Part 4: Commercial Companies Flashcards
(Second half of the semester)
1
Q
Commercial companies take the legal form of:
A
- general partnership
- private limited company (limited liability)
- public limited company
- limited partnership
- partnership with shares
2
Q
Title 1 - General provisions
A
a group of legal provisions that apply to all commercial companies
3
Q
Title 2 - General Partnerships
A
a group of legal provisions that apply to most general partnerships.
4
Q
Title 3 - Quota Companies
A
a group of legal provisions that apply to quota companies
5
Q
Consequences of the legal personality of commercial companies:
A
The initial contributions are transfers in ownership (from the partners to the company);
The distribution of assets after a liquidation constitutes a transfer in ownership (from the company to the partners);
6
Q
What is a Memorandum of association and what are its major components?
A
A contract between the partners (shareholders), discussing the distribution of shares that each partner will hold, as well as key company details (percentage of share capital, address, tax information, members of the board, quota held by each partner, type of initial capital contribution…)
7
Q
What are the Articles of Association?
A
Legal articles that regulate every aspect of the company not regulated by law in addition to laws already in place in the commercial code.
8
Q
What are the components of the article of association?
A
Must contain business names of founding partners, type of company, purpose, headquarters, capital, quota held by each and the type of initial capital contribution.
9
Q
There are two types of provision in the commercial code
A
Imperative and Subsidiary (supplementary) provisions
10
Q
Imperative provisions
A
Main provisions that have to be complied with no matter what
11
Q
Subsidiary (supplementary) provisions
A
must be complied with but companies can regulate with a degree of freedom how it will be followed.
12
Q
What is the general corporate structure of a company? (3 things)
A
Board of Directors
General meetings
Supervisory board
BGS
13
Q
Supervisory boards are not mandatory to have in what type of companies
A
small quota companies
14
Q
Which types of companies are mostly focused in the course for commercial companies?
A
public limited companies and private limited companies
15
Q
Why do people not have a general partnership
A
They have an unlimited liability, Your personal assets can be seized to pay for the debts incurred by the company
16
Q
how can you incorporate a company?
A
Adding money or capital
17
Q
What is the minimum share capital to incorporate a single member/quota company?
A
The minimum for a quota company is 1 euro for a single person.
18
Q
What is the minimum number of members for a quota company, and are there exceptions to this?
A
the minimum is 2, but there is an exception for 1 if its a single member quota company.
19
Q
Whats the minimum for incorporating a public limited company?
A
50,000 euros
20
Q
What is the minimum number of members for a public limited company?
A
five members.
21
Q
What happens if you create a shared limited company with someone, and incurred debts, but you haven’t deposited the full amount of the initial contribution?
A
Generally, you will be held liable for the initial contribution.
22
Q
A company’s 100% shared capital is bought by someone else, is the company the same?
A
Yes, only the partners have changed
23
Q
Single member companies with 1 member are different from each other in what way (legal personality)
A
entity from each other, as the company itself has legal personality separate from the member.
24
Q
Companies only acquire their legal personality after…
A
being registered
25
The legal capacity of companies are...
all rights and obligations necessary to pursue corporate purposes, with the exception of those prohibited by law
26
Donations (if they're small enough) are considered to be
gratuities, and are valid, and are not considered
27
Gratuities are considered to be
not contrary to the company's purpose, which is stated by them plus general of making profit.
28
The provision of in rem or personal guarantees for any debts of other entities is considered to be...
contrary to the purpose of the company
29
what are the exceptions that the provision of in rem or personal guarantees for any debts of entities is considered to be contrary to the purpose of the company?
in cases where the guaranteed company has it's own justified interests or is in a group or a controlling relationship.
30
The contract clauses and company resolutions that establish their purpose or prohibit certain acts shall not...
limit the capacity of the company.
31
Corporate bodies are bound by the duty to not...
exceed the limits of this corporate purpose and to refrain from carrying out such prohibited acts.
32
If board directors give 100% of their company's profit to a charity...
they have a legal problem
33
ultimate purpose of a commercial company
to make profit (generate profit)
34
corporate purpose of a company
those written and established specifically in the company's memorandum of association (articles of association) as the object of the company.
35
Acts contrary to the ultimate purpose of a commercial company are...
null and void, with the exception of gratuities (donations) that are deemed usual according to circumstances and conditions
36
Acts contrary to the corporate purpose of a commercial company are...
valid and effective, however, members of corporate bodies that carry out those acts are liable for damages caused to the company.
37
Difference between the memorandum of association and articles of association
memorandum is the contract between the partners, and articles of association is embedded in the memorandum and regulates every aspect of the company not regulated in law codes
38
What can you contribute to the shared capital of a company?
- Money
- Assets
39
If you contribute to the shared capital of a company with assets that need to be transfered to the company (via public deed)
Then the memorandum of association also has to be verified in a public deed as well
40
What is the minimum number of partners to create a company, and are there exceptions to this?
Two, except when the law requires a higher number (share companies) or it's a single member quota company.
41
minimum number of partners for a share company is what, and are there exceptions to this?
5 members, unless:
- the state holds more than majority of the share capital, thus lowering the minimum to 2
- Share companies incorporated with only one shareholder (initial total domain situations)
42
The incorporation of companies between spouses is permitted, however...
only one of them can have unlimited liability.
43
Title 1 and Title 3
title 1 applies to all commercial companies
title 3 applies to specific companies
44
In regards to private limited companies (quota companies), what are the relevant legal provisions that applies to this type of company?
Title 1 and Title 3, specifically articles 197 to 270 of the act of commercial companies.
45
initial contributions of assets must be...
certified by a statutory auditor
46
quotas are nominative, meaning...
you know at all times who holds how many quotas.
47
Initial capital contributions can be... (in regards to when they have to be paid)
deferred until specific dates
or be made contingent upon specific facts
48
in any case, the initial capital contribution may be required if:
- it's been 5 years after the signature of the articles of association
- its been 5 years after the decision to increase the capital
- once half of the duration of the company elapses
Whichever one of the three comes first.
49
assignments of quotas
has to be executed in writing and shall take effect against the company once its communicated to said company, in writing, or when the company gives its express or tacit recognition (article 228/3) and a request for registration is submitted (article 242-A).
50
mortis causa
cause of death
51
The transfer of quotas shall not take effect until...
the company gives its consent, except for transfers between spouses, ascendants, descendants or partners.
52
regarding the transfers of quotas, what can the articles of association do about it?
They can waive the need for consent, in general for certain situations only (article 229/2)
53
the request for consent must be submitted in...
writing, indicating the transfer and all the terms of the transfer.
54
The articles of association can prohibit the transfer of quotas, however, the partners can...
the partners shall be entitle to waive this right after 10 years of becoming partners.
55
Restriction to the transfer of quotas is regulated in articles...
485 and 487 in the commercial acts code.
56
Are quota companies liable for the contribution of other partners?
Yes they are, as they are under the obligation to pay supplementary capital contributions, provided this obligation is included in the articles of association.
57
Partners loan agreements
- a contract by which a partner lends money or other fungible thing to the company
- Agreements by which the partner agrees to grant a deferral of maturity of his loans
58
What are statutory reserves?
A percentage not less than 1/20 of the company must be used for a mandatory statutory reserve, until the revenue represents 1/5 of the capital, which can't be lower than 2,500.
59
The statutory reserves can be used for what purposes? (3)
- To cover that part of the loss recorded in the balance sheet for the financial year
- To cover that part of the losses brought forward from the previous financial year that can't be covered by other reserves
- For incorporation into the company's capital
60
Statute and statutory laws
An act of parliament, a statutory law means it's mandatory via an act of parliament.
61
Can you use statutory reserves to buy warehouses, cars for the company?
No, you can only use it to cover losses from the year or previous year.
62
How much must a company distribute profits ?
50% of the annual distributable profits
63
what are the exceptions to distributing 50% of the annual distributable profits?
- unless provided for the articles of association
- there is a resolution not to distribute approved by a majority representing 3/4 of the capital, at a partner's general meeting convened for this purpose.
64
Quota companies shall be managed and represented by...
one or more managers, chosen among partners or other persons who are not part of the company.
65
The managers of quota companies must be individuals with...
full legal capacity.
66
The appointment of managers must be...
- in the articles of association or
- elected by a resolution adopted by the partners (article 252)
67
How long must a manager function in the company?
Unless the duration is stated in the articles of association, the functions of the managers shall continue for as long as they are not dismissed or resigned.
68
What is non compete obligation?
managers are not permitted to exercise an activity which is in competition with the company, on their own behalf or for a third party without partner's consent.
69
The appointment of a supervisory body isn't mandatory. What must be designated and what are the conditions to use it
A statutory auditor must be designated
If two of the three options are exceeded:
1. total financial statement: 1,500,000
2. net sales and other profits: 3,000,000
3. average employee number in financial year: 50
70
In shared companies, directors are appointed for a maximum number of how many years?
4-5 years, then they must be re-elected or leave.
71
When you incorporate a company, why should you in the end of the articles of association add a provision regarding the appointment of directors, managers and partners?
Otherwise, you need to convene for a meeting to appoint every addition or change in these people in the company.
72
What provision should you add to the articles of association in regards to managers in the company?
A duration on how long they can operate as there is no set limit by law on how long they can operate for as long as they aren't terminated.
73
inter alia means
notably
74
What acts require resolutions by the partners?
-calling and recovering supplementary contributions
- the amortization of quotas, acquisition and disposal of own quotas, and consent for the division or transfer of quotas
- The dismissal of partners
- The dismissal of managers and members of the supervisory committee
- The approval of the annual report and accounts for the financial year, the distribution of profits
proposals of legal action by the company against management, partners or members of the supervisory committee.
75
Convening for the general meeting is the responsibility of...
All and any of the managers (however, managers are just present, they dont have voting power, only shareholders do)
76
The general meeting must be convened by means of...
a registered letter, sent at least 15 (30?) days in advance unless stated otherwise in the articles of association (article 248/3).
77
Single partner quota companies
private limited companies with only one partner
78
What are the legal limits in relation to ownership?
- One individual can only be a partner in one single partner private limited company.
- A private limited company cannot have as its single partner a single partner private limited company.
79
What happens if a breach of the legal limits in relation to ownership occurs?
a breach of any of the rules may result in the dissolution of the company.
80
Partner's decisions
In the case of single partner quota companies, the sole partners shall exercise the powers conferred upon general meetings, and may, in particular, appoint managers.
81
when convening for a general meeting, at first call, what is the required quorum?
There is no technical requirement for a minimum to attend unless it's specified in the articles of association
82
When convening for a general meeting, at second call, what is the required quorum?
it must be a qualifying majority, of which it is mandatory to be in.
83
What is the quorum required for the general meeting?
shareholders with shares representing at least one third of the share capital must be present or represented.
84
resolutions for general meeting topics must be done by
a majority of votes cast, regardless of the percentage of the share capital represented, as a qualifying majority is not required.
85
Resolutions in relation to certain matters referred to in paragraph 2 of article 383 must be done by
a 2/3rds majority of votes.
86
at the meeting convened at the second time, shareholders representing at least half of the share capital, what is the votes required to pass any laws/topics?
majority of votes cast
87
A share company who's share capital doesn't exceed 200,000 euros can do what with regards to management and leadership?
appoint a sole director instead of a board of directors
88
what are the advantages of appointing a sole director instead of a board of directors?
It's harder to remove the sole director, as there needs to have a cause in order to be able to remove them. Within a board of directors, they can simply be voted out.
89
What is the management and supervision organization methods for a company?
traditional model
anglo saxon model
german model
90
What is the traditional model of management?
Consists of a board of directors (or sole director depending on certain conditions)
A sole supervisor (a statutory auditor or a company of statutory aditors)
A supervisory board
91
The supervision by a supervisory board is mandatory whenever two of the following thresholds are exceeded for two consecutive years:
Total financial statement:100,000,000
net sales and profit: 150,000,000
average number of employees in financial year: 150
92
What is the Anglo-saxon model of management?
Consists of a board of directors
An audit committee
Statutory auditor
A company with this management cannot choose to have a sole director.
93
What is the German model of management?
Consists of a board of executive directors
a general and supervisory board
statutory auditor (which in some cases by law, article 444, must have a committee.
94
What differs between the german model and other models when it comes to the board appointing members?
The general and supervisory board, inter alia, can have the powers to appoint members of the board and its chairman.
The general and supervisory board does not hold management powers, but the law or the articles of association may establish that the executive board
of directors must obtain the consent of the general and supervisory board in order to carry out certain categories of acts.
95
what is an audit committe?
The audit committee referred to in Article 278 no. 1 b) is a body of the company composed of a part of
the shareholders of the administrative council.
96
What are the rights of partners (article 21)
-share in any profits
-to participate in resolution adopted by partners
- right to information (life of company)
- right to be appointed to corporate and supervisory)
97
what does limited mean
the shareholders are not gonna be liable for the company's debts
98
Company name must include the name or corporate name of at least...
one of the partners, followed by the expression "em comandita"
99
How do you incorporate a commercial company?
You need two fundamental documents (memorandum and articles of association), name, share capital, tax payer number.
100
What are the 3 obligations of partners?
The obligation of initial contributions
Additional contributions
Partner loan agreeements
101
