Commercial and Corporate Law: Entities, Governance, and Transactions
The company as a legal person
Commercial questions test the consequences of incorporation: separate personality, limited liability, and the allocation of power among shareholders, directors, and officers. Candidates must also understand the principal commercial instruments used in Bhutan.
Concepts you must command
Know the types of business entity, the formalities of incorporation, the constitution of a company, share capital and transfers, directors' duties of care and loyalty, the rules on related-party transactions, and the requirements for company meetings and resolutions. Understand the difference between a company and a partnership, the doctrine of lifting the corporate veil, and the rules on winding up. Understand negotiable instruments, secured lending, and the basic framework of insolvency.
Traps that appear in questions
- Treating directors as agents of shareholders rather than fiduciaries of the company.
- Lifting the veil merely because a company is a convenient structure.
- Confusing share transfer with transfer of assets.
- Assuming a resolution passed at an improperly convened meeting is valid.
- Overlooking registration requirements for charges.
Rule of thumb
Identify the entity, then the organ with power, then the formality required. Most corporate errors are failures of authority or formality, not substance.
Worked example
A director buys company property for himself without disclosure. The analysis: the director owes a duty of loyalty and must disclose the conflict; the transaction is voidable at the company's instance, and the director must account for any profit. Shareholder ratification is possible only with full disclosure and proper procedure.