4. entrepreneurs collaborators

entrepreneural activty and the need for collaborators

• running a business is not something an entrepreneur can do alown

• even if one oerson owns a business they depend on other people to help run it properly such as

  • employees

  • assistants

  • managers

  • or business partners

• these people known as collaboators help with:

  • the day to day tasks,

  • decision making

  • and dealing with customers and suppliers

• without them the business could not function efficently

2 levels of entrepreneuial activity

• internal (inside the business)= how the business is organised and managed from within

  • the internal hierarchy (who is in charge of who)

  • administrative control (rules, procedures decision making)

  • supervising and coordinating employees

  • managing resources, staff and daily operations

  • about keeping the business running smoothly internally

• external (outside the business)= how the business interacts with the outside world

  • dealing with customers, suppliers, business artner and public authorities

  • negoitating and entering contracts

  • representing the business in commercial or legal matters

  • about how the business operates in the market

level overlap

• although we talk about internal and external seperatly they cannot be completed seperated becayse

  • employees or collaborators often work inside the business but they may also deal with customers sign contracts or repressent the business externally

• so collaborators often afect both internal organisation and external legal relationships at the same time

  • a sales manager internally is subject to the compnays organsiational rules emoloyement contract and management strcture but as part of their role they negotiate and sign contracts with supplier on behlaf of the company; when doing so their actions bind the comnay and its relationships with third parties

  • this shows although the sales manager is an internal collaborato their conduct directly affects the compnays external egal obligations

role amd legal importance of colllbaorators

• collaborators are important because they allow the entreprenur to operatw through other people not personally

  • they help the entrepreneur act through others

  • they can legally bind the entrepreneur when dealing with customers, suppliers or other third parties

  • what collanoators do can create legal rights and obligations directly for the entreprenur even if the entrepreneur is not personally involved

• the entreprenur is often legally responsible for what collaborators do

no single legal system for collaborators

• there is no single set of rules that applies to all collaborators= instead the law is fragmented and spread across different areas of law depending on type of collab

• the legal rules come from:

  • commercial code

  • labour law for employees

  • agency law law 12/1992 for commercial agents

  • company law for directors and company representatives

why the type of collab matters

• the legal status of a collab depends on what kind of collaborator they are

• an employee is governed by labour law

• an agent is governed by agency law

• a company director is governed by company law

• each type has different rights duties and legal consequences for the entrepreneur

clasifications

• collaborators can be classified in different ways

• there is no single catwgory because one collab can fit into several classifications at the same time

• the law uses overlapping criteria to describe collaborators

classification: duration of relationship

• permanent collab= having a long term and stable relationship with the business

  • are part of regular ongoing activity of the business

  • a full time employee or long term commercial agent

• sporadic= work temporarily or occasionally

  • are hired for a specific task or transaction

  • a consultant hired for one project

class:function within the business strucutre

• internal collab= are integrated into the business organisation

  • work under the businesses internal structure

  • usually employees

• external collab= not a part of the internal organisation

  • act in the market on behalf of the business

  • commercial agents, external consultant

class: degree of dependance (employer control)

dependat collaborator= work under the direction and control of the entreprener

• must ollow instructions ie working hours methods hierarchy

• governed by labour law

• employees

independant collaborator= work autonomously

• usually self employed (dont get salary get expenses)

• governed by commercial law

• linked by a commercial contract not an employeement contract

• agents and free lansors

class: scope of authority (legal power they have)

• general authority= broad powers

  • can act on behalf of the business in many matters

  • a store manager with powers to sign contracts, manage staff, deal with customers

• specific authority= limited powers

  • can only act in specific acts or transactions

  • someone authorised to negotiate but not sign contracts (ie employee while managers gone)

overlapping classes

• one collaorato can fall into several categories

  • store manager= permanent, internal, dependant, general

  • freelance marketing consultant= sporadic, external, indpendnant, specific

  • regional commercial agent=permanent ,extrernal , indpendnant,general

  • temporary adminstrative assistant= temporary , internal, dependant , specific

merchant assistant vs merchant collaborators

merchant assistants= dependant collaborators

• work under the entreprenurs authority and control

• have a stable ongoing relationship with the business

• are usually employees

• perform managerial adminsitrative or representative functions inside the business

• gverned by labour law

  • store managers, sales directors , office or admin managers

merchant collaborators= indeodneant collaborators

• work independantly from the entrepreneur

• are not employees

• perform commercial or legal acts for the entrepreneur

• are governed by commercial contracts not labour law

• their actions can produce direct or indirect legal affects for the entreprenur

• governed by commercial law

  • commercial agents or free lancers who indepdnanly neogitate contracts on behalf of the entrepreneur

this distinction is important because it affects

• which law applies

• the entreprenurs liability

• the legal affects of their actions

meaning of representation

• representation explains how the actions of a collaborator can legally affect the entrepreneur

• it creates a link between what the collabroator does and the legal responsibility of the entreprenur

• if rep exists the collaborator acts in the name and on behalf of the entreprenur= any rights or obligations created fall directly on the entreprenur not the collaborator

• representation in commercial law is governed mainly by the commercial code through:

  • mandate

  • powers of attorney

  • agency rules

mandate vs representation

• mandate= internal contract

  • a contractual obligation (between entreprenur and collaborator)

    • one person agrees to act for another

    • regulates the internal relationship between the parties

• representation= external legal effect

  • a legal mechanism (between third party and entreprenur)

  • determines who is legally bound towards third parties

  • operatins in the external relationship

• both rely on ctemplatio domini principle=clear discolsure

  • the collaborator must clearly state they are acting on behalf of the entreprenur (mandate)

  • third parties must know who the real principal is (representation)

• if the collaborator does not make this clear the collaborator may be personally bound and the entreprenur may not be legally liable

representation and powers of attorney in commercial law

• in commercial law representation must be expressly authorised

  • art 281-283 commercial code= a person can only represent an entreprenur if they have clear authorisation

  • art 292 commercial code= the entrepreneur is legally liable for acts carried out by agents within there authorised powers

types of representatives

• general representatives= broad auhtority

  • can manage the entire business or a branch

  • acts usually bind the entreprener fully

  • store or branch manager

• special representatives= limited authority

  • only perform specific acts or transactions

  • cannot go beyond what they are authorised to do

  • an employee authorised to sign on specific contract

orgin of representation

• by law= someone represents the business automatically

  • company directors represent the company by virtue of their position

• by legal transaction= representation granted expressly

  • usually through powers of attorney

effects of representation

when a representative acts WITHIN their authroity

• there acts are treated as acts of the entrepreneur

• the represenative becomes the alter ego of the entreprenur

• third parties can claim directly against the ntrepreneur

requirements:

• complete discolsure principle= the represenative must clearly state they are acting on behalf of the entrepreneur

  • if representation is not discolsed the entrepreneur may not be boudnd and the rep may be liable

powwers of attorney in commercial law

a power of attorney is a unilateral legal act

• it is created by one person only ie entrepreneur

• it does not require acceptance by the representative to exist

• it grants authority but does not oblige the rep to act

in practice powers of attorney usually operat together with other legal relationships

• mandates, commision, employement contracts

• so the power gives authority while another contract usually explains why the person is acting (part of their job, monetary gain ie)

scope of the power

• powers of attorney are intepreted restricively

• the rep only has the power that are expressly granted to them

• no implied or assumed powers exist

in practice

• verifying the scope of powers is essential in commercial practice

• third parties should always check what the rep is allowed to do

form of the power

powers of attorney can be

• private

• verbal

exceptions= however a public deed is required for certain acts:

• a property transaction

• acts that require registration

• general powers of attorney (must be registered in the commercial registry)

modern corporate law article 234 lsc

• company directors automatically represent the compnay

• therefore internal limitations on directors powers cannot be enforced against third arties who act in good faith (didnt know they did not have the authority to do so)

• this protects legal certainty and ensures trust in commercial transactions

auxillories of the entrepreneur (dependant internal collaborators)

• internal collaboarators who work under the entrepreneurs authority

• they differ in scope of authority and legal recognitoon

• 3 main types

  • factor

  • clerk

  • mancebo-outdated concept

auxillary: factor art 283 commercial code (store manager)

factor= general representative of the entrepreneur

• manages a branch of establishment

• has broad powers unless specifically limited

• must be registered in commercial registry

• acts as entrepreneurs alter ego

• broad interpretation confirmed by dgrn resolution march 1996

  • a branch mnaager who can make decisions on behalf of the business

clerk art 292 comcode (employee with special powers)

clerk= partial representative

• powers are limited and delegated

• entrepreneur is bound only when they act within the scope of authority

• no registration in commercial registry required

• supreme court recognises implied authority in ordinary transactions

  • employee authorised to handle certain contracts or orders

mancebo (art 293 294 comcode) (normal employee)

mancebo= store employee with very limited authority

• always dependant on the entrepreneur

• obsolete term today= shows 19th century inconistencies in commercial law

• can perform basic acts like cash sales receipts payements

  • eg cashier in a shop

notorious factor art 286 comcode

notorius factor= a publicly known general representative

• authority is presumed because everyone knows them to act on behalf of the entrepreneur

• protects third parties acting in good faith when dealing with the business

  • widely recognised store manager who regularly negotiate with supliers is assumed to have authorty to complete acts for the business owner

  • protects suppliers who mnay not know the exact limits of the managers authority

indepednant external collaborators

external to the business and indepdnant= not employees

• self employed= work autonomously and are not under entepreneurs direct control

• commercial relationship= link to entrepreneur is business based not employement based

• governed by contracts= rights duties and obligations come from commercial contracts not labour law

  • freelance marketting consutant, external accountant/lawyer, commercial agent negotiating contracts independantly

• difference between different types lies in the commercial contract

  • level of indpendance

  • operational control

  • representation

  • payement structure

main types of commercial collaboration contracts: agency contract law 12/1992

• purpose= continuous promotion or conclusion of business on behalf of the principle

• type= independant intermediary (inbetween business and customer)

  • commercial agent negotiating contracts for a comany ie travel agent

• business risk= usually none, borne to the principle

• key featues

  • indepednance= agent is self employed

  • stability= continous relationship

  • remuneration= commision based not salary

  • representation= entrepreneur only liable for acts expressly authorised (outside bind agent personally)

commision contract

• purpose= performs specific commercial acts for principal

• type= occasional or one off tranactions

  • freelance sales person selling a product earning commision on each sale

• risk= princpal entreprenur

• remuneration= paid per transaction, not continousy like agent

mediation (brokerage)

• regulation= barely regulated (art 89comcom)

• purpose= merely introduces parties to eachother for a potential deal (no involvement in their dealings, contracts or negotiations)

  • business broker, morgage broker (only paid if theirs a sale whereas real estate agent paid anyway)

• represenation= does not act in the name of the prinicpal acts indpendantly

• payement= only upon a succesful deal between the 2 parties

concession

• purpose= grants exclusive distirbution rights/sale of product to a indpednant party

  • bev company with beverage distirbutor, concession in department store with a brand

• type= indepdnant disitirbutor (doesnt work for company) often tied to a territoy or market segment

• risk= disitrbutor

• control= concessionaire control but must repsect exclusivity

franchise

• purpose= use brand and business model from franchisor

  • mcdonalds franchisee operating a local restaurant under the brand and system

• operational control= franchisee manages daily operations but must follow standards

• remuneration= typically an intial fee for model + royalties/ percentage of profits

• risk= franchisee largely

flag contract

• purpose= use of brand under strict standards

  • petrol stations gas and diesel use

• sector= regulated industries

• control= brand sets detailed rules; collanorators operate within them

key differences

high indepdnance= agency commission mediation concession

medium indepdnance= franchise (brand rules), flag contract (regulated industry)

principal risk= agency commission mediation

non princpal risk= concession franchisee operator (taking on the product)

representation/acting on behalf of principal= only in agency for taks their authorised to do

continuous/ongoing= agency, flag,franchise,concession

one off= mediation, commision