What is Companies Law?

Donn Saylor

In business law, companies law is a term applied to the forms of law that govern various companies, corporations, and other business organizations. The main purposes of companies law are to ensure that businesses big and small adhere to the rules of law in a company's country of residence and that funds and resources are distributed in the most equally profitable of ways. Also known as the law of business associations, the predominant entities concerned are corporations, limited and unlimited companies, limited partnerships, limited liability partnerships, nonprofits, partnerships, and sole proprietorships.

Companies law recognizes a corporation as a separate legal personality.
Companies law recognizes a corporation as a separate legal personality.

Companies law recognizes a business or corporation as a separate legal personality. This means that groups of people who have come together with common goals, financial assets, and the intent to generate income are designated as one distinct legal entity. The "legal person" delineation helps to protect individual owners and investors, limiting their liability should the business experience significant losses in profit or damaging lawsuits.

One of the hallmarks of companies law is the upholding of certain standards of business ethics. Companies law monitors the moral and ethical side of the business world, ensuring that both individuals and companies as a whole adhere to practices that are both ethically sound and follow the laws of the countries in which the companies reside. The ethics of finance, human resources, marketing, production rights, sales, and technology are the most common areas of business ethics scrutinized under the tenets of companies law.

The practice of corporate law falls under the category of companies law, though it bears a striking difference in scope. While companies law applies to both big and small business, including nonprofits and trusts, corporate law is focused solely on the actions of large corporations and companies. Though the aims of both types of business law are similar, the issues faced by big business are unique and require special rules and ethical considerations. One of the most discussed issues in big business circles is corporate crime, in which a corporation engages in criminal behavior, typically involving financial matters.

While corporate law keeps its eye on the developments of big business, the practice of corporation sole — another type of companies law — guarantees legal rights to one-owner businesses or organizations. Under corporation sole laws, an individual has one incorporated office and is the only occupant of that space. This style of companies law protects these small associations and permits the business to be passed, in due time, from one office holder to another, granting each new official the same rights as the previous one. Churches overseen by one religious officer are a common example of corporation sole.

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