Session 1 - Corporate Form Flashcards
civil and common law
civil law: legal system born in ancient Roman focused on laws and codes governing principles supposedly applicable to most situations
- common law: people were free to start business and sign contracts, no laws or codes and they applied the principle of the previous judge
business organization definition
is the framework hat laws provide to the business in order to be structured properly and run its on operations and relationships with third parties
what does ownership mean in corporate law
Shared ownership is tailored by contribution of capital: ownership rights are proportionally tied to the amount of investment of capital contributed to the firm.
owners of the company holds shares that include the same set of obligations and rights.
which is the meaning of legal personality
the firm serves as a single contracting party that is DISTINCT from the various owners and managers of the firm (a «nexus FOR contracts»)
what does it mean limited liabilities
business creditors are limited to making claims against assets that are held in name of the firm itself and have no claim against assets that are firm’s shareholders’
assets partitioning allows to
isolate different lines of business
share (and reduce) the risks
grant flexibility in the allocation of risk and return between equity-holders and debt-holders
to facilitate tradability of firm’s shares
to facilitate “delegated management”.
two tier system (dualistic) - two boards
separation between managers and supervisors
one tier system (monistic)
only one board consisting of management and supervisors
3-tier system (latin system)
operational + management + executive different boards
the board of directors is elected by
shareholders (except from Germany)
the board of directors is normally distinct from
shareholders
free transferability of shares permits the firm to
- conduct business uninterruptedly as the identity of her owners changes
- maximize liquidity of shareholdings
- maximize ability of shareholders to diversify their investments
- flexibility in raising capital (on stock exchange markets).
sole proprietorships
- UNLIMITED liability (you create debt, creditor can ask money to the one who owns the company)
- NO legal personality (no separation between the person and the entity)
- fiscal personality
Partnership
Simple organization, substantially based on the individuals: who by default are also vested with the powers of managing and monitoring the business activity
- UNLIMITED liability
- NO CLEAR CUT between partners and partnership
- fiduciary interpersonal relationship
- i can ask money to my other partners
limited liability partnership
- partnership with some or all partners with limited liability
- limited partners’ risk is the amount invested and no parts in running the business
- general partners have unlimited liability and manage
- encourages investors to invest without risking more than the capital they have contributed