Legal Characteristics of Modern Company
OVERVIEW OF CHINESE COMPANY LAW
(I) Legal characteristics of Modern Company
A modern company has a set of legal characteristics:
1. Independent legal personality
2. Limited liability
3. Transferability of shares / interests
4. Centralised Management
5. Investor Ownership
These characteristics respond to the economic exigencies of the large modern business.
1. Independent Legal Personality
Meaning:
- Independent from investors and the management;
- Counter-party in corporate transactions (serve as a single contracting party that is distinct from the various individuals who own pr mange the firm);
- sueing and being sued in its own name;
- the company is the owner of a pool of assets that are distinct from other assets owned by the owner
Assets are conceived as belonging to the firm, rather than the form’s owners, they are unavailable for attachment by the personal creditors of these persons.
It is termed as entity shielding which involves shielding the assets of the corporation from the creditors of entity 's owners.
Entity shielding involves two rules of law.
The first is a priority rule that grants to creditors of the firm, as security for the form’s debts, a claim on the firm’s assets that is prior to the claims of the personal creditors of the firm’s owners. The consequence of this rule is that a firm’s assets are automatically made available for the enforcement of contractual liabilities entered into in the name of the firm.
The second component of entity shielding - a rile of liquidation protection - provides that the individual owners of the corporation (the shareholder) cannot withdraw their share of firm assets at will, thus forcing partial or complete liquidation of the firm, nor can the personal creditors of an individual owner foreclose on the owner’s share of firm assets. This rule serves to protect the going concern value of the firm against destruction either by individual shareholders or their creditors.
(I) Legal characteristics of Modern Company
A modern company has a set of legal characteristics:
1. Independent legal personality
2. Limited liability
3. Transferability of shares / interests
4. Centralised Management
5. Investor Ownership
These characteristics respond to the economic exigencies of the large modern business.
1. Independent Legal Personality
Meaning:
- Independent from investors and the management;
- Counter-party in corporate transactions (serve as a single contracting party that is distinct from the various individuals who own pr mange the firm);
- sueing and being sued in its own name;
- the company is the owner of a pool of assets that are distinct from other assets owned by the owner
Assets are conceived as belonging to the firm, rather than the form’s owners, they are unavailable for attachment by the personal creditors of these persons.
It is termed as entity shielding which involves shielding the assets of the corporation from the creditors of entity 's owners.
Entity shielding involves two rules of law.
The first is a priority rule that grants to creditors of the firm, as security for the form’s debts, a claim on the firm’s assets that is prior to the claims of the personal creditors of the firm’s owners. The consequence of this rule is that a firm’s assets are automatically made available for the enforcement of contractual liabilities entered into in the name of the firm.
The second component of entity shielding - a rile of liquidation protection - provides that the individual owners of the corporation (the shareholder) cannot withdraw their share of firm assets at will, thus forcing partial or complete liquidation of the firm, nor can the personal creditors of an individual owner foreclose on the owner’s share of firm assets. This rule serves to protect the going concern value of the firm against destruction either by individual shareholders or their creditors.