lecture 2- the company and its core charasteristics

Question 1

What are the core characteristics of a ‘company’?

Answer 1

A. Legal personality
B. Limited liability
C. Transferable shares
D. Delegated management
E. Shared ownership

Question 2

What is the advantage/result of having a seperate legal personality as a company?

Answer 2

due to a seperate legal personality:
-a company can sue/ or be sued
-company can enter into contract
-limited liability instead of personal liability

Question 3

What is the difference between personal and limited liability?

Answer 3

Personal Liability: Sole traders and partnerships have no seperate legal personality and are thus personally liable if bussiness’ assets are insufficient
Limited Liability: Companies (private and public) have seperate legal personality- CREDITOR CAN DEAL ONLY WITH THE COMPANY, cannot hold shareholders personally liable.
- other way around Creditors of a shareholder have no claim against the company’s asset.

Question 4

How are company decisions made?

Answer 4

• directors make company day-to-day decisions, act in good faith for company.
• Shareholders appoint directors.
• important decisions are made by resolution (directors, or shareholders resolution)

Question 5

Who is the Owner of a company

Answer 5

The shareholder (?)

Question 6

What are characteristics of a private company?

Answer 6

-Shares are not publicly transferable, and must be transferred by notary deed.
-Smaller group of shareholders. Shareholders often manage the company directly
- less capital needed to start private company.
- fewer disclosure agreements

Question 7

What are characteristics of a Public company?

Answer 7

• Shares can be traded publicly on stock exchange.
• anonymous shareholders.
• Shareholders often manage the company directly.
• more disclosure, reporting rules
• more capital needed to begin.

Question 8

What is the difference in rule making in different jurisdictions (ENG, DE, NL)?

Answer 8

-England’s regime is within one act (flexible vs strict rules depending on Ltd vs PLC)
-Germany separates them into two laws and structurally different entities.
- Netherlands provides two versions under one code with many parallel provisions.