defunct
Defunct: a defunct company is a company that has ceased to trade.
Derivative action
Derivative action: an action by a minority shareholder (or minority shareholders) is a derivative action if the shareholder is suing on behalf of the company.
Director
Director: in English law, there is no legal definition of director, but according to legislation, the term director includes any person occupying the position of director, by whatever name called.
Directors’ duties
Directors’ duties: include the duty of care, skill and diligence, and fiduciary duties. English law refers to seven types of general directors’ duties: to act within powers; to promote the success of the company; to exercise independent judgment; to exercise reasonable care, skill and diligence; to avoid conflicts of interest; not to accept benefits from third parties; and to declare interests in proposed transactions or arrangements. In the United States, these duties are categorised as duty of care and duties of loyalty.
Disclosure
Disclosure: to disclose involves revealing details about an act or transaction. In return for limited liability, companies are required to make certain information about their constitution and financial status available to the public. Directors are under a duty to disclose any personal interest that could lead to a conflict of interest situation.
Disqualification order
Disqualification order: order by which a person is not allowed to act as a company director. The grounds for a disqualification order include: a conviction for an indictable offence, breaches of company law, fraud and unfitness to manage a company. An order on the grounds of unfitness can only be made if the company is insolvent.
Dissolution
Dissolution: here, the term refers to bringing a business organisation to an end.
Dividend
Dividend: a sum paid to shareholders by a company when in profit, the amount being in proportion to their shareholding.
Duty of care
Duty of care: in the United States, a duty of care is also referred to as the business judgment rule. It means that a director must not be negligent in the management of his company, but he will not be liable for mere errors of judgment. The US business judgment rule will protect managers from liability if they have made an informed decision after a reasonable investigation, there is no conflict of interest and the managers have a rational basis for believing that the decision is in the best interest of the corporation.
Duty of loyalty
Duty of loyalty: term used in the United States. It refers to directors’ fiduciary duties, which include duties not to self-deal, not to usurp a corporate opportunity and not to oppress the minority shareholders.
Enlightened shareholder value
Enlightened shareholder value: this UK principle requires a company to take into account various stakeholders. It needs to take the interests of its employees into account, as well as the impact of its operations on the community and the environment, its relationship with its suppliers and customers, and the importance of maintaining a high reputation for the integrity of its business practices.
Event of default
Event of default: an event either specified by statute or specified in a debenture document that means a charge on property secured by the debenture is activated.
Executive director
Executive director (United States: inside director): this is usually a full-time officer employed by the company to manage company business.
Extraordinary general meeting
Extraordinary general meeting: in addition to the AGM, shareholders may be asked to vote on special business if required by a sufficient number of the members.
Fiduciary duties
Fiduciary duties: a director is under an obligation to exercise his powers for the benefit of the company and not for his own benefit. He owes a general duty of trust, honesty and integrity towards the company.
Filing
Filing: in the United States, reference is made to filing rather than registering.
Firm
Firm: partnerships are referred to in English law as firms and the name under which their business is carried on is called the firm name. In the United States, the word company is used synonymously with firm, whereas in English law a firm is never a company.
Fixed charge
Fixed charge: a charge on a particular asset or property.
Fixed interest securities
Fixed interest securities: securities with a fixed rate of interest, such as a bond.
Floating charge
Floating charge: this type of charge attaches to a class of assets, which in the ordinary course of a company’s business would be changing from time to time. The company does not need the holder’s permission to deal with these assets, if in the ordinary course of business. It ‘floats’ above the property until some event occurs which triggers the charge. A similar charge is available in the United States: this may be referred to as a floating lien.
