However, members cannot generally claim against third parties who cause damage to the company which results in a diminution in the value of their shares or others membership interests because this is treated as " reflective loss " and the law normally regards the company as the proper claimant in such cases. In relation to the exercise of their rights, minority shareholders usually have to accept that, because of the limits of their voting rights, they cannot direct the overall control of the company and must accept the will of the majority often expressed as majority rule.
However, majority rule can be iniquitous, particularly where there is one controlling shareholder. Accordingly, a number of exceptions have developed in law in relation to the general principle of majority rule. Through the operational life of the corporation, perhaps the most crucial aspect of corporate law relates to raising capital for the business to operate. The law, as it relates to corporate finance, not only provides the framework for which a business raises funds - but also provides a forum for principles and policies which drive the fundraising, to be taken seriously.
Two primary methods of financing exists with regard to corporate financing, these are:. Each has relative advantages and disadvantages, both at law and economically.
Additional methods of raising capital necessary to finance its operations is that of retained profits  Various combinations of financing structures have the capacity to produce fine-tuned transactions which, using the advantages of each form of financing, support the limitations of the corporate form, its industry, or economic sector. A mix of both debt and equity is crucial to the sustained health of the company, and its overall market value is independent of its capital structure.
One notable difference is that interest payments to debt is tax deductible whilst payment of dividends are not, this will incentivise a company to issue debt financing rather than preferred shares in order to reduce their tax exposure. A company limited by shares, whether public or private, must have at least one issued share; however, depending on the corporate structure, the formatting may differ. If a company wishes to raise capital through equity, it will usually be done by issuing shares. In the common law, whilst a shareholder is often colloquially referred to as the owner of the company - it is clear that the shareholder is not an owner of the company but makes the shareholder a member of the company and entitles them to enforce the provisions of the company's constitution against the company and against other members.
Shares also normally have a nominal or par value, which is the limit of the shareholder's liability to contribute to the debts of the company on an insolvent liquidation.
Corporate Governance in the Common-Law World : The Political Foundations of Shareholder Power
Shares usually confer a number of rights on the holder. These will normally include:. Companies may issue different types of shares, called "classes" of shares, offering different rights to the shareholders depending on the underlying regulatory rules pertaining to corporate structures, taxation, and capital market rules.
It might provide that preference shareholders shall each receive a cumulative preferred dividend of a certain amount per annum, but the ordinary shareholders shall receive everything else. Corporations will structure capital raising in this way in order to appeal to different lenders in the market by providing different incentives for investment. Most jurisdictions regulate the minimum amount of capital which a company may have, [ citation needed ] although some jurisdictions prescribe minimum amounts of capital for companies engaging in certain types of business e.
Often this extends to prohibiting a company from providing financial assistance for the purchase of its own shares. Events such as mergers, acquisitions, insolvency, or the commission of a crime will adversely affect the corporation in its current form. At the end of the corporate lifecycle, a corporation may be "wound up" and enter into bankruptcy liquidation.
This often arises when the corporation is unable to discharge its debts in a timely manner. Comparatively, a merger or acquisition can often mean the altering or extinguishing of the corporation. In addition to the creation of the corporation, and its financing, these events serve as a transition phase into either dissolution, or some other material shift. Liquidation is the normal means by which a company's existence is brought to an end. It is also referred to either alternatively or concurrently in some jurisdictions as winding up or dissolution. Liquidations generally come in two forms — either compulsory liquidations sometimes called creditors' liquidations and voluntary liquidations sometimes called members' liquidations , although a voluntary liquidation where the company is insolvent will also be controlled by the creditors, and is properly referred to as a creditors' voluntary liquidation.
Where a company goes into liquidation, normally a liquidator is appointed to gather in all the company's assets and settle all claims against the company. If there is any surplus after paying off all the creditors of the company, this surplus is then distributed to the members. As its names imply, applications for compulsory liquidation are normally made by creditors of the company when the company is unable to pay its debts.
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However, in some jurisdictions, regulators have the power to apply for the liquidation of the company on the grounds of public good, i. Voluntary liquidations occur when the company's members decide voluntarily to wind up the affairs of the company. This may be because they believe that the company will soon become insolvent , or it may be on economic grounds if they believe that the purpose for which the company was formed is now at an end, or that the company is not providing an adequate return on assets and should be broken up and sold off.
Some jurisdictions also permit companies to be wound up on "just and equitable" grounds. For obvious reasons, in most countries, the courts have been reluctant to wind up a company solely on the basis of the disappointment of one member, regardless of how well-founded that member's complaints are. Accordingly, most jurisdictions that permit just and equitable winding up also permit the court to impose other remedies, such as requiring the majority shareholder s to buy out the disappointed minority shareholder at a fair value.
Insider trading is the trading of a corporation 's stock or other securities e. In most countries, trading by corporate insiders such as officers, key employees, directors, and large shareholders may be legal if this trading is done in a way that does not take advantage of non-public information. However, the term is frequently used to refer to a practice in which an insider or a related party trades based on material non-public information obtained during the performance of the insider's duties at the corporation, or otherwise in breach of a fiduciary or other relationship of trust and confidence or where the non-public information was misappropriated from the company.
In the United States and several other jurisdictions, trading conducted by corporate officers, key employees, directors, or significant shareholders in the United States, defined as beneficial owners of ten percent or more of the firm's equity securities must be reported to the regulator or publicly disclosed, usually within a few business days of the trade.
Many investors follow the summaries of these insider trades in the hope that mimicking these trades will be profitable. While "legal" insider trading cannot be based on material non-public information , some investors believe corporate insiders nonetheless may have better insights into the health of a corporation broadly speaking and that their trades otherwise convey important information e.
In the United States , most corporations are incorporated , or organized, under the laws of a particular state. The laws of the state of incorporation normally governs a corporation's internal operations, even if the corporation's operations take place outside that state. Corporate law differs from state to state. Business entities may also be regulated by federal laws  and in some cases by local laws and ordinances.
Corporate Governance in the Common-Law World : Christopher M. Bruner :
A majority of publicly traded companies in the U. From Wikipedia, the free encyclopedia. For types of business entities, see List of legal entity types by country. By jurisdiction. General corporate forms. Corporate forms by jurisdiction. Naamloze vennootschap N. Business judgment rule Corporate governance De facto and estoppel corporations Internal affairs doctrine Limited liability Piercing the corporate veil Rochdale Principles Ultra vires. Related areas. Civil procedure Contract Corporate registers.
Management accounting Financial accounting Financial audit. Business entities. Corporate group Conglomerate company Holding company Cooperative Corporation Joint-stock company Limited liability company Partnership Privately held company Sole proprietorship State-owned enterprise.
Corporate governance. Annual general meeting Board of directors Supervisory board Advisory board Audit committee. Corporate law. Commercial law Constitutional documents Contract Corporate crime Corporate liability Insolvency law International trade law Mergers and acquisitions. Corporate title. Commodity Public economics Labour economics Development economics International economics Mixed economy Planned economy Econometrics Environmental economics Open economy Market economy Knowledge economy Microeconomics Macroeconomics Economic development Economic statistics.
Types of management. Business analysis Business ethics Business plan Business judgment rule Consumer behaviour Business operations International business Business model International trade Business process Business statistics. Economic integration. Preferential trading area Free trade area Customs union Single market Economic union Monetary union Fiscal union Customs and monetary union Economic and monetary union.
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Main article: History of corporations. Main article: Corporation. Further information: Types of business entity. Main article: Piercing the corporate veil. See also: Corporate benefit. Main articles: Corporate liability and Corporate crime. Main article: Corporate governance. Main article: Corporate constitution. Main articles: Board of directors and Directors' duties.
Such agents have duties to discharge of a fiduciary nature towards their principal.
And it is a rule of universal application that no one, having such duties to discharge, shall be allowed to enter into engagements in which he has, or can have , a personal interest conflicting or which possibly may conflict , with the interests of those whom he is bound to protect So strictly is this principle adhered to that no question is allowed to be raised as to the fairness or unfairness of the contract entered into Main articles: Derivative suit and Unfair prejudice.
Main article: Corporate finance. Further information: Financial law. Main article: Stock. Main article: Mergers and acquisitions. Main article: Insolvency law. Main article: Insider dealing. Main article: US corporate law. The examples and perspective in this article may not represent a worldwide view of the subject. You may improve this article , discuss the issue on the talk page , or create a new article , as appropriate.
August Learn how and when to remove this template message. However this latter feature is not the case in many European jurisdictions, where employees participate in their companies. South African Constitution Art. Blumberg, The Multinational Challenge to Corporation Law: The Search for a New Corporate Personality, has a very good discussion of the controversial nature of additional rights being granted to corporations.
The Dutch East India Company received its charter in , but is generally recognized as the first company in the world to issue joint stock. Not coincidentally, the two companies were competitors. The Economist. Directors and Officers". Bushell v. Faith , and query whether the decision would still be decided the same way.
North-Holland Publishing Company. LVII, No. Retrieved 3 April Cornell Law School. Case Western Reserve Law Review. Delaware Division of Corporations. Retrieved Wolters Kluwer. CT Corporation System. Delaware Court of Chancery. Category Index Outline Portal. Hidden categories: All articles with specifically marked weasel-worded phrases Articles with specifically marked weasel-worded phrases from May All articles that may have off-topic sections Wikipedia articles that may have off-topic sections from May All articles with unsourced statements Articles with unsourced statements from May Articles with limited geographic scope from August Namespaces Article Talk.
Company portal Law portal. Management of a business. Accounting Management accounting Financial accounting Financial audit. Business entities Corporate group Conglomerate company Holding company Cooperative Corporation Joint-stock company Limited liability company Partnership Privately held company Sole proprietorship State-owned enterprise. Corporate governance Annual general meeting Board of directors Supervisory board Advisory board Audit committee. Such generalizations, however, obscure substantial differences across the common-law world. Contrary to popular belief, shareholders in the United Kingdom and jurisdictions following its lead are far more powerful and central to the aims of the corporation than are shareholders in the United States.
This book presents a new comparative theory to explain this divergence and explores the theory's ramifications for law and public policy. Bruner argues that regulatory structures affecting other stakeholders' interests - notably differing degrees of social welfare protection for employees - have decisively impacted the degree of political opposition to shareholder-centric policies across the common-law world. These dynamics remain powerful forces today, and understanding them will be vital as post-crisis reforms continue to take shape. Table of contents Part I. Shareholder Orientation in the Common-Law World: 1.
Introduction and overview; 2. Comparative theory and corporate governance; 3. The corporate governance role of shareholders in common-law jurisdictions; Part II. Comparative theories of corporate governance; 5. Shareholders, stakeholders, and social welfare policy; Part III. The Theory's Explanatory Domain: 6. Stability, change, and the future of corporate governance in the common-law world. Review quote ' Bruner's insights are a revelation It is impeccably researched, beautifully written, and its claims are both forceful and highly persuasive. It is an absolute must for anyone seeking to form a holistic understanding of how corporate law and governance relate to their broader social-institutional context, as well as an excellent primer on the key comparative features of the world's principal common law systems.
In writing this pioneering work, Bruner has undoubtedly earned the right to sit at the very top table of international corporate law scholarship. One can only hope that future research in the field will advance this fascinating line of enquiry yet further.
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By drawing a connection between corporate law and labor and employment law, Bruner has expanded the scope of 'the law of the firm', for lack of a better term, to include not just shareholders, boards, and top-level executives, but rather all the participants in the firm, especially employees. I am unaware of a comparably sustained and in-depth comparative treatment of corporate and economic governance in the common law countries that so clearly articulates the systemic significance of the differences across them.
Bruner's explanation and historical analysis of the pivotal position of labor is an original lens through which to examine corporate governance in common-law countries Without doubt, Corporate Governance in the Common-Law World is a highly commendable work and provides an excellent counterpart for further empirical investigation.