Corporate Laws

Corporate law is the body of laws, rules, regulations and practices that govern the formation and operation of corporations. It’s the body of law that regulates legal entities that exist to conduct business. The laws touch on the rights and obligations of all of the people involved with forming, owning, operating and managing a corporation.

Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation.

While the minute nature of corporate governance as personified by share ownership, capital market, and business culture rules differ, similar legal characteristics - and legal problems - exist across many jurisdictions. Corporate law regulates how corporations, investors, shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community, and the environment interact with one another. Whilst the term company or business law is colloquially used interchangeably with corporate law, the term business law mostly refers to wider concepts of commercial law, that is the law relating to commercial and business related purposes and activities. In some cases, this may include matters relating to corporate governance or financial law. When used as a substitute for corporate law, business law means the law relating to the business corporation (or business enterprises), including such activity as raising capital, company formation, and registration with the government.

The major characteristics of corporate law

There are five principles that are common to corporate law:

1. Legal personality

Corporation owners pool their resources into a separate entity. That entity can use the assets and sell them. Creditors can’t easily take the assets back. Instead, they form their own entity that acts on its own.

1. Legal personality

Corporation owners pool their resources into a separate entity. That entity can use the assets and sell them. Creditors can’t easily take the assets back. Instead, they form their own entity that acts on its own.

2. Limited liability

When a corporation gets sued, it’s only the corporation’s assets that are on the line. The plaintiff can’t go after the personal assets of the corporation’s owners. A corporation’s limited liability allows owners to take risks and diversify their investments.

3. Transferrable shares

If an owner decides they no longer want a share in the corporation, the corporation doesn’t have to shut down. One of the unique features of a corporation is that owners can transfer shares without the same difficulties and hassles that come with transferring ownership of a partnership. There can be limits on how shareholders transfer ownership, but the fact that ownership can be transferred allows the corporation to go on when owners want to make changes.

4. Delegated management

Corporations have a defined structure for how they conduct their affairs. There’s a board of directors and officers. These groups share and split decision-making authority. Board members hire and monitor officers. They also ratify their major decisions. The shareholders elect the board.

Officers handle the day to day operation of the company. They’re the leaders for conducting transactions and making the business run each day. With a defined leadership structure, parties that do business with the corporation have the assurances that actions of officers and the board of directors are legally binding on the corporation.

5. Investor ownership

Owners have a say in making decisions for the corporation, but they don’t directly run the company. Investors also have the right to the corporation’s profits. Usually, an owner has decision-making authority and profit sharing in proportion to their ownership interest. Owners typically vote to elect board members.

Why do corporate laws exist?

The laws and rules that govern corporations keep all corporations operating on a level playing field. Corporate law is meant to be friendly for business. It’s not meant to make it harder to get things done. The laws exist to make it easier for corporations to do business. Rules that govern forming a corporation and rules for how to take corporate actions are meant to help business and make things fair for everyone. They make sure that corporations act in predictable ways that others can rely on.

Who are the people involved in a corporation?

A corporation has many different players. Not everyone who works for or interacts with a corporation is an owner. Some of the key people involved in the operation of a corporation include:

Owners – A person who invests in a corporation is an owner. Typically, the larger share of the corporation that you own, the more say and control you have over decisions. Owners are also often called shareholders.

Directors – Directors oversee the activities of the corporation. Usually, they vote on major decisions. They’re typically elected by the owners, but they don’t necessarily have to follow popular opinion when they vote.

Officers – The officers in a corporation handle the most significant day to day decision making. They take direction from the board of directors on major decisions.

Employees – Employees carry out the day to day functions of a corporation for pay.

Creditors and debtors – When people and other companies do business with a corporation, they’re the corporation’s creditors and debtors.

For the people working in the corporate law firms in India, the following are the practice areas of specialization.

• Banking and finance practice.
• Mergers and acquisitions practice
• Dispute resolution.
• General corporate law.
• Insolvency and restructuring.
• Capital markets.
• White-Collar Crime.