Companies law
Corporation · Company
Partnership (General · Limited · LLP)
Cooperative
Sole proprietorship
United States:
S corporation · C corporation LLC · LLLP · Series LLC Delaware corporation Nevada corporation Business trust
UK/Ireland/Commonwealth:
Limited company (By shares · By guarantee) (Public · Proprietary) Community interest company
European Union/EEA:
SE · SCE
Other countries:
AB · AG · ANS · A/S · AS · GmbH
K.K. · N.V. · OY · S.A. · Full list
Doctrines
Corporate governance
Limited liability · Ultra vires
Business judgment rule
Internal affairs doctrine
De facto corporation and corporation by estoppel
Piercing the corporate veil
Rochdale Principles
Related areas of law
Contract · Civil procedure

Corporate law (also corporations law or company law) refers to the law establishing separate legal entities known as the company or corporation and governs the most prevalent legal models for firms, for instance limited companies (Ltd or Pty Ltd), publicly limited companies (plc) or incorporated businesses (Inc.). Companies law (or the law of business associations) is the field of Law concerning business and other organizations A corporation is a separate legal entity usually used to conduct business Generally a company is a form of Business organization. The precise definition varies For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners In the commercial and legal parlance of most countries a general partnership or simply a Partnership, refers to an association of persons or an unincorporated A limited partnership is a form of Partnership similar to a General partnership, except that in addition to one or more general partners (GPs there are A limited liability partnership (abbreviated as LLP) has elements of Partnerships and Corporations. A sole proprietorship, or simply proprietorship ( Benjamen Clark An S corporation or S-corp, for United States federal income tax purposes is a Corporation that makes a valid election to be taxed under Subchapter S of A C corporation (or C corp) is a Corporation in the United States that for Federal income tax purposes, is Taxed under and Subchapter C ( et A limited liability company (abbreviated LLC or LLC) in the law of the vast majority of the United States is a legal form of business Company The limited liability limited partnership (LLLP is a relatively new modification of the limited partnership a form of Business entity recognized under U A Series LLC is a special form of a Limited liability company that provides liability protection across multiple "series" each of which is theoretically protected A Nevada Corporation is a Corporation chartered under the Laws of the U A Massachusetts business trust or MBT is a legal trust set up for the purposes of business but not necessarily in the state of Massachusetts. A limited company in the United Kingdom is a Corporation whose liability is limited by law A private company limited by shares is a type of company incorporated under the laws of England and Wales, Scotland, that of certain Commonwealth countries In British or Irish Company law, a company limited by guarantee is an alternative type of Corporation used primarily for Non-profit A Public Limited Company ( PLC, plc or plc or p l c is a type of Limited company in the United Kingdom or the Republic of Ireland which is A proprietary company is a form of Corporation in Australia that is limited by Shares. A community interest company (CIC is a new type of company introduced by the United Kingdom government in 2005 under The Community Interest Act 2004, designed The European Economic Area ( EEA) came into being on 1 January 1994 following an agreement between member states of European Free Trade Association (EFTAthe The Council Regulation on the Statute for a European Company of the European Union was adopted October 8 2001. TemplateExpert and TemplateExpert-subject, has been modified to include two WikiProjects and Portals (Expert-subject is limited to Aktiebolag (literally " share Company " or " Stock Company " is the Swedish term for " Limited Aktiengesellschaft ('aktsiəngəzεlʃaft abbreviated AG) is a German term that refers to a Corporation that is limited by shares i An ansvarlig selskap is a Norwegian personal responsibility Company model mainly used in small-to-medium businesses which translates directly into "Responsible An Aktieselskab (abbreviated A/S) is the Danish name for a Stock -based Corporation. Aksjeselskap is the Norwegian term for a Stock -based Company. Gesellschaft mit beschränkter Haftung ( GmbH) is a type of legal entity very common in Germany (where it was created in 1892 Austria nl '''''Naamloze Vennootschap''''' (usually abbreviated NV) is the Dutch term for a Public Limited liability Corporation. Osakeyhtiö, literally a " stock company " is the Finnish equivalent of a Limited company ( Ltd or LLC) or Gesellschaft For the art organization see Société Anonyme (art SA generally designates Corporations in various countries mostly those employing There are many types of business entity defined in the legal systems of various countries Corporate governance is the set of Processes customs Policies, laws and institutions affecting the way a Corporation is directed administered or controlled Limited liability is a concept whereby a person's financial Liability is limited to a fixed sum most commonly the value of a person's investment in a company or partnership Ultra vires is a Latin phrase that literally means "beyond the powers" The business judgment rule is an American Case law -derived concept in Corporations law whereby the "directors of a corporation. The internal affairs doctrine is a Choice of law rule in Corporations law. De facto corporation and corporation by estoppel are both terms that are used by Courts to describe circumstances in which a business organization that has The corporate law concept of piercing (lifting the corporate veil describes a legal decision where a shareholder or director of a Corporation is held liable for the The Rochdale Principles are a set of ideals for the operation of Cooperatives. A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law Civil procedure is the body of law that sets out the process that Courts will follow when hearing cases of a civil nature (a " Civil action " as opposed to Note This Wikipedia entry deals with the legal concept legal person. A corporation is a separate legal entity usually used to conduct business Incorporation (abbreviated Inc in US and Canadian business names is the forming of a new Corporation (a corporation being a legal entity

In the U. K. , corporate law is a subset of companies law, and in the U. Companies law (or the law of business associations) is the field of Law concerning business and other organizations S. , it is often viewed (at least for teaching purposes) as part of the law of business associations. Companies law (or the law of business associations) is the field of Law concerning business and other organizations In each case, corporations are distinguished from a wider spectrum of organizational forms, such as partnerships, trusts, unincorporated associations, guilds or sole proprietorships. For partnership in cricket terminology see List of cricket terms A partnership is a type of Business entity in which partners In Common law legal systems a trust is an arrangement whereby Property (including real tangible and intangible is managed by one person (or persons or organizations A voluntary association or union (also sometimes called a voluntary organization, unincorporated association, or just an association) is a group A guild is an association of craftsmen in a particular trade The earliest guilds were formed as confraternities of workers A sole proprietorship, or simply proprietorship ( Benjamen Clark

Technically, a company (in the U. S. , a corporation) is a juristic person or legal entity which has a separate legal identity from its shareholding members, and is ordinarily incorporated to undertake commercial business. Note This Wikipedia entry deals with the legal concept legal person. A business (also called firm or an enterprise) is a legally recognized organizational entity designed to provide goods and/or services to Although some jurisdictions refer to unincorporated entities as companies, in most jurisdictions the term refers only to incorporated entities. Incorporation (abbreviated Inc in US and Canadian business names is the forming of a new Corporation (a corporation being a legal entity It has been judicially remarked that "the word company has no strictly legal meaning",^[1] but is taken to mean a specific form of entity created under the laws of the relevant jurisdiction. Because of the limited liability of the members of the company (in the U. Limited liability is a concept whereby a person's financial Liability is limited to a fixed sum most commonly the value of a person's investment in a company or partnership S. , the shareholders of the corporation) for the company's debts and the separate personality and tax treatment of the company, it has become the most popular form of business vehicle in most countries in the world. Companies law (or the law of business associations) is the field of Law concerning business and other organizations

However, companies have a number of other uses. They are not normally subject to rules against mortmain or perpetuity as are trusts, and may have perpetual existence. Mortmain is a legal term derived from medieval French literally meaning dead hand. The rule against perpetuities is a rule of law in effect under the property, Trusts, Estate, and Contract law of many Common law Companies are often used in tax structuring. Companies, being commercial entities, are often easier to utilise in financing arrangements than partnerships and individuals. ^[2] Companies have an inherent flexibility which can let them grow; there is no legal reason why a company initially formed by a sole proprietor cannot eventually grow to be a publicly listed company, but a partnership will generally always be limited as to the maximum number of partners. ^[3]

Contents 1 Etymology 2 History 3 Types 4 Corporate constitution 5 Shares and share capital 6 Corporate personality 7 Capacity and powers 8 Officers and agents 9 Members' rights and majority rule 10 Director's duties 11 Liquidations 12 See also 13 Notes

Etymology

In the United States, a company may or may not be a separate legal entity, and is often used synonymously with "firm" or "business. " A corporation may accurately be called a company; however, a company should not necessarily be called a corporation, which has distinct characteristics. A corporation is a separate legal entity usually used to conduct business According to Black's Law Dictionary, in the U. Black's Law Dictionary is the most widely-used Law dictionary for the Law of the United States. S. a company means "a corporation — or, less commonly, an association, partnership or union — that carries on industrial enterprise. "^[4]

History

Although some forms of companies are thought to have existed during Ancient Rome and Ancient Greece, the closest recognizable ancestors of the modern company did not appear until the second millennium. For the Noel Coward play see South Sea Bubble (play. The South Sea Bubble of 1720 was an Economic bubble that occurred Edward Matthew Ward ( July 14, 1816 &ndash January 15, 1879) was an English Victorian narrative painter best known Tate is the United Kingdom 's national museum of British and Modern Art and is a network of four art galleries in England: Tate Britain (opened in Ancient Rome was a Civilization that grew out of a small agricultural community founded on the Italian Peninsula as early as the 10th century BC The term ancient Greece refers to the period of Greek history lasting from the Greek Dark Ages ca The first recognizable commercial associations were medieval guilds, where guild members agreed to abide by guild rules, but did not participate in ventures for common profit. The earliest forms of joint commercial enterprise under the lex mercatoria were in fact partnerships. The Law Merchant is a legal system used by merchants in medieval Europe, including England.

But with the expansion of international trade, Royal charters were increasingly granted in Europe (notably in England and Holland) to merchant adventurers. A Royal Charter is a Charter granted by the Sovereign on the advice of the Privy council to legitimize an incorporated body such as a city company England is a Country which is part of the United Kingdom. Its inhabitants account for more than 83% of the total UK population whilst its mainland Holland is a region in the western part of the Netherlands. A maritime and economic power in the 17th century Holland today consists of the Dutch provinces of The Royal charters usually conferred special privileges on the trading company (including, usually, some form of monopoly). In Economics, a monopoly (from Greek monos, alone or single + polein, to sell exists when a specific individual or enterprise has sufficient Originally, traders in these entities traded stock on their own account, but later the members came to operate on joint account and with joint stock, and the new Joint stock company was born. A joint stock company (JSC is a type of business entity it is a type of Corporation or Partnership. ^[5]

Early companies were purely economic ventures; it was only belatedly realized that an incidental benefit of holding joint stock was that the company's stock could not be seized for the debts of any individual member. ^[6] The development of company law in Europe was hampered by two notorious "bubbles" (the South Sea Bubble in England and the Tulip Bulb Bubble in Holland) in the 17th century, which set the development of companies in the two leading jurisdictions back by over a century in popular estimation. For the Noel Coward play see South Sea Bubble (play. The South Sea Bubble of 1720 was an Economic bubble that occurred Tulip mania or tulipomania ( Dutch names include tulpenmanie tulpomanie tulpenwoede tulpengekte and bollengekte) was a period in the

But companies, almost inevitably, returned to the forefront of commerce, although in England to circumvent the Bubble Act 1720 investors had reverted to trading the stock of unincorporated associations, until it was repealed in 1825. The Bubble Act of 1720 (Officially titled the Royal Exchange and London Assurance Corporation Act 1719) was an Act of the Parliament of Great Britain (citation However, the cumbersome process of obtaining Royal charters was simply insufficient to keep up with demand. In England there was a lively trade in the charters of defunct companies. However, prevarication amongst the legislation meant that in England it was not until the Joint Stock Companies Act 1844 that the first equivalent of modern companies, formed by registration, appeared. The Joint Stock Companies Act 1844 (7 & 8 Vict c 110 was an Act of the Parliament of the United Kingdom that expanded access to the incorporation Soon after came the Limited Liability Act 1855, which in the event of a company's bankruptcy limited the liability of all shareholders to the amount of capital they had invested. For the history of introduction of the Act and early experience with its application see Limited liability History. The beginning of modern company law came when the two pieces of legislation were codified under the Joint Stock Companies Act 1856 at the behest of the then Vice President of the Board of Trade, Mr Robert Lowe. The Joint Stock Companies Act 1856 was a consolidating statute recognised as the founding piece of modern UK company law legislation Robert Lowe 1st Viscount Sherbrooke PC ( 4 December 1811 – 27 July 1892) British and Australian That legislation shortly gave way to the railway boom, and from there the numbers of companies formed soared. In the later nineteenth century depression took hold, and just as company numbers had boomed, many began to implode and fall into insolvency. Much strong academic, legislative and judicial opinion was opposed to the notion that businessmen could escape accountability for their role in the failing businesses. The last significant development in the history of companies was the decision of the House of Lords in Salomon v. Salomon & Co. where the House of Lords confirmed the separate legal personality of the company, and that the liabilities of the company were separate and distinct from those of its owners. Salomon v Salomon & Co Ltd (1896 AC 22 (HL is a foundational decision of the House of Lords in the area of Company law.

In a December 2006 article, The Economist identified the development of the joint stock company as one of the key reasons why Western commerce moved ahead of its rivals in the Middle East in post-renaissance era. The Economist is an English-language weekly news and International affairs publication owned by The Economist Newspaper Ltd and edited in London The Renaissance (from French Renaissance, meaning "rebirth" Italian: Rinascimento, from re- "again" and nascere ^[7] Of course one should not underestimate the effects of early industrialisation either. is a process of social and economic change whereby a human group is transformed from a Pre-industrial society into an industrial one

Further information: Corporation: Origins

Types

Main article: Company

There are various types of company that can be formed in different jurisdictions, but the most common forms of company are:

• a company limited by shares. A corporation is a separate legal entity usually used to conduct business Generally a company is a form of Business organization. The precise definition varies A private company limited by shares is a type of company incorporated under the laws of England and Wales, Scotland, that of certain Commonwealth countries The most common form of company used for business ventures.
• a company limited by guarantee. In British or Irish Company law, a company limited by guarantee is an alternative type of Corporation used primarily for Non-profit Commonly used where companies are formed for non-commercial purposes, such as clubs or charities. The members guarantee the payment of certain (usually nominal) amounts if the company goes into insolvent liquidation, but otherwise they have no economic rights in relation to the company .
• a company limited by guarantee with a share capital. A hybrid entity, usually used where the company is formed for non-commercial purposes, but the activities of the company are partly funded by investors who expect a return.
• an unlimited liability company. In the United Kingdom, an unlimited company is a company formed by registration under the Companies Act 1985 where the liability of the members is unlimited - A company where the liability of members for the debts of the company are unlimited. Today these are only seen in rare and unusual circumstances.

In legal parlance, the owners of a company are normally referred to as the "members". In a company limited by shares, this will be the shareholders. In a company limited by guarantee, this will be the guarantors.

Companies are also sometimes distinguished for legal and regulatory purposes between public companies and private companies. A Public Limited Company ( PLC, plc or plc or p l c is a type of Limited company in the United Kingdom or the Republic of Ireland which is The term privately held company refers to ownership of a business company in two different ways first referring to ownership by non-governmental organizations and second Public companies are companies whose shares can be publicly traded, often (although not always) on a regulated stock exchange. A stock exchange, share market or bourse is a Corporation or Mutual organization which provides "trading" facilities for Stock Private companies do not have publicly traded shares, and often contain restrictions on transfers of shares. In some jurisdictions, private companies have maximum numbers of shareholders.

There are, however, many specific categories of corporations and other business organizations which may be formed in various countries and jurisdictions throughout the world. In Law, jurisdiction (from the Latin ius iuris meaning "law" and dicere meaning "to speak" is the practical Authority For a partial list of these, see Types of business entity. There are many types of business entity defined in the legal systems of various countries

Corporate constitution

In almost every jurisdiction in the world, a company must have a corporate constitution, which defines the existence of the company and regulates the structure and control of the company. In relation to artificial persons, the constitutional documents (sometimes referred to as the charter documents) of the entity are the documents which define the existence

By convention, most common law jurisdictions divide the corporate constitution into two separate documents:

• the Memorandum of Association (in some countries referred to as the Articles of Incorporation or the Certificate of Incorporation) is the primary document, and will generally regulate the company's activities with the outside world, such as the company's objects and powers and specify the authorised share capital of the company. Common law refers to law and the corresponding legal system developed through decisions of courts and similar tribunals rather than through legislative statutes or executive The memorandum of association of a company, often simply called the memorandum (and then often capitalised as an abbreviation for the official name which is a proper The Articles of Incorporation (sometimes also referred to as the Certificate of Incorporation or the Corporate Charter) are the primary rules governing the management The authorised capital of a company (sometimes referred to as the authorised share capital or the nominal capital, particularly in the United States
• the Articles of Association (in some countries referred to as the by-laws) is the secondary document, and will generally regulate the company's internal affairs and management, such as procedures for board meetings, dividend entitlements etc. The articles of association of a company often simply referred to as the articles (and then often capitalised as an abbreviation for the official name which is a proper noun A bylaw (sometimes also spelled by-law or byelaw) most commonly refers to a city or municipal law or ordinance passed under the authority of a Charter ^[8]

In many countries, only the primary document is filed, and the secondary document remains private. In other countries, both documents are filed. Some countries provide statutory forms of basic corporate constitution which a company may adopt (for example, Table A in the United Kingdom, or Replaceable Rules in Australia). In United Kingdom|UK company law, Table A refers to the default form of Articles of Association for companies limited by shares incorporated either in England

In civil law jurisdictions, the company's constitution is normally consolidated into a single document, often called the charter. Civil law or Romano-Germanic law or Continental law is the predominant system of law in the world. A charter is the grant of authority or rights stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified

It is quite common for members of a company to supplement the corporate constitution with additional arrangements, such as shareholders' agreements, whereby they agree to exercise their membership rights in a certain way. A shareholders' agreement (sometimes referred to in the US as a stockholders' agreement) is an agreement between the Shareholders of a Company Conceptually a shareholders' agreement fulfills many of the same functions as the corporate constitution, but because it is a contract, it will not normally bind new members of the company unless they accede to it somehow. ^[9] One benefit of shareholders' agreement is that they will usually be confidential, as most jurisdictions do not require shareholders' agreements to be publicly filed.

Another common method of supplementing the corporate constitution is by means of voting trusts, although these are relatively uncommon outside of the United States and certain offshore jurisdictions. A voting trust is a trust whereby the shares in a company of one or more shareholders and the voting rights attached thereto are legally transferred to The United States of America —commonly referred to as the An offshore financial centre (or OFC) although not precisely defined is usually a low- Tax, lightly Regulated jurisdiction which specializes in providing

Some jurisdictions consider the company seal to be a party of the "constitution" (in the loose sense of the word) of the company, but the requirement for a seal has been abrogated by legislation in most countries. A company seal (sometimes referred to as the corporate seal or common seal) is an official seal used by a company.

Shares and share capital

Main article: Stock

Companies generally raise capital for their business ventures either by debt or equity. Software for Fixed assets management and Stock control developed in 2004. In Finance, a bond is a Debt security, in which the authorized issuer owes the holders a debt and is obliged to repay the principal and Interest Capital raised by way of equity is usually raised by issued shares (sometimes called "stock" (not to be confused with stock-in-trade)) or warrants. In Finance, a warrant is a security that entitles the holder to buy stock of the company that issued it at a specified price which is usually higher than the stock

A share is an item of property, and can be sold or transferred. Holding a share makes the holder a member of the company, and entitles them to enforce the provisions of the company's constitution against the company and against other members. Shares also normally have a nominal or par value, which is the limit of the shareholder's liability to contribute to the debts of the company on an insolvent liquidation.

Shares usually confer a number of rights on the holder. These will normally include:

• voting rights
• rights to dividends declared by the company
• rights to any return of capital either upon redemption of the share, or upon the liquidation of the company
• in some countries, shareholders have preemption rights, whereby they have a preferential right to participate in future share issues by the company

Many companies have different classes of shares, offering different rights to the shareholders. Dividends are payments made by a Corporation to its Shareholder members In Economics, capital or capital Goods or real capital refers to items of extensive value For example, a company might issue both ordinary shares and preference shares, with the two types having different voting and/or economic rights. For example, a company might provide that preference shareholders shall each receive a cumulative preferred dividend of a certain amount per annum, but the ordinary shareholders shall receive everything else.

The total number of issued shares in a company is said to represent its capital. Many jurisdictions regulate the minimum amount of capital which a company may have, although some countries only prescribe minimum amounts of capital for companies engaging in certain types of business (e. g. banking, insurance etc. A banker or bank is a Financial institution whose primary activity is to act as a payment agent for customers and to borrow and lend money Insurance, in Law and Economics, is a form of Risk management primarily used to hedge against the Risk of a contingent loss ).

Similarly, most jurisdictions regulate the maintenance of capital, and prevent companies returning funds to shareholders by way of distribution when this might leave the company financially exposed. In some jurisdictions this extends to prohibiting a company from providing financial assistance for the purchase of its own shares. In Law, financial assistance refers to assistance given by a company for the purchase of its own shares or the shares of its holding companies

Corporate personality

Main article: Piercing the corporate veil

One of the key legal features of corporations are their separate legal personality, also known as "personhood" or being "artificial persons". The corporate law concept of piercing (lifting the corporate veil describes a legal decision where a shareholder or director of a Corporation is held liable for the However, the separate legal personality was not confirmed under English law until 1895 by the House of Lords in Salomon v. Salomon & Co. [1897] AC 22. English law is the legal system of England and Wales, and is the basis of Common law legal systems used in most Commonwealth countriesand the Year 1895 ( MDCCCXCV) was a Common year starting on Tuesday (link will display full calendar of the Gregorian calendar (or a Common year The House of Lords, in addition to having a legislative function has a judicial function as a Court of last resort within the United Kingdom. Salomon v Salomon & Co Ltd (1896 AC 22 (HL is a foundational decision of the House of Lords in the area of Company law. However, it is now largely accepted throughout the world that companies are legally separate and distinct entities.

Separate legal personality often has unintended consequences, particularly in relation to smaller, family companies. Unintended consequences are outcomes that are not (or not limited to what the actor intended in a particular situation A family business is a business in which one or more members of one or more families have a significant ownership interest and significant commitments toward the business’ overall well-being

• In B v B [1978] Fam 181 it was held that a discovery order obtained by a wife against her husband was not effective against the husband's company as it was not named in the order and was separate and distinct from him. In Law, discovery is the pre-trial phase in a Lawsuit in which each party through the law of Civil procedure can request documents and other evidence ^[10]
• In Macaura v Northern Assurance Co Ltd [1925] AC 619 a claim under an insurance policy failed where the insured had transferred timber from his name into the name of a company wholly owned by him, and it was subsequently destroyed in a fire; as the property now belonged to the company and not to him, he no longer had an "insurable interest" in it and his claim failed.

However, separate legal personality does allow corporate groups a great deal of flexibility in relation to tax planning, and also enables multinational companies to manage the liability of their overseas operations (see Adams v Cape Industries plc [1990] Ch 433). Multinational corporation ( MNC) or transnational corporation ( TNC) is a Corporation or enterprise that manages Production or delivers Adams v Cape Industries plc Ch 433 resolved a number of important issues under English law.

There are certain specific situations where courts are generally prepared to "pierce the corporate veil": to look directly at, and impose liability directly on the individuals behind the company. The corporate law concept of piercing (lifting the corporate veil describes a legal decision where a shareholder or director of a Corporation is held liable for the The most commonly cited examples are:

• where the company is a mere façade
• where the company is effectively just the agent of its members or controllers
• where a representative of the company has taken some personal responsibility for a statement or action^[11]
• where the company is engaged in fraud or other criminal wrongdoing
• where the natural interpretation of a contract or statute is as a reference to the corporate group and not the individual company
• where permitted by statute (for example, many jurisdictions provide for shareholder liability where a company breaches environmental protection laws)
• in many jurisdictions, where a company continues to trade despite inevitable bankruptcy, the directors can be forced to account for trading losses personally

Capacity and powers

Historically, because companies are artificial persons created by operation of law, the law prescribed what the company could and could not do. Environmental law is a complex and interlocking body of Statutes, Common law, Treaties, conventions Regulations and policies which very Bankruptcy is a legally declared inability or impairment of ability of an individual or organization to pay their Creditors Creditors may file a bankruptcy petition against Usually this was an expression of the commercial purpose which the company was formed for, and came to referred to as the company's objects, and the extent of the objects are referred to as the company's capacity. Discussion As an aspect of the Social contract between a state and its Citizens the state adopts a role of protector to the weaker and more vulnerable members If an activity fell outside of the company's capacity it was said to be ultra vires and void. Ultra vires is a Latin phrase that literally means "beyond the powers" In Law, void means of no legal effect The Latin phrase void ab initio means "to be treated as invalid from the outset"

By way of distinction, the organs of the company were expressed to have various corporate powers. If the objects were the things that the company was able to do, then the powers were the means by which it could do them. Usually expressions of powers were limited to methods of raising capital, although from earlier times distinctions between objects and powers have caused lawyers difficulty. ^[12]

Most jurisdictions have now modified the position by statute, and companies generally have capacity to do all the things that a natural person could do, and power to do it in any way that a natural person could do it.

However, references to corporate capacity and powers have not quite been consigned to the dustbin of legal history. In many jurisdictions, directors can still be liable to their shareholders if they cause the company to engage in businesses outside of its objects, even if the transactions are still valid as between the company and the third party. And many jurisdictions also still permit transactions to be challenged for lack of "corporate benefit", where the relevant transaction has no prospect of being for the commercial benefit of the company or its shareholders. Corporate benefit (sometimes referred to as commercial benefit) is the requirement under some legal systems that the directors of a company must exercise

Further information: Corporate benefit

Officers and agents

As artificial persons, companies can only act through human agents. Corporate benefit (sometimes referred to as commercial benefit) is the requirement under some legal systems that the directors of a company must exercise As was once memorably remarked, "It has no body to kick and no soul to damn. "^[13]

The main agent who deals with the company's management and business is the board of directors, but in many jurisdictions other officers can be appointed too. The board of directors is normally elected by the members, and the other officers are normally appointed by the board. These agents enter into contracts on behalf of the company with third parties.

Although the company's agents owe duties to the company (and, indirectly, to the shareholders) to exercise those powers for a proper purpose, generally speaking third parties' rights are not impugned if it transpires that the officers were acting improperly. Third parties are entitled to rely on the ostensible authority of agents held out by the company to act on its behalf. In law ostensible authority refers to the apparent authority of an agent (usually a Company director) of a company as it appears to others and it can operate both A line of common law cases reaching back to Royal British Bank v Turquand established in common law that third parties were entitled to assume that the internal management of the company was being conducted properly, and the rule has now been codified into statute in most countries. Royal British Bank v Turquand (1856 6 E&B 327 and the eponymous "Rule in Turquand's Case " refer to the rule of English law that a third party

Accordingly, companies will normally be liable for all the act and omissions of their officers and agents. This will include almost all torts, but the law relating to crimes committed by companies is complex, and varies significantly between countries. Tort law is the name given to a body of law that creates and provides remedies for civil wrongs that do not arise out of Contractual duties Corporate manslaughter is a Crime in several Jurisdictions It enables a Corporation to be punished and censured for culpable conduct that leads to a person's

Further information: Vicarious liability of companies and Corporate liability

Members' rights and majority rule

Members of a company generally have rights against each other and against the company, as framed under the company's constitution. This article is about vicarious liability in private litigation for vicarious liability in criminal law see Vicarious liability (criminal. In the Criminal law, corporate liability determines the extent to which a Corporation as a fictitious person can be liable for the acts and omissions In relation to the exercise of their rights, minority shareholders usually have to accept that, because of the limits of their voting rights, they cannot direct the overall control of the company and must accept the will of the majority (often expressed as majority rule). However, majority rule can be iniquitous, particularly where there is one controlling shareholder.

Accordingly, a number of exceptions have developed in law in relation to the general principle of majority rule.

• Where the majority shareholder(s) are exercising their votes to perpetrate a fraud on the minority, the courts may permit the minority to sue^[14]
• members always retain the right to sue if the majority acts to invade their personal rights, e. g. where the company's affairs are not conducted in accordance with the company's constitution (this position has been debated because the extent of a personal right is not set in law). Macdougall v Gardiner and Pender v Lushington present irreconcilable differences in this area.
• in many jurisdictions it is possible for minority shareholders to take a representative or derivative action in the name of the company, where the company is controlled by the alleged wrongdoers

Further information: Shareholder and Derivative suit

Director's duties

Main article: Board of directors

In most jurisdictions, directors owe strict duties of good faith, as well as duties of care and skill, to safeguard the interests of the company and the members. A shareholder derivative suit is a lawsuit instigated by a Shareholder of a corporation not on the shareholder's own behalf but on behalf of the Corporation. A mutual shareholder or stockholder is an Individual or company (including a Corporation) that legally owns one or more shares of A shareholder derivative suit is a lawsuit instigated by a Shareholder of a corporation not on the shareholder's own behalf but on behalf of the Corporation. fiduciary duty is a legal relationship of confidence or trust between two or more parties most commonly a fiduciary or Trustee and a principal

The standard of skill and care that a director owes is usually described as acquiring and maintaining sufficient knowledge and understanding of the company's business to enable him to properly discharge his duties.

Directors are also strictly charged to exercise their powers only for a proper purpose. For instance, were a director to issue a large number of new shares, not for the purposes of raising capital but in order to defeat a potential takeover bid, that would be an improper purpose. ^[15]

Directors also owe strict duties not to permit any conflict of interest or conflict with their duty to act in the best interests of the company. A conflict of interest is a situation in which someone in a position of trust such as a Lawyer, Insurance adjuster, a Politician, executive or director This rule is so strictly enforced that, even where the conflict of interest or conflict of duty is purely hypothetical, the directors can be forced to disgorge all personal gains arising from it. In Aberdeen Ry v Blaikie (1854) 1 Macq HL 461 Lord Cranworth stated in his judgment that:

"A corporate body can only act by agents, and it is, of course, the duty of those agents so to act as best to promote the interests of the corporation whose affairs they are conducting. Robert Monsey Rolfe 1st Baron Cranworth PC ( 18 December 1790 &ndash 26 July 1868) was a British lawyer and Liberal Such agents have duties to discharge of a fiduciary nature towards their principal. And it is a rule of universal application that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have, a personal interest conflicting or which possibly may conflict, with the interests of those whom he is bound to protect. . . So strictly is this principle adhered to that no question is allowed to be raised as to the fairness or unfairness of the contract entered into. . . " (emphasis added)

However, in many jurisdictions the members of the company are permitted to ratify transactions which would otherwise fall foul of this principle. It is also largely accepted in most jurisdictions that this principle should be capable of being abrogated in the company's constitution.

Further information: Corporate governance and Conflict of interest

Liquidations

Main article: Liquidation

Liquidation is the normal means by which a company's existence is brought to an end. Corporate governance is the set of Processes customs Policies, laws and institutions affecting the way a Corporation is directed administered or controlled A conflict of interest is a situation in which someone in a position of trust such as a Lawyer, Insurance adjuster, a Politician, executive or director It is also referred to (either alternatively or concurrently) in some jurisdictions as winding up and/or dissolution.

Liquidations generally come in two forms, either compulsory liquidations (sometimes called creditors' liquidations) and voluntary liquidations (sometimes called members' liquidations, although a voluntary liquidation where the company is insolvent will also be controlled by the creditors, and is properly referred to as a creditors' voluntary liquidation).

As its names imply, applications for compulsory liquidation are normally made by creditors of the company when the company is unable to pay its debts. A creditor is a party (eg person organization company or government that has a claim to the services of a second party However, in some jurisdictions, regulators have the power to apply for the liquidation of the company on the grounds of public good, i. e. where the company is believed to have engaged in unlawful conduct, or conduct which is otherwise harmful to the public at large.

Voluntary liquidations occur when the company's members decide voluntarily to wind up the affairs of the company. This may be because they believe that the company will soon become insolvent, or it may be on economic grounds if they believe that the purpose for which the company was formed is now at an end, or that the company is not providing an adequate return on assets and should be broken up and sold off. Insolvency means the inability to pay one's debts This is defined in two different waysCash flow insolvency unable to pay debts as they fall dueBalance sheet insolvency

Some jurisdictions also permit companies to be wound up on "just and equitable" grounds. ^[16] Generally, applications for just and equitable winding-up are brought by a member of the company who alleges that the affairs of the company are being conducted in a prejudicial manner, and asking the court to bring an end to the company's existence. For obvious reasons, in most countries, the courts have been reluctant to wind up a company solely on the basis of the disappointment of one member, regardless of how well-founded that member's complaints are. Accordingly, most jurisdictions which permit just and equitable winding up also permit the court to impose other remedies, such as requiring the majority shareholder(s) to buy out the disappointed minority shareholder at a fair value.

Where a company goes into liquidation, normally a liquidator is appointed to gather in all the company's assets and settle all claims against the company. In Law, a liquidator is the officer appointed when a company goes into winding-up or Liquidation who has responsibility for collecting in all of the assets If there is any surplus after paying off all the creditors of the company, this surplus is then distributed to the members.

See also

• Business organizations
• Corporation
• Corporate liability
• Limited Liability Company (LLC)
• Limited Liability Partnership (LLP)
• Limited Partnership (LP)
• List of company name etymologies
• List of companies named after people
• North American Industry Classification System (NAICS formerly SIC)
• Offshore company
• Organization
• Private limited company
• Public limited company (PLC)
• Quasi corporation
• Types of companies
• Securities regulation in the United States
• Companies House
• Companies Registry

Notes

Further Reading: *{{|title= A Comparative Bibliography: Regulatory Competition on Corporate Law |url= http://ssrn.com/abstract=1103644}}

Dignam, A and Lowry, J (2006) Company Law, Oxford University Press ISBN-13: 978-0-19-928936-3

Foss v Harbottle (1843 2 Hare 461 67 ER 189 is a famous decision English Precedent on Corporate law.

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