Corporate law is a field of private law that governs the relations and transactions between individuals starting from the formation and until the end of it. The main target of corporate law is to increase aggregate welfare for each individual who is affected by the firm’s activities and operations. Within the development of the modern economic world, uniformity has become a need for business relations at international level. The main practice areas commonly referred to as the corporate law field can be summarised as banking and finance, mergers and acquisitions, dispute resolution, and insolvency and restructuring.
Although a precise definition of the corporation does not exist in most jurisdictions, a corporation can be defined as a legal entity in which the rights and liabilities of owners are separated from the company. A theory in English law asserts the idea of the nexus of contracts which sets down that a company is nothing more than a cumulation of contracts between private individuals. Regarding the characteristics of a corporation, five core elements should be discussed to understand the basics of corporate law. Legal entity, limited liability, transferable shares, management under a board structure, and shared ownership by contributors of capital are the essentials of a corporation that pursues the aim of performing efficient economic activities.
Legal Entity
The term “legal entity” is defined in the Companies Act 2006 as a body corporate or a firm that is a legal person under the law by which it is governed. By forming a legal entity, a corporation becomes subject to rights and obligations within the jurisdiction. Having a legal entity enables a corporation to enter into agreements, have the right to hold titles, be sued and sue, and many other capacities. Thus, creating a corporate veil by which the shareholders limit their liability. Therefore, corporations with limited liabilities are commonly preferred so that shareholders can be relieved from company debt, save for its contribution obligations. The liability of owners in limited liability companies is determined either by shares or by guarantee.
Transferable Shares
Transferable shares are another feature of a corporation that enables companies to conduct their businesses seamlessly during a change of control. When the owner does not wish to be a shareholder anymore, shares can be transferred to someone else in a way that the activity and operation of the firm will not be interrupted.
Management under Directors
The separate legal entity of a corporation requires an authority to operate the business activities and directors of the company hold such authority. The directors are elected by the shareholders. The decisions are taken by directors and the voting system may differ depending on the content of the decision which might be the majority of votes or unanimity of votes.
Investment
Under the characteristics of the corporation, an owner’s control over the business and benefits on net earnings are separate. In principle, these two abilities meet on the same individual when an investor fully owns the firm and acts as the director. The amount of earnings received by an investor is generally proportional to the contribution of capital to the firm save for preferred shares. As the directors do not necessarily need to be shareholders, investors may venture in corporations without the hassles of management.
Incorporation
As stated in Section 1065 of the Companies Act 2006, any person may require the registrar to provide him with a certificate of incorporation of the company. The doctrine of incorporation is preferred in U.K. corporate law within the current legislation. This doctrine asserts the idea that the legal incorporation of a company is regarded as an autonomous legal person in its own right, with its own legal personality.
The incorporation process in U. K. can be followed by a guideline published on www.gov.uk which also highlights essential information about a corporation. In addition to that, model articles can be found on the website for required documents to incorporate a company. However, it must be noted that each business has different sorts of needs in varying natures and these needs will not be satisfied with templates cast stone.
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