Lecturer: Miljen Matijašević Session 5

1. Revision - Vocabulary practice 2. Forms of Business Organisation in the USA 3. Vocabulary practice

Contract

You might have to change the form of the word Complete the following sentences with the words from the list. There is one more word than you need. You might have to change the form of the word, add a suffix and/or a prefix.

1. If the defendant is to be found liable for negligence, the damage _________ by the claimant must have been _________, and not too _________ from the tortious act itself in order to establish _________. 2. Parties are considered to have entered into a contract if there has been _________ acceptance of the binding offer made by one party. If this criterion has not been met, the contract is considered as _________. 3. If a product causes damage, the producer, distributor and/or seller have _________ liability for the damage. 4. In cases where both tortious and non-tortious risks of damage are present, the tortious risk is referred to as the _________ risk, and the non-tortious as the _________ risk.

1. If the defendant is to be found liable for negligence, the damage SUSTAINED by the claimant must have been FORESEEABLE and not too REMOTE from the tortious act itself in order to establish CAUSATION. 2. Parties are considered to have entered into a contract if there has been UNQUALIFIED acceptance of the binding offer made by one party. If this criterion has not been met, the contract is considered as VOID. 3. If a product causes damage, the producer, distributor and/or seller have STRICT liability for the damage. 4. In cases where both tortious and non-tortious risks of damage are present, the tortious risk is referred to as the INCREASED risk, and the non-tortious as the ORIGINAL risk.

1. What is the definition of contract? 2. What are the necessary elements of a contract? 3. What is a counter-offer? Can it make part of a contract? 4. Does acceptance need to be communicated? 5. Which types of contract must be in written form? 6. What is the difference between a void and a voidable contract?

Company/corporate law

COMPANY LAW (UK) / CORPORATE LAW (US)  deals with the creation and regulation of business entities  a business entity - poslovni subjekt

Three main types: 1. sole proprietor (a.k.a. sole trader) 2. partnership 3. limited company What do you think the main differences are and what kinds of businesses are they suitable for?

 The simplest and most common type of business organisation  Owned by one person, who: ◦ has unlimited control over the business ◦ enjoys all the profits ◦ has unlimited liability for debts and losses

 Suitable for businesses such as self- employed hairdressers, plumbers, retail shopkeepers, barristers, translators, etc. Think of the advantages and disadvantages of being a sole proprietor!

AdvantagesDisadvantages  one person – owner and manager: ◦ independent decision- making ◦ keeps all the profits  simple to set up  few formalities  unlimited liability for debt and losses  risks increase if the business becomes very successful  hard to raise substantial capital

 association of two more more persons (usually up to 20) partnership agreement  subject to a partnership agreement  common among accountants, solicitors, architects, etc.  a simple partnership – not a legal person

 May regulate the following: ◦ duration of the partnership ◦ its name and business ◦ the manner of sharing profits, losses and costs ◦ capital contribution ◦ joining and leaving the partnership ◦ restrictions imposed on the partners ◦ etc.

AdvantagesDisadvantages  capable to raise and utilize more capital  brings together people with different skills  profits distributed  limited freedom and decision-making power  certain disadvantages in comparison with a limited company

Limited company (UK) / Corporation (US)  An artificial person created under law and empowered to achieve a specific purpose  A legal entity (pravni subjekt) which can own property, enter into contracts, sue and be sued – an identity separate from its shareholders

 Some characteristics: ◦ perpetual life (perpetual succession) ◦ limited liability ◦ transferability of shares ◦ access to capital ◦ professional management

 usually starts out as a Private Limited Company (Ltd.)  Needs to be registered – gets a registered number (reg.no.) and Certificate of Incorporation (UK)  This is called: company registration (UK) or incorporation (US)

 Constitutional documents: ◦ Memorandum of association  states the principal objects (purposes) of the company ◦ Articles of association (statut društva)  sets out the relationship between the company and its shareholders  limited liability  issue of new shares

 A company has: ◦ shareholders ◦ a Board of Directors (managers of the company’s operations) ◦ creditors (those to whom the company owes money)

 if a private limited company needs to raise capital in order to expand its business, enter into a major project, it can decide to either: ◦ borrow money from an investment bank  subject to payment of interest, whose rate depends on the risks involved ◦ raise capital by selling its shares on the stock market

listed company  if a company issues shares and puts them on the stock market, we say that it is a publicly listed company and is referred to as a public limited company (plc)  it issues a prospectus*, offering a public sale of its shares, listing them at a stock exchange** (e.g. FTSE – the London Stock Exchange) *prospekt, javni poziv na kupnju dionica **burza dionica, vrijednosnih papira; stock market – tržište vrijednosnih papira

 the company is run by the Board of Directors  the Board is accountable to the shareholders, although the Board decides how to distribute profits  they can decide to pay a dividend to the shareholders, or re-invest the profits into the business  a dividend is a proportion of the profits paid to the shareholders

 PLCs hold Annual General Meetings (AGM) where the performance of the company in the previous year is presented, as well as plans and strategies for the future  an Annual Report is produced and submitted to the shareholders  members of the Board of Directors may submit themselves for re-election by the shareholders

AdvantagesDisadvantages  limited liability, i.e. no personal liability of the shareholders  perpetual life  can sell shares, easier to raise capital  ease of transfer  more complicated and expensive to set up  lots of formalities

sole proprietor/trader partnership limited company corporation legal entity unlimited liability partnership agreement transferability of shares perpetual life private limited company company registration registered number articles of association

public limited company listed company prospectus shareholder Board of Directors stock market stock exchange accountability AGM annual report dividend

Thank you for your attention!