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Corporate Law, Corporate Constitution And Corporate Litigation

13th April 2010
By Robert Bell in Business Law
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Corporate law is the set of regulations instigated for the corporate world. The word corporation is synonymous with publicly owned large companies. In US, a company is equivalent to a firm or business, irrespective of whether or not it is a separate legal entity. A corporation can be called a company but a company cannot be called a corporation because a corporation is an association or a union that carries on industrial enterprises.

The most important feature of a corporation is the legal independence of it from the people who are impetus in creating it. If a corporation is on the verge of bankruptcy it will affect the employees more than the higher executives. The shareholders will lose their money but they are not liable for the debts that remain to be paid to the creditors. This rule is known as limited liability and is the reason why corporations have a name ending with Ltd.

Corporate Constitution

Corporate law is derived from two sources which constitute the corporate constitution. In some common law countries including United States, corporate constitution is divided into two different documents. The main and primary document is the Memorandum of association which regulates the activities of the companies with the outer world. This document implies the various objects to be followed by the company and provides the authorized share capital of the company.

The second document is the Articles of Association which regulates the internal management and affairs of the company. These internal procedures include board meetings, entitlements etc. In case of an inconsistency, only the memorandum is publicized in United States. In case of civil law jurisdictions, both the documents are consolidated into one single document known as the Charter.

Usually many companies supplement the Corporate Constitution with additional agreements. This may include documents like shareholder’s agreements etc. One advantage of this document is that it will be completely confidential and will not be publicly filed in case of a jurisdiction. This document fulfils many functions same as that of the Corporate constitution that incorporate the Corporate Law.

Another supplement to corporate constitution is that of the voting trusts which is most common in United States.

Corporate Litigation

As per the Corporate Law, as framed under the Corporate Constitution, members of the company have rights against the company and against each other. According to this right, minority shareholders should accept that they do not have an overall control over the company and have to accept the wishes of the majority shareholders. This is because of their voting limits. This is usually known as the majority rule. However, especially in case there is only one majority shareholder, this customary majority rule may be unethical.

There are number of exceptions to this majority rule, according to the Corporate Law. Minority Members have the right to sue the majority shareholders if they are voting to fool the minority and if the majority invades the personal right of the minority. Another exception is that if the company is controlled by potential wrongdoers, the minority shareholders can file a suit against them.Jane Cooper writes about Houston business attorney related topics and coporate lawyer Houston subjects.
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