"Comprehensive Business Law Notes for AAT and CA Students – Your Ultimate Study Guide!"
Are you preparing for your AAT or CA exams? These meticulously crafted business law notes are all you need to succeed! Covering everything from fundamental concepts to in-depth analysis, our notes are speci...
An incorporated company, often referred to as a corporation, possesses
several distinct characteristics that set it apart from other business entities.
Here are the primary characteristics:
### 1. **Separate Legal Entity**
An incorporated company is a separate legal entity from its owners
(shareholders). This means the corporation can own property, incur debt,
enter into contracts, sue, and be sued independently of its shareholders.
### 2. **Limited Liability**
Shareholders of a corporation have limited liability. This means they are not
personally liable for the company's debts and obligations beyond their
investment in the company. Their personal assets are protected.
### 3. **Perpetual Existence**
A corporation has perpetual existence, meaning it continues to exist even if
the owners or shareholders change or if shareholders die or sell their shares.
The company only ceases to exist if it is formally dissolved.
### 4. **Transferability of Shares**
Shares of a corporation can be transferred easily from one person to another.
This provides liquidity and flexibility for shareholders and facilitates
investment.
### 5. **Centralized Management**
The management of a corporation is typically centralized in a board of
directors and officers. The board of directors is elected by the shareholders
and is responsible for major decisions and policies, while officers handle
day-to-day operations.
### 6. **Corporate Formalities**
Corporations are required to follow specific formalities and procedures, such
as holding annual meetings, keeping minutes of meetings, and maintaining
detailed financial records. These formalities ensure transparency and
accountability.
### 7. **Taxation**
,Corporations are subject to corporate tax on their earnings. In some
jurisdictions, this can lead to double taxation, where the corporation pays
taxes on its profits, and shareholders pay taxes on dividends received.
However, some types of corporations, like S corporations in the U.S., can
avoid double taxation.
### 8. **Raising Capital**
Corporations can raise capital more easily compared to other business
entities. They can issue shares of stock to investors and may also issue bonds
or other securities.
### 9. **Regulation and Compliance**
Corporations are subject to extensive regulation and compliance
requirements. They must adhere to corporate governance standards,
securities laws, and other legal and regulatory obligations.
### 10. **Ownership and Control Separation**
There is often a separation between ownership (shareholders) and control
(board of directors and officers) in a corporation. This separation can lead to
the principal-agent problem, where the interests of the managers (agents)
may not always align with those of the shareholders (principals).
### 11. **Distinct Name**
An incorporated company operates under a distinct legal name, which is
registered and protected by law. This name helps in establishing the
company's identity and brand in the market.
12. can sue and be sued in company name
The "veil of incorporation" refers to the legal concept that separates the actions
and liabilities of a corporation from those of its shareholders, directors, and officers.
This doctrine is fundamental in corporate law and allows a corporation to be treated
as a separate legal entity, distinct from the individuals who own or run it. Here are
key points related to the veil of incorporation:
Salomon v A Salomon & Co Ltd (1897) AC 22 is a landmark UK company law case
that firmly established the principle of corporate personality and the concept of
limited liability. This case is foundational in company law, illustrating the separation
, of a company's legal identity from its shareholders and directors.
● A debenture is a type of long-term debt instrument issued by a company to
borrow money. It is essentially an IOU that the company gives to investors.
When a company is liquidated, its assets are sold off to pay its liabilities. The order in
which different parties are paid is governed by legal and contractual priorities. Here
is a simplified overview of the typical order of payment to liability parties during
liquidation:
1. Secured Creditors
● Definition: Creditors who have a legal claim (lien) on specific assets of
the company as collateral for their loans.
● Payment: They are paid first from the proceeds of the sale of the assets
on which they have a claim. If the secured assets are insufficient to
cover the debt, the remaining amount owed to them becomes
unsecured.
2.Creditors who liable
3. Preferential Creditors
● Definition: Creditors given priority by law, often including employees and
certain taxes.
● Payment:
● Employee Claims: Wages, salaries, and sometimes redundancy
payments owed to employees up to a certain limit.
● Taxes: Certain unpaid taxes like VAT, PAYE (Pay As You Earn), and
National Insurance contributions.
4. Unsecured Creditors
● Definition: Creditors who do not have any specific assets securing their debt.
● Payment: These include suppliers, customers, and unsecured lenders. They
are paid from the remaining assets on a pro-rata basis (each receives a
proportionate share based on the amount of their claim).
5. Shareholders
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