Commercial Law and Corporate Law
Commercial Law and Corporate Law tests business entities, corporate governance, and commercial instruments. Expect integrated questions on company formation, director duties, shareholder resolutions, negotiable instruments, and insurance.
Core rules
- A company acquires legal personality on registration; promoters may act before registration, but liability rules differ before and after incorporation.
- Directors owe duties of loyalty and care. A conflict-of-interest transaction requires disclosure and proper approval; otherwise the company may claim disgorgement or damages.
- Shareholder resolutions must satisfy notice, quorum, and voting rules. Defects may make a resolution void or voidable, depending on the defect.
- Corporate personality may be disregarded only in exceptional abuse or evasion cases, not merely because a company is thinly capitalized.
- Negotiable instruments depend on formal signatures and good-faith acquisition; insurance depends on insurable interest and disclosure duties.
Worked example
A CEO causes the company to sell land to his own shell company below market value without disclosure. The transaction is a conflict-of-interest transaction. The CEO breached loyalty by failing to disclose and obtain approval. The company can claim the secret profit or damages; the contract is not automatically void merely because of the conflict. If a shareholder challenges the approving resolution, the court examines notice, quorum, and whether the conflicted director voted improperly.
Traps
- Piercing the corporate veil without exceptional abuse.
- Treating every resolution defect as void rather than voidable.
- Ignoring approval and disclosure for self-dealing.
- Confusing promoter liability with company liability.
- Missing formal requirements for negotiable instruments.