purpose ofÂ aÂ company law
- Maximizing welfare ofÂ shareholders, creditors, employees
- Enabling law andÂ protective measures
- Broader social objectives:
- reporting onÂ sustainability (long term influence onÂ environment)
- sustainability asÂ corporate goal
- gender andÂ race quotas forÂ corporate boards (inÂ ATÂ >40% ofÂ same gender required)
GesellschaftsrechtÂ â€“ German Law cover company andÂ partnerships
Corporate (company) law andÂ Partnership law are inÂ America. TheÂ are separated.
You canâ€™t invent aÂ new type ofÂ company type (partnership, gmbh, ag).
Every participant is responsible forÂ actions, debts. You can e.Â g. loose aÂ house ofÂ aÂ company will be aÂ bankrupt. You canâ€™t transfer sharesÂ â€“ if someone could have aÂ higher pie, then this guy can do stupid thing andÂ then everyone will be responsible forÂ this. Everyone will be dependable onÂ theÂ human more
Partners are notÂ active managers
Limited liabilities ofÂ silent partner
Partner can be hidden, be anonymous. InÂ aÂ register, silent partner can be notÂ written.
DownsideÂ â€“ silent partner can loose aÂ control andÂ will notÂ be reliable forÂ debts ofÂ entrepreneur
Account documents are notÂ available forÂ aÂ public.
Partnership under civil law
Joint andÂ several debts ofÂ all partner
E.g. go toÂ holiday together andÂ rent aÂ house together.
Criteria forÂ aÂ company
- Legal personalityÂ â€“ legal fiction toÂ take debts andÂ responsibilities.
- Members notÂ personally liable forÂ company debtsÂ â€“ andÂ everything belongs toÂ legal personality
- Delegate management toÂ third parties. Most ofÂ theÂ timesÂ â€“ notÂ shareholders. So, you can invest money, butÂ you will notÂ be aÂ manager
- Transferable shares
- Investor control / ownership
most ofÂ theÂ banks need aÂ human toÂ be aÂ debt taker with your assets toÂ be sure that you will bring theÂ money back.
Types ofÂ companies
PLCÂ â€“ Public Limited Company
AGÂ â€“ AktienGesellschaft
Can be listed inÂ stock market, butÂ notÂ mandatory.
Usually managers andÂ stakeholders are different people
LTDÂ â€“ Private Limited Company
GmbHÂ â€“ Gesellschaft mit beschrĂ¤nkter Haftunng
Less members (usually 1 member)
managers are usually theÂ owners ofÂ aÂ company.
Companies can own theÂ other companies. AndÂ they are going toÂ be enterprises. ButÂ anÂ owner-company is notÂ responsible ofÂ aÂ company which is controlled byÂ her. So it is notÂ aÂ big deal if aÂ company will be aÂ bankrupt.
Tax depends onÂ theÂ type ofÂ company
- hybrids ofÂ PLC andÂ LTD
QuotasÂ â€“ ?....?
If aÂ gov will give anÂ insurance toÂ companies, theÂ , taxpayers will pay forÂ that. Creditors will be less responsible, because they know that if they will be bankrupts, then government will help toÂ pay debt.
Banks donâ€™t give aÂ credit ofÂ aÂ cost ofÂ assets inÂ case that there will be theÂ same situation asÂ it 2008. Margin ofÂ 15%Â â€“ if aÂ immobile property will loose 15% from theÂ moment theÂ debt was given, then still bank will still have aÂ profit, even if aÂ creditor will notÂ be able toÂ pay forÂ debt. OfÂ course, after selling aÂ property, creditor will get theÂ money above theÂ indebtedness, if aÂ property cost more.
Company asÂ aÂ national law
- We will use Austrian law asÂ aÂ starting point
- codified law
- court decisions asÂ results ofÂ private enforcement
- Soft law
- Security lawÂ â€“ affects PLC, majority andÂ minority problem
- Insolvency lawÂ â€“ if aÂ company canâ€™t meet theÂ debts, (e.Â g. bankruptcy). Laws help business andÂ banks toÂ survive andÂ get benefits.
Sources ofÂ Law
European Company Law
- Primary lawÂ â€“ freedom ofÂ establishment, freedom ofÂ capital
- [Bonus] Century lawÂ â€“ freedom toÂ incorporate any company inÂ Europe
Harmonisation via Secondary Law
- Only selected issues
- important inÂ securities legislation
Separate Company Forms
- Societas Europaea
- nothing forÂ SMEs (small, medium enterprises)
Principals andÂ Agents
Principalâ€™s welfare depends onÂ agentâ€™s actions
PrincipalsÂ â€“ Shareholders. They bring assets andÂ money inÂ heads ofÂ Agents.
AgentsÂ â€“ Managers. They have toÂ work inÂ interest ofÂ Principal
How can Principal control if Agent plays inÂ interests ofÂ Principal?
If agent Doesnâ€™t work properly- what toÂ do?
Principal-agents conflicts inÂ company law
ShareholdersÂ â€“ management
- Third party managers
- agency costs, freeriding
- importance depends onÂ corporate ownership
- Widely-held companies vs. concentrated ownership
- Austria vs. UK
Majority shareholdersÂ â€“ minority shareholders
- more important inÂ Austria
- salient issue InÂ corporate groups (transfer pricing, corporate opportunities)
ShareholdersÂ â€“ creditors
- creditors have claims (e.Â g. forÂ loans) butÂ canâ€™t influence running ofÂ business
- important if company is inÂ crisis
ShareholdersÂ â€“ employees
- Employees invest human capital butÂ canâ€™t make any decisions
- labor law + board level representation