Company Law

Background:   why do we need companies and partnerships?   what kind of organs do they have?   what is unlimited and what is limited liability?   usually, who is the representative of a company?   how can the state recognize a company?

Reasons, functions 1. Combining different factors of production (e.g. labour, capital) 2. Limiting liability – enhancing entrepreneurial spirit 3. Company as an organized marketplace

Establishing a company: the requirements 1. Members (minimum? restrictions?) 2. Capital requirements:   a) Equity v credit capital   b) Registered capital v actual capital   c) Minimum registered capital 3. Establishing documents: co. name + seat + members + activities + capital (cash / in kind) + officers + extras (signing, duration, type specific elements)

The process of establishing a capital 1. Signing the establishing document 2. Counter-signature of an attorney 3. Pre-company status, preliminary activity 4. Paying-in the contribution (according to the ratio defined by national law) 5. Registration: birth of the company

Organs/bodies of the company 1. General/strategic decision making (legislation): members’ meeting, (general) assembly 2. Management (day-to-day operation, execution): executives, managing partners 3. „Trust is good, control is better”: supervisory board, non-executive directors (two-tiered v one-tiered systems)

Types of business entities   Partnerships: general and limited partnership   Limited liability company   Stock corporation (shareholding company)

General Partnership   Unlimited & joint and several liability!   Small, family businesses.   Easy to establish and to administer.   Representative: managing partner.   No minimum capital requirement.

Limited partnerships   The same rules are applicable as in case of general partnerships, with the exception that there is a limited partner.   The liability of the limited partner does not exceed the money he/she invested.   The question whether the limited partner may take part in the management of the company depends on local law.

Limited liability company Limited liability company (LLC ~ USA), Private company limited by shares (Ltd. ~ UK), GmbH (Germany), Kft. (Hungary), SARL (France) Limited liability of the members. Representation: managing director. Transfer of shares: some restrictions may apply, e.g. right of preemption, assent of the members’ meeting.

Stock corporation   Closely & publicly held stock corporation.   Publicly held stock corporation: shares/stock publicly traded on the capital market (stock exchange) ~ in case of a closely held corporation public trading is forbidden (similar to LLC).   Board of Directors, Supervisory Board, Auditors, Assembly.