What is Corporate Law?
Corporate law is the body of laws, rules, regulations and practices that help the formation and operation of corporations. It’s the body of law that regulates businesses. The laws touch on the rights and obligations of all of the people involved with forming, owning, operating and managing a corporation.
What’s a corporation?
A corporation is a legal entity that exists to conduct business. It’s a separate legal entity from the people who make it. A corporation can conduct business in its own name just like any person can. When a person owns a part of a corporation, their liability is limited to their ownership in the corporation. They can’t lose more than their investment in the corporation.
The major characteristics of corporate law
There are five principles that are common to corporate law:
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.
When a corporation faces a lawsuit, it’s only the corporation’s assets that are liable. 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.
If an owner decides they no longer want a share in the corporation, the corporation doesn’t have to shut down. 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.
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. They run the business each day. 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.
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?
Corporate law is meant to be friendly for business. 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.
Corporate law is civil
Corporate law is civil not criminal law. When there are disputes, the corporation’s officials can go to the appropriate civil court in order to resolve the dispute. Of course, officers and employees can still face criminal liability for fraud and other criminal acts. However, the laws that govern the formation and operation of corporations are generally a civil body of law with civil remedies.
Corporate law is a foundation of economic activity. Corporate lawyers help corporations form and help them do business. Nella can help foresee problems before they start and help a corporation take steps to avoid things that can be problematic. She can tackle complex concepts and exercise sound judgment to resolve many legal corporate law issues.