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Corporate law is the law of the most dominant kind of business enterprise in the modern trade world. Corporate law is the study of how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community and the environment interact with one another under the internal rules of the company.
Corporate law is a part of a broader companies law. Other types of business associations can include partnerships, or trusts or companies limited by guarantee. Corporate law is about big business, which has separate legal personality, with limited liability for its shareholders, who buy and sell their stocks depending on the performance of the board of directors. It deals with the firms that finish their titles with “plc” (UK), “Inc” (US), “AG and GmbH” (Germany), or “Sti” (Turkey).
The 5 characteristics of the modern corporation are :
1- Separate legal personality of the corporation
2- Limited liability of the shareholders
3- Transferrable shares (such as the London Stock Exchange, New York Stock Exchange or Euronext in Paris)
4- Delegated management, (control of the company placed in the hands of a board of directors)
5- Investor ownership (ownership by shareholders)
Ownership of a corporation is complicated by increasing social and economic interdependence, as different stakeholders compete to have a say in corporate affairs. Company boards have representatives of both shareholders and employees to “codetermine” company strategy. Corporate law is often divided into corporate governance (which concerns the various power relations within a corporation) and corporate finance (which concerns the rules on how capital is used).
The law treats a corporation as a legal “person” that has standing to sue and be sued, distinct from its stockholders. The legal independence of a corporation prevents shareholders from being personally liable for corporate debts. It also allows stockholders to sue the corporation through a derivative suit and makes ownership in the company (shares) easily transferable. The legal “person” status of corporations gives the business perpetual life; deaths of officials or stockholders do not alter the corporation’s structure.
Corporations are taxable entities that fall under a different scheme from individuals. Although corporations have a “double tax” problem (both corporate profits and shareholder dividends are taxed) corporate profits are taxed at a lower rate than the rates for individuals.
Corporate law has important intersections with contracts and commercial transactions law.
