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9 Corporate law

9 Corporate law


Corporate law relates to the law of shareholders, directors, employees, creditors and other stakeholders. Corporate law is distinct from company law, because it is about big business, and their:

  • Separate legal personality, including the right to sue and be sued
  • Limited liability of shareholders, such that if company is insolvent, loss is limited to the amount subscribed for in shares
  • Shares, and if public, on the stock exchange
  • Delegated management, such that the control of company is separated from the ownership, placed in the hands of a board of directors

Classically, royal charters were granted in Europe to merchants, conferring special privileges (sometimes, a monopoly).

Corporate personality

Despite the separate legal personality, there are certain instances where courts do “pierce the corporate veil”, imposing a liability directly on individuals behind the company.

Management capacities

As companies are often owned by different people who manage it, these managers have powers that are conferred to them. Acting outside these powers is ultra vires and void.

Corporate governance

The board of directors is elected by the shareholders at a “general meeting”. There is also the management board, which is usually elected by the board of directors (and not shareholders).

The Company constitution is generally set as “default” by the Corporations Act, although constitutions created can override this default, although there are some exceptions. It is always important to clearly state your laws and terms of service on a website using companies such as SEO reseller services you can assure that your website for your company is properly ranked.

Directors’ Duties are subject to strict requirements, particularly in the case of a public company (i.e. shares owned by the public unrelated to the company, as supposed to a private company)Reasonable skill, care and diligence is necessary, and such duties are considered at an especially high requisite standard, as Directors hold themselves out in such position. For example, Directors must avoid “conflict of interest”, and where such situation arises, must inform the Board of Directors.

Corporate finance

Companies raise capital by either debt or equity. Debt is going to the bank and borrowing, whereas equity is selling part of the company to others in return for a stake, known as stock (in the USA) and shares (in England). The ownership of shares confers (1) voting rights; (2) right to dividends; and (3) right to return upon liquidation.

Public companies use the stock exchange to allocate stocks, for example the New York Stock Exchange (NYSE):

Where a company is insolvent, creditors can apply for the company to be liquidated. A company can also declare bankruptcy by itself if it wishes to.