Corporate Law and EU Company Law Review

This set of vocabulary flashcards covers fundamental concepts of Corporate Law, EU directives, governance structures, financial reporting principles, and emerging topics like DAOs and ESG.

Corporate Law

A branch of business law that deals with the formation, governance, and dissolution of corporations, encompassing the legal framework for shareholders, directors, and stakeholders.

Enterprise

An economic activity organized in order to produce or exchange services or goods to make a profit or reach a minimum target of break-even.

Business

The complex set of assets, including material goods, services, and contracts, used and organized by an entrepreneur to carry on economic activity.

Break-even

The minimum target for an economic activity where total costs are at least equal to total revenue.

Legal Personality

The capacity to segregate assets and the patrimonial autonomy of a subject that allows it to enter into contracts.

Legal Subjectivity

The capacity of a subject to have rights and duties, which may sometimes be limited by age, health, or state of mind.

Principal

The person or entity in an agency relationship who authorizes another to act on their behalf and retains control over objectives and goals.

Agent

The person authorized to act on behalf of the principal, carrying out tasks and making decisions based on the authority granted.

Agency Problems

Conflicts of interest in which one party, such as a manager or majority shareholder, is expected to act in the best interest of another party but has diverging incentives.

Contractualism (Shareholding approach)

A doctrine stating that the interest of the company is synonymous with the interest of the shareholders as owners and founders.

Institutionalism (Stakeholder approach)

A doctrine, prominent in Germany, considering the company's interest to be the benefit of third parties such as employees and creditors rather than just shareholders.

Enlightened Shareholder Value

An approach from the UK Companies Act of $2006$ where directors maximize shareholder interest while taking into account the interests of various other constituencies.

Authorized Legal Capital

The maximum amount of assets that directors are authorized to raise from shareholders or third parties as contributions in exchange for shares.

Subscribed Legal Capital

The total amount of contribution that shareholders have committed to pay to the company.

Issued and Paid-up Legal Capital

The total amount of capital actually paid by the shareholders to the company.

Harmonization

The EU legislative approach using directives to eliminate conflicts between laws of Member States while allowing them freedom in implementation.

Uniformation

The EU legislative approach using regulations to create a single, specific rule valid for all Member States.

Real Seat

A connecting factor for determining company nationality based on where the company actually carries out its business and administration.

Law of the Incorporation

A connecting factor where the law applicable to a corporation is determined by the jurisdiction where it was initially created, regardless of where its activity is carried out.

Business Judgment Rule

A principle stating that a manager is not liable for an unfruitful investment if it was conducted in good faith, with proper advice, and followed the correct procedure.

Duty of Care

The obligation for a director to conduct business in a professional way and seek expert advice when they lack specific competence.

Duty of Loyalty

The obligation for directors to act fairly and put the company's interests above their own personal interests.

One-tier System (Monistic)

A governance structure used in the UK where the general meeting appoints a board of directors that contains an internal supervisory function.

Two-tier System (Dualistic)

A governance structure used in Germany where the general meeting appoints a supervisory board, which then appoints the management board.

Latin System

A governance system reflecting the Italian model where the general meeting appoints both the administrative organ (directors) and the supervisory organ (Collegio Sindacale).

Ultra Vires Doctrine

A traditional doctrine where acts beyond the company's scope were void; it has been largely replaced in the EU by Art $9$ of Directive $2017/1132$ to protect third parties.

Societas Europaea (SE)

A European public limited liability company established under Regulation $2001/2157/EC$ with a minimum capital requirement of $120,000\,Euros$.

Going Concern Basis

The accounting principle that an undertaking is viewed as an entity that will continue functioning for at least $12\,months$ into the future.

Prudence Principle

A financial reporting principle stating that costs must not be underestimated and profits can only be recognized when they are certain.

Accrual Basis (Actual basis)

The accounting principle where transactions are recorded when the economic operation takes place, regardless of whether the payment has been made or received.

Substance Over Form

The requirement that financial statements represent the economic reality and substance of a transaction rather than just its legal form.

Smart Contract

A coded agreement or program stored on a blockchain that executes automatically when predefined conditions, such as 'if…then' logic, are met.

DAO (Decentralized Autonomous Organization)

An entity composed of coded smart contracts that execute automatically without human oversight, operating on a distributed ledger like Ethereum.

Security Tokens

Digital assets representing ownership in an asset or company, similar to stocks or bonds, and subject to securities regulations.

Utility Tokens

Digital assets that provide access to a product or service within a company’s ecosystem but do not represent ownership.

Governance Tokens

Digital assets that grant holders voting rights specifically within decentralized organizations, allowing them to influence decisions.

Oracle

Technical interfaces or services that connect blockchain smart contracts and DAOs to external systems and real-world data.

Modern Slavery

Exploitative situations including forced labor, debt bondage, and human trafficking that an individual cannot refuse due to violence, threats, or abuse of power.

Due Diligence (CSDDD)

The target duty for large corporations to identify, prevent, and mitigate adverse human rights and environmental impacts throughout their global value chains.

Golfo-Mosca Law

Italian Law no. $120/2011$ which mandates gender balance on corporate boards, requiring a specific percentage of the under-represented gender.