Company law

Vocabulary:

legal person – юридическое лицо

legal identity (entity) – юридическая правосубъектность

liability limited by shares – ответственность по долгам, ограниченная пакетами акций

limited by guarantee – ответственность по долгам, ограниченная гарантиями членов

assets – имущество

partnership – партнерство, товарищество

share = security = equity = stock - акция

dividend – дивиденд

debenture – облигация

loan - заем

to run a business – вести дело, управлять компанией

dissolve = wind up = terminate = liquidate – распускать, прекращать существование, ликвидировать

ultra vires – вне компетенции

insider trading – незаконные сделки с ценными бумагами с использованием конфиденциальной информации

Organization. When people wish to associate for business, they have to consider whether to form a limited company (also called a corporation), a partnership or a sole proprietorship.

A limited company has a legal identity separate from its members. The members of a limited company have limited liability. This means that if the business has difficulties, the members have to pay its debts only up to a certain limit. The company’s liability itself is not limited; as long as the business has money or assets creditors may sue.

Another way to run a business is when two or more people form a partnership in which they share management, profits and liability to debts.

A sole proprietorship is a business owned and usually operated by a single person. And even if a sole proprietor employs other people, he alone is responsible for management and for any debts. Some examples include small retail stores, doctors’ and lawyers’ practices and restaurants.

Raising Capital. The money needed to start a business is called capital. If a person does not have enough capital to start a business, he may borrow some from the bank in the form of a loan or overdraft. Selling shares is another way companies raise capital. A share is ownership of a proportion of a company, and the right to a proportion of any profit it makes (called dividend). If a shareholder has more than 50% shares, he is a majority shareholder and has a majority or controlling interest in the company.

Management. The internal management of the company is regulated by a document called the Articles of Association. The Articles have rules about holding meetings; members’ voting rights; issuing shares; and appointment and removal of directors

Termination. A company may be terminated (dissolved) when its registration is cancelled or it goes bankrupt – that is, it cannot pay all its debts.

Breach of Company Law. Violation of company law may cause both civil suits and criminal prosecutions. For example, it is illegal if a company is engaged in an activity which is outside its capacity. Such activity is called ultra vires and may cause civil suits. The purpose of the doctrine is to stop using company assets for unauthorized activities.

A possible cause for criminal prosecution is insider trading. This means using inside knowledge to gain private profit when buying and selling company shares. (Directors and employees of companies often know if a company’s shares will rise or fall long before ordinary shareholders. As a result, they could make profits by buying or selling before everybody else or by selling their special information.)