Checklist
This checklist offers an overview of company law across some of the world’s major regions.
Definition
A company is a legal entity created by law that consists of one or more persons. For a company to exist, it has to be incorporated and governed by its bylaws. A company comes into existence when the relevant incorporation body issues a certificate of incorporation.
The incorporation procedures differ from jurisdiction to jurisdiction and depend on the company laws governing the country in which the company is incorporated. In general, most company laws are there to regulate the running of companies in the interest of investors and shareholders. The overall purpose is transparency and accountability.
A company is considered to be domestic in the country in which it is incorporated and foreign in every other country. In the United States, a company is also considered foreign if it is incorporated in another state of the Union. This has implications not only for the formalities of incorporation but also in relation to the financial and tax regime of the company. The company laws governing the company will be those where the company is resident.
The procedures for incorporating a company in the United States depend on the state in which the company is incorporated. There is no general corporation law or federal common law relating to corporations. The main recognized commercial jurisdictions are the states of Delaware, New York, and California.
Each country of the European Union has its own specific requirements regarding the formalities of incorporation and the types of companies that may be formed. Some countries require greater formalities than others. In the United Kingdom, for example, incorporating a company is relatively easy and not expensive.
In May 2006 a new company law came into force in Japan. The new law simplified many of the formalities of incorporation, reduced its cost, and made the governing of companies more flexible.
Advantages
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Company law provides a regulated environment for companies to operate in.
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It protects shareholders and investors in a company.
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In general, company law allows for the harmonization and homogenization of international markets, thus maintaining transparency, fair dealing, and protection against fraud.
Disadvantages
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Company law is very complex and specialized.
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When dealing with more complex company law issues, it is wise to obtain legal advice.
Action Checklist
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Check the company laws of the country in which you incorporate your company.
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Obtain specific legal and tax advice and make sure that you understand the implications and responsibilities of incorporation and ownership of a company in that particular jurisdiction.
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Be prepared to comply with the formalities of incorporation and also with the filing requirements and formalities required to be made after the incorporation.
Dos and Don’ts
Do
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When incorporating or acquiring a company, always seek to understand the company laws of the country or region in which the company is registered.
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Obtain relevant advice regarding the acquisition or incorporation of a company.
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Research the market carefully before making a decision to incorporate a company in that country.
Don’t
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Don’t underestimate the need for proper research and professional advice.
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Don’t ignore the importance of understanding directors’ duties and secretarial duties under company law; if you do, the consequences could be costly.
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