Week 2&3

Question 1

For a business to operate, it must have a ____?

Answer 1

legal form

Question 2

Business forms include:

Answer 2

Question 3

Benefits specific to corporations / limited companies / sociétés anonymes

Answer 3

Question 4

In comparison to the 5 benefits of the corporations / limited companies / sociétés anonymes, partnerships have:

Answer 4

1. no separate legal personality
2. no transfer of ownership through shares
3. no perpetual existence
4. no centralized management
5. no possibility to raise capital through sale of shares
6. no possibility to be listed on the stock market.

Question 5

When deciding between the different business forms, owners must consider:

Answer 5

1. Jurisdiction
2. Liability
3. Flexibility
4. Taxation
5. Power Distribution

Question 6

How to protect a subsidiary’s activity from spilling over to the parent company / shareholder?

Answer 6

“Piercing the corporate veil doctrine” or “Lifting the corporate veil” or “The alter ego doctrine”

Question 7

Corporate Charter (Memorandum of Association in the UK)

Answer 7

(drafted by the shareholders, they are also called Articles of Incorporation or Certificate of Incorporation or, for an LLC, Articles of Organization): includes company’s name, address of the registered office, amount of the share capital, type and value of the shares, names of the legal representatives etc.

Question 8

By-laws (Articles of association in the UK)

Answer 8

describe how the organization is to be run and specify elements/procedures described in the Corporate Charter (drafted by the Board of Directors after the company’s incorporation and filed with the State to become appendix to the Charter)

Question 9

What is the difference between shareholders’ agreements and company by-laws?

Answer 9

Question 10

What happens if the SHA conflicts with the by-laws?

Answer 10

It shall be specified in the SHA whether its provisions prevail or not over the provisions of the by-laws.

Question 11

How can parties be dissuaded from breaching the obligations set forth in the constitutional documents?

Answer 11

Question 12

Resolutions of the general meetings of shareholders are only validly passed if the meeting has a ____?

Answer 12

quorum (a certain number of shareholders must be present)

Question 13

àResolutions usually require a majority over _____ of the cast votes to be passed.

Answer 13

50%; E.g. appointment, remuneration and control of directors

Question 14

Special or extraordinary resolutions, which often require a majority of ____ to be passed, are required for important matters such as:

Answer 14

two-thirds;

• alteration of the articles or by-laws
• winding-up
• changes in capital structure

Question 15

The Board of Directors overview

Answer 15

Question 16

Apparent authority

Answer 16

Apparent authority is the power of an agent to act on behalf of a principal, even though not expressly or impliedly granted. This power arises only if a third party reasonably infers, from the principal’s conduct, that the principal granted such power to the agent. The idea of apparent authority protects third parties who would otherwise incur losses if the agent’s signature did not bind the principal after reasonable observers thought that it would. Typically, if an agent has apparent authority, the agent’s principal will be held liable for the actions of the agent which are within the scope of the apparent authority.

Question 17

Three requirements are necessary to give rise to apparent authority:

Answer 17

1. Representation must be made to the contractor that the agent had authority to enter, on behalf of the company, into a contract of the kind sought to be enforced.
2. The representation was made by person(s) with ‘actual’ authority to manage business of the company generally or in respect of matters relating to the contract.
3. Contractor, by relying on the representation, was induced to enter into contract.

Question 18

Exceptional liability towards third parties

Answer 18

When a legal representative has committed an act of personal misconduct (faute personnelle) distinct from the exercise of his duties.

Question 19

Criminal Liability

Answer 19

The law contains many provisions imposing criminal sanctions on managers. E.g., in France: misappropriation of corporate assets, misleading and inaccurate financial statements or distribution of fictitious dividends; in UK: under Companies Act 2006: fraudulent trading, prohibited financial assistance