Company Law 4 CSEH, Tamás

Chapter 1: What does it mean „company”?

What is the company Participant involved in the economy and in the daily life Invention: H.N.Butler said: The company is the greatest invetion of the modern ages. Tool to get capital Association: the company by his nature comes into existence between two or more persons exept in case of the one-person company

Association Different types of association exist among the people: marriage, family, team, comity, state and different forms of cooperation. Every association has the same goal and object: to move and represent the interests of its members. The company is a special kind of association which is generated by economic purpose: profit making. In order to act in the real and economic life the association needs to have personnality, that is, the ability to obtain rights and obligations

Legal personnality 1.: Two types of persons: a) natural person (human being) and b) artificial or legal person 2.:Legal personality: Its existence comes from the law so it may be named „artificial”. L.P. is granted by the State as the supreme legislation power to the certain association if it fullfils all conditions required by the law.

Legal personality Definition: It is a legal capacity to obtain rights and undertake commitments under its name, such as to acquire property, conclude contracts, and to sue and to be sued. But There are some limits which come from the nature of artifical persons: it can not adopt any child. The company disposes of L.P. but by its nature it is not able to act. So in order to act it needs human acting by his management.

Core features of company coming from the L.P. 1.Own company name 2.Own company patrimony 3.Own company liability 4.Own company organisation (structure) 5.Birth by incorporation

Corporate name Every company has a name which distinguishes it from other company. Under the name it can obtain rights and undertake commitment and can pass contracts and can be owner. It is required that the name should be exclusive (not to be able to be confused with name of an other company ) and should not be misleading The name consists of name and abbreviation of the form of the given company. (e.g.: BNP Paribas S.A., McDonald’s Plc., Deutsche Telekom A.G.) The name may consist of whether a combination of certain numbers or a combination of certain letter.

Corporate name Shell LLC. Can I give this name to my company or not? Shel (with just one „l”) LLC. Is it a possible corporate name of my company? Whether or not is it forbidden to give the following name to a company: „8X2 LLC.”?

Own patrimony Every member should give a contribution to the company in order to be member in exchange for a company share. Contribution may be in money or in nature (Contribution in nature may be building, animals a.s.o.) and in rights (e.g.:know-how, lease, or right to rent a building) The most important: the contribution will become the patrimony of the company itself and not of its members, that is, the patrimony of the company distincts from the personal patrimony of its members. Consequence: the member is not the proprietor of the assets of company and he can not dispose of that. It is the company who is the owner of his own assets.The member is just owner of the company share got in exhange for the contribution.

Own patrimony In order to be shareholder I have given a car as a natural contribution to the company. Questions: who is the owner of the car? Whether or not do I have right to sell it? Can I ask the company to give back the car? Answers: the owner of the car is the company. Since I am not proprietor of the car I can not sell it. During the existence of the company I can not reclaim my contribution since company has ownership over it but I can sell my ownership over the company share gotten in exchange for my contribution.

Own organisation In order to act it needs human acting by his management. Every legal person, the company also, should have an own organisation which may be called as the „body” of the corporate entity. The managment is the leader of the company, it directs the function of the company represents the company before third person and passes contract in name of the company. Supervisory board checks the management in favor of the members. Accounts clerk cheks the book of the company in favor of the public whether they are fit to dispoitions of the law. Labors are not belong to the real organisation of the company since they are rather creditor of the company with reagard to their workforce.

Own liability According to the own patrimony the company is liable with that. If it breached the contract passed by its management it is the company who whould be liable for that. Consequently if the company breaches the contract the other party can not sue the member since the company and not the member is the contractor party. It is true conversely since if the other party breaches the contract the company and not the member may sue it for the claim coming from the contract.

Own liability Let us assume that the company has entered into a credit contract with a bank. 1) The company can not repay the credit in deadline. From who can the bank claim repaying that credit? From the members or from the company? Right answer is: from the company since it is the company and not the members who was the contracting party of the bank. 2)After contracting, the bank does not want to provide the credit for the company. Can the member claim providing it from the bank? No, since this claim belongs to the company as contracting party and not to the member.

Birth by incorporation In order to get legal personality the company should be incorporated into a Register taken by the State via its administration. The reason of the incorporation comes from the publicity. The Register is public, that is, whoever may learn the datas about the company. The Register contains the name and the seat of the company, the name of the members of the management, the amount of capital of the company, and the books of the company.

Foundation of the company Why is it good or bad to establish a company? What are its advantages and disadvantages? Credit from the bank or establishment of a company. What is the less expensive? What is the maximum size of a company?

Foundation of a company Memorandum of Association: every member has to undersign it personnally or via representative. It has to contain some mandatory disposition provided by the law (i.e.: name and residence of the company, the name of the members) but besides this the members can freely agree in the text of the Memorandum exept dispostions which would be against the law (i.e.: criminal law)

Foundation of the company After that you have to file the Memorandum and required papers to the Register taken by the State administartion to incorporate the company to be established.