International Legal English - Unit 2 - Company Law

directors' duties

The duties owed by directors to a company can be classified into two groups. The first is a duty of care and the second is a fiduciary duty. The duty of care requires that the directors must exercise the care of an ordinarily prudent and diligent person under the relevant circumstances. The fiduciary duty stems from the position of trust and responsibility entrusted to directors. This duty has many aspects. but. broadly speaking, a director must act in the best interests of the company and not f

company definition

The management of a company is carried out by its officers, who include a director, manager and/or company secretary. A director is appointed to carry out and control the day·to-day affairs of the company. The structure, procedures and work of the board of directors, which as a body govern the company. are determined by the company's articles of association. A manager is delegated supervisory control of the affairs of the company. A manager's duties to the company are generally more burdensome t

partnership

A company1 is a business association which has the character of a legal person, distinct from its officers and shareholders. This is significant. as it allows the company to own property in its own name, continue perpetually despite changes in ownership. and insulate the owners against personal liability. However, in some instances. for example when the company is used to perpetrate fraud or acts ultra vires, the court may 'lifF the corporate veil' and subject the shareholders to personal liabil

management roles

6 Finally. a company's state of health is reflected in its accounts 8 , including its balance sheet and profit-and-Ioss account9• Healthy profits might lead to a bonus10 or capitalisation issuell to the shareholders. On the other hand, continuous losses may result in insolvency and the company going into liquidation.

company health

By contrast, a partnership is a business association which. strictly speaking, is not considered to be a legal entity but. rather. merely an association of owners. However. in order to avoid impractical results, such as the partnership being precluded from owning property in its own name, certain rules of partnership law treat a partnership as if it were a legal entity. Nonetheless, partners are not insulated against personal liability. and the partnership may cease to exist upon a change in own

company formation

A company is formed upon the issuance of a certificate of Incorporation) by the appropriate governmental authority. A certificate of incorporation is issued upon the filing of the constitutional documents of the company. together with statutory forms and the payment of a filing fee. The 'constitution' of a company consists of two documents. One, the memorandum of association4 , states the objects of the company and the details of its authorised capital, othelWise known as the nominal capital. Th

legal person

a business or institution that the law treats for some purposes as if it were a person distinct from its members or owner (eg a company)

personal liability

legal responsibility for acts or omissions (=failures to act, especially when you should have) / usually plural: liabilities) financial obligations of a business

fraud

if you commit a fraud then you deliberately lie or do not give important information because you want someone else to rely on (=put trust in) this lie or incomplete information so that they will give up something of value, usually money

ultra vires

used to describe an action that goes beyond a person or business entity's legal power or authority

corporate veil

the general principle that a company's shareholders and employees are immune from civil lawsuits filed against it

legal entity

any person, partnership, proprietorship, company, association or other organisation that can be a party to a contract

certificate of Incorporation (US certificate of existence|certificate of goodstanding)

a document issued by a governmental authority granting a company status as a legal entity

statutory forms

a document that registered companies have to complete with information on their business activities and then file with a governmental authority

memorandum of association (US articles of Incorporation/ certiftificate of incorporation)

(UK LAW) in the UK, one of two documents which form the constitution of a company. It sets out the important elements of the corporation, including its name, address, objects and powers

authorised capital/ nominal capital /registered capital

the maximum amount of share capital that may be issued by a company, as detailed in the company’s memorandum of association

articles of association (US bylaws)

a document outlining the rules governing a company's internal organisation

annual general meetings /extraordinary general meetings (US annual meetings of shareholders / special meetings of shareholders)

In the UK, the general meeting held by the company every year is referred to as the annual general meeting or the AGM. Special meetings called to address specific matters are referred to as the extraordinary general meeting or EGM.

board of directors

the governing body of a company elected by the shareholders

duty of care

a legal obligation not to act negligently, especially towards another person that could be harmed by your actions or omissions (=failure to act)

fiduciary duty

the legal duty of a professional in a position of trust to act in the best interests of a client

conflict of interest

a clash between a person's personal interest and his public or fiduciary duties

balance sheet

statement showing the financial position of a business on a specified date, including the company's assets (=items of positive value) and liabilities (=items owed)

profit-and-loss account

calculation of the profit of the business during a particular period;

The Cash Flow Statement

movements of cash in and out of the business during a particular period.

bonus

an extra amount of money that is added to someone's payment as a reward for performing well at work

capitalisation issue (US cash dividend)

when money from a company’s reserves is converted into issued capital and distributed to shareholders instead of a cash dividend

authorised capital

Authorised capital is the maximum amount of shares a corporation is authorised to issue. This authorisation derives from one of the company’s constitutional documents. A portion of the authorised capital can (and often does) remain unissued to shareholders.

issued capital

shares that are actually issued to shareholders

liquidation /winding up

concluding a company's affairs by selling its assets and paying its debts with any surplus being distributed to the owners

auditor

person appointed by the company to examine the company's accounts and to report to the shareholders annually on the accounts

company secretary

company's chief administrative officer, whose responsibilities include accounting and finance duties, personnel administration and compliance with employment legislation, security of documentation. insurance and intellectual property rights

director

person elected by the shareholders to manage the company and decide its general policy

liquidator

person appointed by a court. the company or its creditors to wind up the company's affairs

managing director

company director responsible for the day-to-day operation of the company

official receiver

officer of the court who commonly acts as a liquidator of a company being wound up by the court

promoter

person engaged in developing or taking the initiative to form a company (arranging capital. obtaining personnel. making arrangements for filing corporate documentation)

proxy

representatives of shareholders who are authorised to attend and vote at general meetings on behalf of a shareholder and in accordance with the shareholders instructions / the written authority to act or vote on behalf of another person.

receiver

person appointed by creditors to oversee the repayment of debts

shareholder

member of the company by virtue of an acquisition of shares in a company

DBA

"doing business as" - a name under which a company does business that is not the legal name of the company as shown in its company statutes /a name under which a person does business

stock ledger

a record of a company's shares, including details of the names and addresses of the shareholders

general partnership agreement

a contract that defines the rights, duties, responsibilities and liabilities of the partners in a general partnership business entity.

IRS

Internal Revenue Service (IRS) The federal agency responsible for the collection of federal taxes, including personal and corporate income taxes, Social Security taxes, and excise and gift taxes.

resolution

an official decision taken at a meeting; the expression of opinion or will of an official body (eg shareholders' meeting, Board of Directors' meeting, etc) by vote

sole proprietorship

an unincorporated business with only one owner

general partnership

a partnership in which each partner faces unlimited liability for all partnership debts regardless of the amount of the individual partner's capital contribution

limited partnership

a partnership in which the business is managed by a general partner who manages the business and whi is personally liable (=responsible) for the partnership's debts and obligations

C corporation

C corporation refers to any corporation that, under United States federal income tax law, is taxed separately from its owners. A C corporation is distinguished from an S corporation, which generally is not taxed separately. Most major companies (and many smaller companies) are treated as C corporations for U.S. federal income tax purposes.

S corporation

for United States federal income tax purposes, is a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. In general, S corporations do not pay any federal income taxes. Instead, the corporation's income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns

private limited company (ltd)

a company where the liability of the owners is limited to their shareholdings and where the shares may not be offered for sale to the public through a stock exchange

public limited company (PLC)

a company where the liability of the owners is limited to their holdings of shares and where the shares may be offered for sale to the public through a stock exchange

vest in

vest something in someone or something to grant sole power or control over something to someone or some group

provide

to say what will or must happen if particular conditions exist, usually in writing /(FORMAL) to give or supply something that someone or something needs