lecture 1 (corporations & agency problems) Flashcards
public law
relationship between the state and its citizens
Divided into consitutional, administrative and criminal
Private or civil law
Rights and duties of individuals towards each other
Consists of contract, tort, property, trusts and family
Common law is popular in
North america, australia, india, and few african countries
Three busiess forms
Corporations (private corporation (closely held) or Public corporation (open)
Partnerships (general partnership, limited partnership, limited liability partnership, limited liability limited partnership)
Sole proprietorship
What jurisdictions are prominant in the US
Federal governments and state governments
Courts: Federal courts on federal subject matters or interstate suits
States: Everything else, including corporate law
serbanes-oxley act
The Sarbanes-Oxley Act (SOX) is a US federal law enacted in 2002 to improve corporate governance and financial reporting after accounting scandals. It mandates strict standards for financial disclosures, internal controls, and corporate accountability to protect investors and restore confidence in the financial markets.
In the us different states have different laws, companies are free to incorporate
in any state regardless of whether they are doing business there or have any contact with the state
–> most corporations are incorporated under the law of the state delaware
Introduction to the jurisdictions of europe
member states have national statutory company law but are also subject t oeuropean law
Regulations
A binding legislative act. it must be applied in its entirety across the EU
Directives
Set out a goal that all EU countries must achieve. However it is up to the member states to devise their own laws on how to reach these goals
Minimum and maximum harmonisation
Recommendations
not binding. Ar ecommendation allows the institutions to make their views known and to suggest a line of action without imposing any legal obligation on those to whom it is adressed
who has more regulatory competition Europe or US
Europe
why?
Reputational aspects
Two conflicting doctrines in europe
(doctrine of incorporation (including the netherlands)
(doctrine of real seat)
European company (societas Europaea, SE)
Soft laws
yet another souce of law: corporate governance codes
Soft law with principles and best practices:
Comply or explain principle
Almost all countries, come supra-national, some part of the country
Incorporation
the formation of the company
Different documents need to be filled, including the articles of association, mandatory capital and registration in the commercial register
Procedures are usually similar, although there are some differences: E.g.
Stringent vs more flexible
Liability for pre-incorporation company
Minimum capital amount
Articles of association (II) manadory rules and default rules
mandatory rules: cannot be modified by contract (articles of association)
Usually aimed at protection of weaker parties (for example creditors)
Default rules: applicable in case articles of association or another contract does not state otherwise
E.g. Article 2:195(1) DCC: unless the articles of association provide otherwise, a valid transfer of shares requires that the shareholder who wants to dispose of one or more of his shares, firstly offers those shares to his co-shareholders in proportion to the number of shares that is held by each of them at the momen that such offer is made
Five characteristics of corporations
1) legal personality
2) limited liability
3) Transferability of shares
4) Delegated management under a board structure
5) investor ownership
legal personality
serve as a contracting party
Shareolders: Owners of hte shares not the assets (entity shielding; liquidation protection and the priority rule)
Perpetual life, but artificial creature of the law
Hence, the corporate form is a set of features that enables a company to have an autonomous life independent of its investors; separate patrimony (demarcation of a pool of assets)
limited liability
Shareholders are only liable up to their committed investment (owner shielding)
Limited liability is a right that belongs to the shareholders rather than the company itself
asset partitioning
Asset partitioning refers to the legal or financial strategy of segregating assets into different entities or structures to protect them from certain risks or liabilities. This can involve setting up separate legal entities, trusts, or other arrangements to shield assets from creditors, legal claims, or other potential threats. The goal is to limit exposure and preserve assets in case of adverse events.
tort law
A tort is a legal term that refers to a wrongful act or infringement of a right that causes harm or injury to another person or their property, leading to legal liability. Tort law covers a wide range of civil wrongs, including negligence, intentional acts, and strict liability.
