Session One: Contract/Company Flashcards
Why law?
No Law = No Business
Laws are necessary (but not sufficient) for doing business
A Developed Legal System Must…
- Provide Certainty, so that trade and investments can be made with knowledge of likely outcomes
- Provide Protection, for legitimate activity and punish those who break the rules
- Provide Transparency, so there is a “level playing field”
- Provide an Effective and final means of dispute resolution between businesses and others
What is a contract?
Basic Building Block of Business Law
An agreement (offer & acceptance) and an intention to be contractually bound
Some contracts have to be in a specific form, but this varies by country
Contrasting Contract Laws
Law of Obligation vs Law of the Deal
Roman Law and “Common Law” countries take a different view
- France = contracts create a (civil law) obligation to perform them
- UK = contracts are deals, the legal expression of a commercial transaction
Why are there contrasting contract laws
“Consideration” = what the contract is about
Each Party to the contract must contribute something of present value for the contract to be legally enforceable, but there is no requirement for equality or fairness
e.g. I promise to pay you if you do this YES
vs. I will love you forever if you do this NO
vs. I did this for you, now will you do this for me NO
Business Law, the contract applied
A contract is the basis of
- Corporate Law
- Employment Law
- Sales and Distribution (and supply)
Other important types of business law
- Obligations (tort/delict) = environmental law, product liability
- Administrative and regulatory law: more important in some sectors than others
- Criminal Law: increasingly important part of business law = bribery, money laundering
Forms of Business: Sole Trader
- easy to set up: YES
- easy to finance: ?
- owner liable for debts: YES
- continues after owner’s death: NO
- business has own tax: NO
Forms of Business: Partnership
- easy to set up: YES
- easy to finance: ?
- owner liable for debts: YES
- continues after owner’s death: NO
- business has own tax: ?
Forms of Business: LLP
aka Limited Liability Partnership
- easy to set up: NO
- easy to finance: ?
- owner liable for debts: ?
- continues after owner’s death: YES
- business has own tax: YES
Forms of Business: Limited Company
- easy to set up: ?
- easy to finance: YES
- owner liable for debts: NO
- continues after owner’s death: YES
- business has own tax: YES
Forms of Business: PLC
aka publically listed company
- easy to set up: NO
- easy to finance: YES
- owner liable for debts: NO
- continues after owner’s death: YES
- business has own tax: YES
The Corporation (Ltd. and PLC) aka legal personality + limited liability
A company is a separate person for legal purposes
- new person is “born” at the moment of registration
- owns property listed in its own name
- can sue and be sued separately from owners
BUT
- this means debts are its own and NOT the owners
- Creditors cannot sue shareholders to get loans back
- shareholders only liable for the amount they have promised to pay for their shares
Setting up a Corporation
Varies widely by country
- Company formed by two contracts
— Memorandum = contract between the members (shareholders)
— Articles of Association (by-laws) = contract between the members as a body and the directors
Memorandum and Articles are Registered at national registry (and maybe regional chambers)
- tax registration for both direct taxes and VAT
OR you can buy a “nearly new” company “off the shelf”
Setting up other business types
- Sole trader: in UK, just do it
- Partnership: in UK, just do it (no formalities, but good idea to have a written partnership agreement)
- LLP: is NOT a partnership, some members have limited liability, in Europe needs to be registered
