Commercial and Corporate Law: Personality, Organs and Duties
Commercial and corporate law tests the legal architecture of business: the company as a legal person, the allocation of power between organs, capital and securities, directors' duties, and the contract types that support trade.
Separate personality
- On incorporation the company becomes a legal person distinct from its shareholders; creditors reach company assets only. Veil-piercing for fraud, commingling or gross undercapitalisation is exceptional and must be grounded in statute or settled case law.
- Shareholders' liability is generally limited to unpaid capital.
Organs and duties
- General meeting: constitutional amendments, appointments, distributions. Board: management and representation. A supervisory or audit organ where the two-tier model applies.
- Directors owe duties of care and loyalty. Conflicts must be disclosed and approved; self-dealing without disclosure is voidable and triggers damages or accounting for profits.
Capital, shares and minority protection
- Pre-emption rights on new issues; transfer restrictions usually sit in the articles; minority rights include information, challenge of resolutions, and derivative actions.
Commercial contracts
- Agency depends on actual or apparent authority; apparent authority binds the principal where it clothed the agent with the indicia of authority.
- Sale of goods: delivery, passing of risk, retention of title. Secured transactions: registration determines priority.
Worked example
The CEO signs a supply contract with a firm he owns, without disclosure. Reasoning: the loyalty duty and conflict rules are breached; the contract is voidable at the company's option and the CEO must account for profits. A shareholder may bring a derivative action after demanding that the board sue.
Traps
- Making a director personally liable for company debts merely because he signed.
- Ignoring related-party approval formalities.
- Misreading pre-emption rights as a transfer restriction.