Understanding Corporate Law & Its Importance

Understanding Corporate Law & Its Importance

July 14, 2022 By Dinesh Parmar

What is Corporate Law?

Corporate law is a set of rules, regulations, laws & practices that govern the formation, operation, management & organisation of the Corporation. These rules & regulations serve as primary guidelines about how to run & manage a corporation successfully. It covers all the stakeholders involved in the corporation & defines their legal rights, duties & obligations.

What is a Corporation?

To better understand corporate law, we should first define what do we mean by a corporation.

A corporation is a separate legal entity formed to conduct business & transactions. It differs from the group of individuals that are working or associated with it, be it owners, shareholders or employees. A corporation can conduct business in its own name just like an individual. Put simply, a corporation is like a separate person.

5 Prime Principles of Corporate Law

1. Limited Liability

If ever a corporation gets sued, the liability is with the corporation only since it's a separate entity. The owners & investors are not personally responsible to the corporation, their liability is limited to only the amount they have invested in the corporation.

2. Investor Ownership

Investors' ownership in the corporation is limited to the profit share only in the proportion of their investment. Though they may help in making decisions, they aren’t involved in actual decision-making per se. The task of running & decision-making rests with the owners & management of the corporation.

3. Legal Personality

All the stakeholders, be it investors, owners or employees pool their resources in a separate legal entity that can utilise the assets for conducting its business activities & transactions. The separate legal entity can make use of resources the way it likes whether in buying or selling assets without seeking permission of investors or owners alone.

4. Transferable Shares

Hassle-free transferring of shares is one of the unique features of the corporation. If an owner no longer wants to be a part of the corporation, they may transfer their shares to another owner in the corporation, just like in a business partnership.

5. Delegated Management

A corporation follows a hierarchical approach such that proper accountability & responsibility is established & defined to prevent chaos. Typical corporation management consists of a Board of Directors & Officers. The Board hires, monitors & supervises the officers & is responsible for the ratification of decisions made by the officers. The officers are responsible for conducting day-to-day activities of the corporation & making routine decisions. The shareholder's in turn help elect the board members.

Why is Corporate Law Important?

Corporate law is often misunderstood as it exists to place restrictions on corporations & the way they conduct their business. The truth is almost the opposite, the laws, rules & regulations are there to prevent usurping of power by any large, big-pocket corporations. Its main purpose is to ensure free & fair conduction of businesses by establishing a uniform platform for all. It prohibits any discrimination in the capital, size or market share terms & allows easy entry & exit for any sized corporations. In short, they enhance the ease of doing business for corporates.

The Legal Defense: Lawyers, Advisers & Firms

Corporate lawyers are the people who help corporations in cases where there are violations of Corporate Laws. A corporate lawyer is someone who is extremely familiar with the ins & outs of corporate laws & assists corporations in instances where there is a misuse of power, breach of laid agreements, unethical business practices, employer & employee conflicts, intellectual property violations, bankruptcy & other law violations.

Corporate Law or Legal Advisers are inhouse lawyers that advise corporations in their decision-making process by providing inputs & ensuring that the corporation remains within the confines of the law. Corporate Law Advisers are in great demand these days, especially with the boom of entrepreneurship to help these small companies grow steadily while preventing them from crossing legal boundaries.

In instances where a hostile takeover or forced acquisition is on the cards, a reputed Corporate Law Firm is the option to be explored. These firms have years of expertise behind them & can effectively suggest & advise tactics such as White Knight, Pacman Defense, and Poisson Pill among others to successfully prevent any forced merger, acquisition or takeovers. Corporate Law firms bring together a host of experienced corporate lawyers & advisers in one place to assist in fighting the big conglomerates' unjust business practices. Not just that, they also are useful in charting an expansion plan & preparing strategies for fostering growth & innovation in the concerned corporation within legal limits.

What Skills to look for in a Corporate Lawyer or Firm?

1. Excellent Communication & Negotiation Skills

Undoubtedly this is the number one skill to look for, as most of the corporate lawyers would try their level best to prevent litigations & try to settle the matter as amicably as possible. Communication & negotiation skills are also important to lead the way in getting the best deal possible & tender advice in cases of mergers & acquisitions.

2. Attention to Detail

A good corporate lawyer is one who knows the loopholes that unethical businesses usually adopt & how to plug such loopholes. Put simply, they must be thorough with their understanding of Corporate Law & must always pay great attention to the fine print in legal documentation. An observant eye could easily catch the traps that are deceptively employed in certain documents.

3. Perseverance & Passion

Litigation is a tricky & tedious process, it can stretch from days to several years. A good corporate lawyer must have patience, perseverance & passion in abundance. They should be interested in the work they are doing & not try to rush through cases in search of more money or accolades.

4. Knowledge About Latest Trends

With the revolution in the IT space, a vast majority of laws & rules are being updated regularly with ease & often they get missed due to the huge workloads. In-depth knowledge about the current trends & best business practices also helps in advising clients to grow their businesses in a more sound & efficient manner. It also increases the credibility & impression one carries with their work.

The Last Thing

We have almost covered in an exhaustive manner the fundamentals & importance of Corporate Law, the defense required to mitigate or prevent legal troubles & the skills to look for in a corporate lawyer. A sound understanding & knowledge of these basics are prerequisites to interpreting the complex laws of the land where the business is incorporated. In today’s time with cutthroat competition, getting a corporate lawyer is a necessity, more importantly, the right one to opt for. Should you face any issues or have any unanswered queries, feel free to reach out to us, our team of dedicated professionals with decades of expertise are ever-ready to help you scale heights.

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