CORPORATE LEGAL ASPECTS

THEME 1. CORPORATE LEGAL ASPECTS

Corporate legal aspects = corporate legal risk

Corporate: people who manage a business together.

Law: relating to the law.
Risk: trying to avoid an illegal action.

Corporate risk: the risk that business takes.

Security risk : anything related to financial laws. How corporations in the financial markets have to
work in order to respect financial laws.

Private limited company: transferability is not as easier as in public limited company, the process is
longer.
Public limited company: It’s shares are in the market, the markets are liquid and easy to buy and get
them.

Compliance officer — buscar en casa

The main aspects for creating a corporation are

Separately legal personality: you separate your business entity from yourself. The risk is on the
business as a separated entity.
To create a business money and people are required, without people you are not going to get
investors and no money. The main goal to create a company is to raise benefits and capital. So, it will
be attractive for investors. Creating a corporation gives you the liability to get the money from
investors.

If your shareholders leave, they will take the money with them. Why inverstors want to stay in the
company? Investors bring money to the company and this give them shares so that makes them
partly owners of the company. There is like a pact between the corporation and the inverstors.

Transferability of ownership
If you are a shareholder and you want to leave the corporation, you will have to sell your shares. It
means that you are transferring your shares to the buyer.

Separate legal personality

A legal entity is distingue of its components. The director, the employees, the shareholders…
everyone who takes part in the corporation.

Legal personality are the acts that you can do as a person. In legal entities which are purely fictional
even if they have offices, machines, computers.. however when you have a company is not actually
tangible. You can not touch the company so that makes intangible but it has legal personality which
means that you have the capacity to act, to own assets, enter in contracts. That’s why there is a
separation between personal and corporate assets.

The separation between a moral …. , is called the corporate veil there is a separation between you
and the company which limited the liability.

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If there is no corporate veil, there is no separation between the business and yourself, it means that
if the company do not have money you will have to pay.

It is a legal concept that separates the personality of a corporation from the personalities of the
shareholders, directors or anywhere that is a member of the company. It protects them from being
personally liable for any debts or credits that the corporation has.

PISS THE CORPORATE VEIL

It is a situation in which corporates put aside limited liability and hold shareholders or a corporation
liable for the corporations actions or debts. You are held to a certain standard in your acts, in the
way you generate debts.

1. FRAUDS
Some situations could be frauds, it cancels and cuts everything. Any rights that you have go out of
the window. If someone makes a fraud it takes away all of the rights that has in the company.
A other situation could be “a wrong doing”, you do not have intention to do it but you committed it.
Frauds are in purpose and wrong doing not. But in both situations, you have been acting out of the
law. For example, using the corporate account for personal aims.

2. INTERFEARENCE (management tips or suggestions)

Tortious interference occurs when one party interferes with an advantageous business relationship
of another party, causing economic harm. It is important to remember that this must be an
intentional act, and proving it can be challenging. In conclusion, trying to manage a sister company
can piss the corporate evil (for example, Novotel gives some tips to Ibis Styles (both companies are
in the some corporation) to improve their quality, they are managing their entity “putting their
nouse in their sister’s assets).

3. INSTRUCTIONS (obligation, one company is directing to other)

There is an influence in both cases, you put into practice what you have been instructed or what
they have recommended you.

4. FAILURE (not maintaining the corporate government, not respecting corporate law)
- Failure to complain:
- Failure :

APPLICABLE LAW
When you have a corporation you have the freedom of choice of law. It is the freedom for the
parties to choose which law from which jurisdiction (which country) would apply to the transaction
they are in.

CORPORATE STATUS OR ARTICLES OF ASSOCIATION

The creation of a business is a contract. The way the inverstors are going to invest and the way the
company is going to be managed and the relation between shareholders, managers or director is
what we call the corporate status (contract). Whatever problem that could happen between
shareholders or managers will be directed to the corporate status (articles of association).

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In conclusion, it is a contractual document that dictates how the company is managed, who has
invest in the company, what do they get in retourn, what voting rights gives them.

FORUM SHOPPING
Forum shopping is to choose which jurisdiction would be more advantageuous for opening a
business or making a transaction. Choose which country can offer the best deal due to the attractive
jurisdiction such as administrative process, taxes, obligations…

Reciprocidad,

UCE, the European

There are some exceptions to this freedom (forum shopping)
- Public interest rules (mandatory rules) For example: you can not set up a company escaping
human working conditions.
- Public order: you can no set up a company which is envolved in illegal facts, a company
based on saying only this type of person can work here.

The law of the place of the corporation is important because it regulates the relation between the
company, its executive officers and its shareholders.
The principales of mutual or reciprocity, it is the main advantage of being a citizen of the European
Union. Exchange of equal or identical advantages or privileges, such as removal of traveling
restriction between two countries.

The case of the US, there are some common laws for all the states but each state has their own laws.

CORPORATE GOVERNANCE
Is about how the company is managed. Managing the relationship between the board members
(director) and shareholders. So the question is, who has more power. The shareholders vote and the
directors take decisions. The problem is that directors only think in their own goals. So, that’s when
ESG comes.

Board members vs shareholders.

Shareholders have right to vote, the right of dividends (distribution of anual revenues of the
company but it’s limited by the legal reserve). The shareholders have no power to manage or own
the company.

COLLECTIVE POWER OF THE BOND OF DIRECTIONS

It’s role is direct the company which means implemented the strategy and acting for the interest of
shareholders. Other important element is the accounts. They need to communicate, they need to be
transparent with the shareholders.

Board directors vs General Management (CEO)

Limitation and delegation of powers

Directors against the chief executive officer. The board will limit the power of the CEO and the CEO
delegates his powers to the corporate officer. CEO and Board directors are in the same level of
hierarchy.

The CEO is the legal responsible of the company.

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RESPONSABILITY OF CORPORATE OFFICERS

Shareholders are the owners of the company because they own shares of the company.
The board members do not own the company, they collectively directs the companies affairs. In
some cases, the board member don’t have shares of the company.
The chairman led the global vision of the company.
The CEO manage the company in the day to day basis.
The board of directors are the representatives of the shareholders. They delegate power to the CEO.

The differences between the chairman and the CEO, the chairman leds the global vision of the
company and the CEO manages the day to day issues of the company.
The board of directors are the representatives of the shareholders. They delegate power to the CEO.

The company’s liability

A company is bound by any contract made by a persona acting as its expressly authorized
representative.
Contractual bound = contractually ligado

The civil liability is is the liability of the company which may be in charge of boards members,
managers, representatives, agents, employees within the scope of their duty or authority

Management misconduct, the legal representatives of the company.