Corporate Law 101

Corporate law is important whether you are a business owner or simply a student. In this article, we will cover a variety of topics, including intellectual property rights, bankruptcies, and tax laws.

Principle-agent problems

The Principal-Agent Problem is the concept of one person making decisions for another. It’s also the result of an asymmetric distribution of information. This happens when one party has a much more comprehensive information than the other.

The principal-agent problem has been studied and examined by economic theorists for many years. Then, in the 1970s, American economists first started to check it.

The Principal-Agent Problem was outlined in a paper by Michael Jensen and William Meckling in 1976. They argued that the nature of an owner-contractor relationship dictates a firm’s costs.

The Principal-Agent Problem has many applications, including the politics and science of business. For example, if the CEO of a company decides to pay big bonuses to managers or opts to plow profits into expansion, the company is liable to suffer financial losses.

Separate legal personality

Having a separate legal personality is one of the most fundamental aspects of corporate law. Its legal significance has been recognized since ancient times. It underlies business law and prevents members from doing illegal acts in the company’s name.

The Doctrine of Separate Legal Entity was formulated in the nineteenth century. It was first applied in Salomon v A Salomon & Co Ltd. The company was incorporated under the Companies Act of 1862. It was a financially struggling company.

The case was brought to the House of Lords, and the resulting decision reaffirmed the intent of the Companies Act. It also overturned the lower court’s decision and held that a company is a distinct legal entity from its owners.

It is important to note that the concept of a separate legal personality has been recognized in almost all company laws worldwide. This is due to its benefits.

Tax law

Having a career in Tax law can be rewarding. It is challenging, intellectually demanding, and offers excellent job prospects. In addition to providing expert advice, tax lawyers can also give the clients tax-efficient transactions.

Many tax lawyers work on a team with other attorneys and accountants. Others specialize in tax law and are employed by big firms. Most tax lawyers work for individual and closely held businesses, though some move on to in-house positions.

One of the most important aspects of any tax law practice is staying current with new developments in tax law. These changes may affect the way that a business is structured. For example, a not-for-profit corporation with charitable activities may qualify for a 501(c)(3) tax-exempt status. However, the business may lose that status if the organization misapplies earnings.

Intellectual property rights

During the 19th century, intellectual property rights became essential in trade negotiations. The resulting Paris Convention, written in 1883, has been amended several times to keep up with the changing nature of IP law.

The underlying social purpose of intellectual property is to promote the creation of new technology and encourage creativity and innovation. However, developing and producing IP requires heavy investments in human and financial resources.

The costs involved in translating IP into commercial ventures have increased over time. Consequently, protecting knowledge is essential to ensure sufficient profits are available for continued R&D investment.

Patents and copyrights are two main types of intellectual property rights. A patent protects the right of the inventor to exclude others from making, using, or selling the invention. A copyright protects the author’s right to reproduce or distribute an original work. These rights are enforceable through lawsuits or court order.

Bankruptcy

Generally, bankruptcy is the legal process through which a company or individual can eliminate or modify obligations. There are two types of corporate bankruptcy. The first involves liquidation, which ends a business, and the other consists of a reorganization, which allows a company to continue operating.

The best way to describe the difference is that banks and creditors have priority over one another in the formal process, while in the informal case, the manager has the final say. However, in the official process, the manager makes the most of their powers by selling as much of the company’s assets as possible.

In the legal case, the company proposes to its creditors. This may be a plan to repay the debts over a certain period. It might also be an agreement to accept less than what is owed.