Commercial Companies Flashcards

Flashcards covering key concepts from the lecture notes on commercial companies.

What constitutes a company according to Title Two: Commercial Companies?

A contract by which two or more persons pool contributions to carry out an activity with the aim of sharing the resulting profits, while being prepared to bear and share the losses.

What are the two aspects of a company resulting from its legal personality?

A contractual aspect and an institutional aspect.

How does an association differ from a company?

Members of an association do not seek to make profits, defined as anything added to a person's assets.

When is a company considered civil?

When its purpose is not to carry out commercial acts (e.g., medicine, legal profession, engineering, accounting).

What is an exception to the rule that defines civil and commercial companies?

Limited liability companies and joint-stock companies are considered commercial companies even if their purpose is not commercial.

What are the general conditions required for the formation of a contract to establish a company?

Consent, object, cause, form for certain contracts, and capacity must be valid.

What are the two types of companies Lebanese law allows to be formed with a single will?

The SARL (Limited Liability Company) and the offshore company.

What is the consequence of a company carrying out an activity not in line with its object?

The law prohibits the company from carrying out such activities.

What are the three forms of financial participation (contributions) in a company?

Cash contributions, contributions in kind, and contributions in industry.

What constitutes the company's share capital?

Cash contributions and contributions in kind.

What is the mandatory legal reserve required by law, and what are the requirements for its constitution?

10% annually until reaching 30% of the capital.

What is moral participation in a company?

The principle of collaboration among partners to achieve the company's activity.

What is a leonine clause, and what is its effect?

Any article in the company's articles of association that prevents one of the partners from participating in the profits or exempts them from participating in the losses, results in the annulment of the company.

What does the law require regarding the publication of the company contract?

Registration with the court of first instance, i.e., the commercial register to which the company's headquarters is attached.

If a company does not comply with the rules of incorporation, what can the judge do?

Allow the partners to correct the defect causing the annulment, as long as no judgment has been rendered.

How is the company identified, and what distinguishes the naming process for partnerships versus capital companies?

The determination of the name varies. In a partnership, it's composed of the name of one or more partners with the expression "and partners". In joint-stock or capital companies, the name can be any name, provided that the legal form of the company and its capital are added.

What happens if the place where the main decisions of the company are made differs from the official headquarters?

This effective place is legally considered as the company's headquarters.

What does the company's assets encompass?

All its rights, assets, liabilities, and obligations.

What happens during the dissolution of companies if there are serious disputes between partners?

The judge decides to dissolve the company, unless they consider that the dispute results from the failure of one of the partners to fulfill their obligations, in which case the judge can expel the partner responsible for the dispute.

What happens if a company's term expires?

The company naturally ends at the expiration of its duration, unless the partners decide to extend it.

What role does a liquidator play in the dissolution of a company?

They are responsible for recovering the company's rights and settling its obligations to determine its net assets.

What types of companies are included in partnership or share companies?

The general partnership.

What types of companies are considered capital or stock companies?

The joint-stock company.

What type of company is a limited liability company considered?

A mixture of partnership and capital companies.

Name a characteristic that defines an SNC (General Partnership).

Two or more persons carry out a commercial activity under a corporate name and are personally and jointly liable for the company's debts.

What does 'personal liability' of partners in an SNC mean?

In case of non-payment of the company's obligations, the company's creditors can pursue the partners on their personal assets.

What are the two types of general meetings in an SNC?

The extraordinary general meeting and the ordinary general meeting.

Who can be appointed as the director of an SNC?

Chosen from among the partners or outside of them.

What are the restrictions to the power of a director?

The director is prohibited from making decisions outside the company's purpose or of a significance exceeding the proper normal functioning of the company; the director cannot manage another company with a similar purpose without authorization; and the director cannot undertake an activity in which they have a direct or indirect interest without authorization.

What are the two requirements for a company to be bound by the director's acts?

That the director signs on behalf of the company, mentioning the corporate name and attaching their personal signature, and that the director has acted within their powers.

Besides the common reasons of dissolution, on what grounds can a General Partnership be dissolved?

If the partner resigns, loses their legal capacity, or is declared bankrupt.

What must the founders of a joint-stock company do once they have agreed on the draft articles of association?

Certify it and deposit it with the notary.

What is the minimum nominal value per share and the minimum capital for a joint-stock company?

One thousand Lebanese pounds per share, with a minimum capital of thirty million pounds.

What are the points included in the agenda of a constitutive general meeting?

Final approval of the valuation of contributions in kind, final approval of the incorporation acts and the articles of association, election of the members of the board of directors, and appointment of the principal auditor.

What are the two categories of securities issued by a company?

Shares and bonds.

What is the fundamental duty of a shareholder?

Paying up the share, i.e., paying its nominal value in full.

What are the cases when a company may issue preferred shares?

To stimulate investments in it, issue preferred shares not exceeding 30% of its share capital, benefiting from material advantages, privileges, and specific priorities, while restricting certain rights.

What are the two conditions must be fulfilled for a company to be able to issue bonds?

The total of the bonds must not exceed double the share capital and the company's share capital must be fully paid up.

Who is required to convene the general meeting?

The board of directors, and in case of failure of the latter, by the auditors. The auditors are also required to convene the general meeting whenever shareholders representing one-fifth of the capital request it.

What are the matters examined by the ordinary general meeting at least once a year?

Reading the reports of the board of directors and the auditors on the accounts of the previous financial year, approval of the accounts, granting discharge to the members of the board of directors, granting authorization as provided for by articles 158 and 159, election or removal of the members of the board of directors, appointment of the auditor, and miscellaneous matters.

What are the main points decided by the extraordinary meeting?

The amendment of the articles of association, particularly the company's capital, either by increase or by reduction.

What are the ways through which an increase of the company's capital can be done?

By the issuance of new shares; by deducting the value of the increase from the free reserve and adding it to the capital; by converting debts into capital.

What are the bodies included in the management of the company?

The board of directors, the president of the board of directors, the general manager, and the deputy general manager.

What are the points that should be taken into account regarding the board of directors?

A member can be a shareholder or not, and can be a legal entity; one-third of the members must be Lebanese; a member cannot sit on more than eight boards of directors of companies based in Lebanon.

What are the different matters covered by the powers of the Board of Directors?

All matters necessary for the proper functioning of the company, except for daily operations. Including the implementation of the decisions of the general meeting, the election and removal of the president of the board, and the convening of general meetings.

For what acts are the members of the board of directors jointly and severally responsible?

Acts of fraud, violations of laws and regulations, as well as their management errors.

What supervisory role does in the company the president of the Board of Directors have?

Has a general supervisory authority over the company's operations, without intervening in the daily affairs. The president presides over the board of directors and give general directives to the general manager that are not binding on the latter.

How is the supervision of management activities ensured?

By a principal auditor, appointed by the general meeting.

What happens if a joint-stock company Loses more than three-quarters of its capital?

It is necessary to convene an extraordinary general meeting to decide on the dissolution of the company or the reduction of the capital or the continuation of its activities despite these losses.

How are losses attributed to the partners in a limited liability company (SARL)?

Partners bear losses only up to the amount of their contributions. A single partner is called the "sole partner" and exercises the powers granted to the general meeting of partners.

What are the two bodies into the limited liability company (SARL) is divided into?

The management body, composed of a manger, and the meetings of partners, similar to general meetings of joint-stock companies.

What is the purpose a holding company is intended for?

To acquire stakes in other companies.

If a holding company does no comply with the law on the activities they undertake, what consequences can it face?

The company becomes subject to the income tax applicable to capital companies operating in Lebanon, in addition to a fine equal to 50% of the value of the tax.

Where must the activities that an offshore company can carry out, be located?

All located outside Lebanese territory.

What are the similarities in the level of the Article of Association between holding and offshore companies?

The possibility of setting the capital in foreign currency; keeping their accounts in foreign currency; being exempted from the presence of Lebanese persons on their board of directors; and being satisfied with a principal auditor who can be elected for a term of three years.