Private Law Part 2 - Commercial and Corporate Law Flashcards class9-10

Vocabulary flashcards covering the basics of commercial and corporate law, business forms, intermediation, and insolvency based on the lecture notes.

Commercial law

A part of private law in the civil law tradition that applies to legal relationships between natural or legal persons engaged in "trade & commerce," also known as merchants./ Part of private law (in civil law tradition) that applies to legal relationships between persons engaged in trade and commerce ("merchants")

Company law

A business organisation characterized by four constitutive elements: involvement of two or more shareholders, an investment (cash or kind), a project (object), and the purpose of return or distribution to shareholders./ Part of private law providing the legal structure for business organisations called companies .

Association

A business organisation involving two or more members with a project or object, but lacking an investment requirement and with a purpose intended to achieve a 'noble goal' rather than distribution to members.

Corporate law

A subfield of company law applicable to corporations, which are companies with a legal personality separate and distinct from their shareholders./ Subfield of company law concerning corporations with separate legal personality from shareholders .

separate legal personality

The corporation exists independently from shareholders, owns assets itself, enters contracts itself, and can sue or be sued .

incorporation

Creation of a corporation through notarial deed and/or registration, giving it legal personality .

Agency conflicts

In corporate law, these focus on three types of tension: 1st (directors vs. shareholders), 2nd (majority vs. minority shareholders), and 3rd (shareholders vs. creditors)./ Corporate law contains rules designed to manage these conflicts (directors' duties, shareholder rights, capital rules, etc.) .

Sole trader

A natural person engaged in economic activity where there is no legal distinction between private and business capital, resulting in unlimited liability for the entrepreneur./ A natural person carrying out business activities personally, without separate legal personality. • no distinction between private/business assets
• unlimited liability

unlimited liability

Creditors may seize entire patrimonium both professional and personal assets of the entrepreneur.

Patrimonium

The universal set of assets and liabilities held by a person; under the New Belgian Civil Code, every natural and legal person is generally the holder of only one patrimonium./
The totality of assets and liabilities of a natural or legal person./ Creditors can seize all assets in the debtor's patrimonium unless law or contract provides otherwise .

Legal Person (Corporation/Association)

• separate legal personality
• distinction between business and personal capital
• limited or unlimited liability

Limited liability

A principle where the company is exclusively liable for its debts, and the liability of shareholders is limited to the amount of their investment or capital contribution.

(Simple) Partnership

A non-incorporated personal company based on contractual agreements where invested assets are typically co-owned by partners and partners do not have the privilege of limited liability.

• contractual basis
• usually no legal personality
• no limited liability
• shares difficult to transfer

Continental General Partnership

A legal person where company creditors can seize company assets, but partners also bear unlimited liability and can have their personal assets seized in a second instance./• legal personality (a separate legal person)
• unlimited liability, partners personally liable for company debts

Limited Partnership

A company with two types of partners: Limited Partners who have limited liability but no management rights, and General Partners who have unlimited liability./ The limited partner:
• mainly invests money
• does not manage the business
• has limited liability

This means:
• They can only lose the amount they invested.
• Their personal assets are protected.

Private Limited company

A company with legal personality and limited liability, often characterized as intuitu personae with a limited number of shareholders and restricted transfer of shares (e.g., BV/SRPL, SARL, GmbH)./ A company mainly for small and medium businesses (SMEs). The identity of the shareholders matters (intuitu personae), so shares cannot easily be sold to outsiders.

Public Limited company

A company with legal personality and limited liability, generally allowed to be listed on a stock exchange and characterized as intuitu pecuniae with free transfer of shares (e.g., NV/SA, SA, AG)./A company mainly for large businesses. The money invested matters more than who owns the shares (intuitu pecuniae), so shares can be freely sold and the company can be listed on a stock exchange.

Equity Financing

• Money provided by shareholders.
• Shareholders
- get dividends if the company makes profit
- have governance/voting rights
- they are paid last if the company goes bankrupt.

Debt Financing

Money borrowed from creditors (e.g. banks).
Creditors:
- receive fixed interest payments
- have priority in repayment
- usually do not have voting rights.

multinational corporation

Enterprise established in more than one country whose entities coordinate operations .

corporate group

What is a corporate group?

Group of companies where a parent company owns or controls other companies (subsidiaries), usually through shared ownership.

Subsidiary

A corporation that is owned or controlled by another legal entity, known as a parent company./ Separate legal personality
- Separate corporation

Branch

An office located at a place other than the headquarters of the company that does not possess a separate legal personality./- No legal personality
- Office of the same compan

Insurance

A co-operative device to spread the loss caused by a particular risk over a substantial number of persons who are exposed to it and agree to insure themselves through an insurer. /
It spreads the financial risk of loss among many people. Some types, such as professional liability insurance, are often mandatory for businesses.

Registration

• Must register in the National Business Register (central electronic database). A unique identification number is assigned and must be used on all business documents (invoices, letters, orders, etc.). The European Business Register (EBR) facilitates this across borders.

• To be officially identified and receive a unique identification number that must appear on all important business documents.

Bank Account

• Obligation to open a bank account, often with a requirement to mention the account number on invoices. Businesses often must have a bank account and mention the account number on invoices and payment requests.

Invoice

A document issued by a creditor that confirms the existence of a debt resulting from a supply of goods or services against remuneration./A document issued by the creditor that confirms a debt for goods or services supplied and is sent to the debtor.

Late payment

A payment of the principal sum that is not made within the contractual or statutory period, provided the creditor has fulfilled their own contractual and legal obligations./ Failure to pay the amount due within contractual/statutory payment period .
In that case creditor may claim interest.

Annual Accounts

• Obligation to keep and publish accounts to monitor business health. Listed companies use International Financial Reporting Standards (IFRS).

• They monitor business health through receipts and expenses .

• Income Tax:

Progressive taxation

A tax system where higher taxes are imposed on more advantaged persons, often combined with various specific deductions.

Flat-rate taxation

A tax system where everyone pays the same tax rate regardless of income, generally offering a generous basic allowance instead of specific deductions.

Intermediary

A separate and independent business organisation distinct from the supplier that uses skills and efforts to bring a supplier's products to the market.Independent business organisation helping supplier bring products/services to market .

commercial agency agreement

the agent acts in the name and for the account of the principal.

distribution agreement

,the distributor acts in their own name and for their own account, buying and reselling the goods themselves.

Commercial agent

A self-employed intermediary who acts on a continuing basis to negotiate or conclude sales contracts in the name and for the account of the principal./ A commercial agent is a self-employed intermediary who negotiates or concludes contracts in the name and for the account of the principal in exchange for payment.

indemnity ("German approach")

Money paid to the commercial agent because the principal continues to benefit from the customers or business brought by the agent after termination. The maximum is one year's remuneration.

compensation ("French approach")

Money paid to the commercial agent for the loss suffered because the agency contract was terminated. There is no fixed maximum cap.

Distributor

An independent party who agrees on a continuing basis to purchase products from a seller and resell them in their own name and for their own account./
Distributor buys and resells products in own name and for own account .

Franchising

A contract where one party grants another the right to use a trademark or commercial formula (including trade names, know-how, and assistance) for remuneration./A contract where a business (franchisor) allows another business (franchisee) to use its:
• trademark.
• business mode
• know-how
in exchange for remuneration.

Representation

When a person (representative) has the authority to directly affect the legal position of a principal in relation to a third party by acting on the principal's behalf./ When a person acts on behalf of another person (the principal), so that the legal effects of the act apply directly to the principal.

insolvency

Situation where company cannot pay its debts .

Liquidation practitioner appointed to liquidate assets and pay creditors .

Pari passu

The general principle in insolvency where creditors are paid proportionally and equally from the proceeds of liquidation, unless a specific priority exists. Creditors paid proportionally/equally when no priority exists .

restructuring

An alternative to insolvency where a company negotiates with creditors to avoid liquidation and continue operating.

c

Which comparison is incorrect?
a) A company organization, as well as the organization of an association, includes the involvement of two or more persons.
b) A company as well as an association has a project, which is their "object", which translates into their activity.
c) A company, as well as an association require an investment by law to start their organization.
d) The purpose of a company is to return profit to the shareholders, whereas the purpose of an association is a 'noble goal' and not to return profit to the members.

c

Which is a key characteristic of a "Private Limited" company?
a) Generally speaking, only "Private Limited" companies are allowed to be listed on a stock exchange.
b) Invested assets are co-owned by partners rather than owned by the partnership.
c) Intuitu personae; limited number of shareholders and transfers of shares to outsiders is barred or restricted.
d) The "Private Limited" company is subject to stricter requirements than private companies, particularly with regard to capital and company structure.

a

Which definition is correct?
a) An insurance is: "A co-operative device to spread the loss caused by a particular risk over a number of persons, who are exposed to it and who agree to insure themselves against the risk."
b) An insurance is: "Insurance is a document issued by the creditor that confirms the existence of a debt as a result of a supply of goods or services against renumeration sent to the debtor."
c) An insurance is: "A device that enables a business to monitor the
health of the business by keeping track of receipts and expenses."
d) An insurance is: "A universal platform which is obligatory for every
business to register their organization, for which the business gets
allocated a unique identification number, making them easily identifiable by the public."

d

Which is an example of a B2B contract between a supplier and an
intermediary, establishing legal representation?
a) Public procurement agreement.
b) Commission agency agreement.
c) Restructuring agreement.
d) Commercial agency agreement.

a

Maria owns a "Personal Company" called 'M-Couch', where she is
the sole trader. She never wanted to set up a "Private Limited"
liability company because it seemed to much work at the time.
What are the consequences of Maria's choice?
a) If M-Couch is liable for a professional cost, creditors can have
recourse on the personal assets of Maria.
b) If Maria is liable for certain personal costs, creditors can only
have recourse on the personal assets of Maria.
c) If M-Couch is liable for a professional cost, creditors can only
have recourse on the professional assets of M-Couch.
d) If Maria is liable for certain personal costs, creditors can have
recourse on the contracts between Maria and M-Couch

c

Maurice concludes a commercial agency agreement with M-Couch, and he becomes a commercial agent for M-Couch. M-Couch terminates the agreement. What can Maurice do after the termination of the agreement ?
a) The contract is terminated, and therefore, Maurice cannot do anything anymore.
b) Maurice can assign his rights and duties to another person without the agreement of M-Couch.
c) Maurice can claim an indemnity that represents the continuing benefits to M-Couch due to the efforts of the agent unless the termination was justified on legal grounds or he assigned his rights and duties to another person.
d) Maurice can request compensation for the loss he suffered as a result of the termination of the contract, even if it is a justified termination under national law