International Corporate Law and Governance Report Analysis

This report provides a comprehensive overview of international corporate law and governance. It begins with an introduction to corporate law as a fundamental aspect of business organizations, emphasizing the significance of separate legal entities and the roles of directors and shareholders. Task 1 delves into fundamental legal concepts such as separate legal entities, limited liability, regulation of share capital, corporate governance, appointment and removal of directors, and the rights and duties of shareholders. The report uses the case of Salomon v Salomon & company to provide information about piercing of corporate veil. Task 2 explores corporate governance theories, including agency theory, stakeholder theory, stewardship theory, and transaction cost economics. The report highlights the regulations and strategies employed to ensure a balance between stakeholders, management, customers, suppliers, government, and society, offering a detailed analysis of the legal framework and practical applications within the international corporate landscape. The report also highlights the importance of corporate governance in the legal position of every company and the duties of members.

International Corporate Law
& Governance

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
1. Fundamental legal concept and corporate legal entity............................................................1
TASK 2............................................................................................................................................5
2. Corporate governance theories, regulation and strategies.......................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Corporate law is the significant part of every business organization. It is considered as
broader concept of companies. It is complete study of shareholders, workers, creditors and other
members who are directly connected with entity. International corporate law and governance is
able to deals with issues of both public as well as private law (Aguilera and Jackson, 2010). At
the time of incorporation and wind up of company, owners need to comply with rules, regulation
and policies which are imposed on them. Further laws are imposed on entities which are
registered under company law. Every corporate firm having separate legal entity which are
different from their directors and other members. Directors having ultimate over entire
performance of company so that, they have to fulfil their obligation in timely and effective
manner. Shareholders are also part of firm who hold number of shares against which receive
amount in the form of dividends.
TASK 1
1. Fundamental legal concept and corporate legal entity.
Corporate law imposed legal obligation on various types of business entities. Any issue
which create within organization are able to resolve through this law. Owners are bound to
follow rules and regulation as related to incorporation or wind up of company also imposed on
them. Firm having separate legal entity different from their members also having perceptual
succession and common seal (Mallin, 2011). Firstly, owner is bound to registered their names in
order to conduct transaction with their own names as no other companies can use same name of
firm. Every running business needs to comply with laws in order to maintain their performance
in international market and try to opted various types of methods which are helpful for them to
attain their set of target. Members have to use appropriate tools and techniques in order to protect
rights of employees and maintain quality work as well. Human resources department responsible
to appoint employees as per the limit has been fixed by law. Allot work to worker according to
their skill, knowledge and experience. Companies not able to remove directors or other higher
authorities without any legal formalities. Provide one-month advance salary or one-month notice
to them. Provide specific rights to their shareholders in order to protect their interest. Owners
having ultimate control over entire operation of business. They have to follow set of rules and
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procedure on continuous basis in order to comply with laws which are enacted by act of
parliament.
Shareholders are also considered as important part of every firm who invest money in
organization in the form of shares and receive dividends as well (Scherer and Palazzo, 2011). On
the other hand, debenture holders invest money in form of debentures and receive interest after
stipulated time period. Members of firm conduct meeting which is called as annual general
meeting and extra ordinary general meeting. In such, staff members are responsible to take
effective decision in interest of entire company and able to maintain performance as well.
There are various types of fundamentals of corporate laws which having impact on
existence of every business organization. These laws needs to follow by entities in order to
ensures smooth functioning. Various laws are as aligned below-
Separate legal entity- Every company having separate legal entity other than their
directors and other higher authorities. After registration companies are able to done all
transaction with their own name with any influence of other (Bebchuk and Weisbach, 2010). No
other company is able to use name of other firm for conduct their own transaction. In case they
do such act then courts imposed penalties of them equal to mentioned under law. After
registration in company’s law act company can sue other and be sued by others. If all members
leave office, then existence of business is still continuing. According to laws various types of
restrictions are imposed of firms not on its directors or other members. Furthermore, it is
fundamental concept of law which is beneficial for continuous success of firm.
Case: Salomon v Salomon & company, this case provides information about piercing of
corporate veil. Through which members are aware about entire financial performance of firm.
Through no data of company reveal in public.
Limited liability- This is the legal term which is imposed on members. As persons who
are connected with firm are responsible to bear limited liability. They are only able to pay
amount equal to shares they hold. They have to pay amount equal to nominal value of shares
they hold. If shareholders failed to made payment of their shares then their shares are being
forfeited and sell to another person at revised value (Boulton, Smart and Zutter, 2010). They
have to follow rules and regulation which are imposed on them. Members of public limited
company are bound to fulfil limited liabilities and in case private firm members are bound to
fulfil unlimited liabilities. In this legal term shareholders are legally able to pay debts of entity
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which are equal to the extent of nominal value of shares which they are hold. Which is not able
to exceed amount which members are invested in firm. This is considered as one of the biggest
benefit.
Regulation of share capital- The effective share capital of every company has been
divided into small parts which are called as shares. Law imposed some regulation and rules on
entire business organization which have to follow by owners. This rules of law is able to resolve
matter of employees which created within working place (Brammer, Jackson and Matten, 2012).
This is able to maintain relationship among both employer and workers. Owners needs to ensures
that company follow all rules, regulation and policies which are imposed on them. They have to
ensures that available resources are effectively use in order to attain their goals and objectives.
They have to frame effective plans and strategies which are helpful for them to attain their target.
Through this companies receive better opportunities for attain continuous success and maintain
performance in international market.
Corporate governance
The legal position of every company has been defined under corporate governance.
Members who are employed in company, their duties are mentioned under law. All effective
decisions taken in meeting which are conducted by members in order to discuss some important
points. Shareholders also having right to receive interest amount (Harford, Mansi and Maxwell,
2012). If companies, follow provisions of law then are able to control overall operation of firm
and maintain its performance as well. They have to comply with systematic procedure of
appointment as well as removal of directors. Not able to done unfair dismissal with them. In
order to remove employee, staff members have to provide one-month advance salary or notice
period to them. They have to appoint required number of employees as per the regulation of
corporate law.
Appointment of directors- Firm needs to appoint required number of employees which
are mentioned under law. Human resources department is responsible to appoint worker who
have required skills, knowledge and experience (Dolzer and Schreuer, 2012). Also allot work to
them accordingly. Through this they are able to attain their target and objective as well.
Company also appoint additional directors for the purpose of meet their set of target. Duties of
members are mentioned under company law. Members have to take effective decision with
majority in order to protect interest of people. After appointment of workers, managers and
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leaders are responsible to conduct proper training session for their employees in order to boost
up their level of confidence and improve their quality work as well. Through this they are able to
control performance of employees.
Removal of directors- According to section 168 of Companies act 2006, existing
members having power to remove director (Muchlinski, 2012). For this purpose, members with
majority may pass special or ordinary resolution in order to remove director and also specified
for the same. Person who commit wrongful act orb not beneficial for the success of company,
other members may hold meeting take decision regarding removal of such person. While
conducting such activities members need to follow rules and regulation as imposed on them. But
before leaving office company provide opportunity of being heard to them. Tribunal take final
decision regarding the same.
Directors duties- Directors are considered as important part of every business
organization. There are various types of duties or powers are imposed on them which have to
fulfil by directors. They need to avoid conflict from company and try to use their collective
efforts in order to attain set of target and objectives as well (Abdi and Aulakh, 2012). Not to
revel specific information in public which may cause harm to success of company. Try to
conduct transaction with the name of company. Prepare proper written financial document and
record all relevant information of firm. Use their collective efforts in good faith in order to
protect interest of people and put company in profitable position. Take decision only with
majority number of members. They have to follow instructions which are provided by board of
directors. Try to provide use their skills and knowledge for create competitive advantage of firm.
Rights of shareholders- Various rights and duties of shareholders are mentioned under
law which need to be follow by every company (Karolyi, 2012). Shareholders are responsible to
to pay entire amount equal to the nominal value of their shares. This is considered as compulsory
payment which is paid by members of company in order to hold percentage of share capital.
Shareholders having right to receive dividend after specified time period and equal to percentage
defined by company.
 Right to attend meeting- Shareholders having to right to attend general or extra
ordinary general meeting and also able to share ideas and information as well.
Right to receive advance notice of meeting and other member must ensure their
attendance.
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 Right to receive dividend- The rate of dividend has been fixed by company and
members with their mutual consent. They have to mentioned such rate of
dividend on written paper and company imposed stamp over it.
 Right to check books of accounts- Shareholders having right to check books of
accounts of firm in order to identify actual financial position of company in
international market. But not able to revel such information in public. In case
they can do so then court imposed penalties on them equal to mentioned under
law.
Operations of company- Directors and shareholders are considered as real owner of
having ultimate control over entire performance of company (Tricker and Tricker, 2015). For
this purpose, all members are able to equally participate in decision making process. Use various
types of plans and strategies which are helpful for companies to attain their target.
Power to remove shareholders- According to section 168 of company’s act members
having ultimate right to remove shareholders who are unable to pay their debts and amount equal
to nominal value of shares which they hold (Martynova and Renneboog, 2011). Members having
certain powers to attain target of company and maintain their performance as well.
TASK 2
2. Corporate governance theories, regulation and strategies.
Corporate governance theories:
Corporate governance is the rules, regulations and processes that direct and control
organisation. It ensures the balance between different stakeholders like stakeholders,
management, customers, suppliers, government and society (Balasubramanian, Black and
Khanna, 2010). Fundamental corporate governance theory includes various theories like Agency
theory, stakeholder theory, stewardship theory and transaction cost economics etc.
Agency theory
It is defined as the relationship between principals as shareholders and agent like
company executives and managers (Renders, Gaeremynck and Sercu, 2010). According to this
theory shareholder are the true owner of the organisation and they hire the agents to perform the
task. They delegate the running of business to director and manager who are agent of stakeholder
who have core duty to protect the interest of the stakeholder. Somewhere, stakeholder so not
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make decision that is best to the interest of the principal. It was first highlighted by Adam Smith
in 18th century. According to this theory, agent is consented to self-interest, opportunist
behaviour and in short of harmony among pursuits of principal and the agent. The agent makes
focus only on the project that has high return, not on providing fluctuating incentive payment.
There are two factors that affect prominence of this theory.
 First, this theory is simple and conceptual that diminish company into two participants of
manager and shareholder. Second, it suggests that employees and manager of the company can be self-interested.
Stakeholder theory
This theory is first embedded in year 1970. It is defined as where people are affected by
the achievements of the objectives of organisation (Ammann, Oesch and Schmid, 2011).
According to this theory, the managers of the company have strong network of relationship to
serve, this covers suppliers, business partner and employees. It is identified that group of
network is more effective as comparison to other owner manager employee relationship as
defined in Agency theory. It states the group of people and stakeholder who require management
attention. This is identified that such group participate in business so that best benefits can be
obtained. They can affect that decision making of the company and this theory is concerned with
nature of relationship in relation to process and outcomes for business and its stakeholder.
Transactional Cost Theory
It is first invented by Cyert and March (1963) and later on described by Williamson in
year 1996. this is interdisciplinary alliance of law, economic and companies. It describes that
business consist of the views and perspective of different people. This theory has assumption that
transactional theory is firm that has become so large, they establish substitute for market to
determine its resources. On other hand, organisational; structure of the company helps to
determine the price and production. The transaction in this theory is unit of analysis. The group
of people with transaction suggests that the managers are opportunist and make their best interest
to arrange transaction to their interest.
Stewardship Theory
Steward make the adequate protection of the wealth of stakeholder theory the
performance of the organisation. It helps to maximise the utility function of steward. According
to this, steward are the executive of company and its managers are working for shareholder's
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interest as protect and make profit. This theory stresses not on view of individualism, but on role
of top management as steward, link their goal to the objective of organisation. It suggests that
steward is satisfied and motivated when the success of company can be attained. This theory
recognizes the importance of structure that help the steward and provide adequate autonomy that
is on trust. It emphasis on position of employees and executives so that they can act more
effectively to secure and enhance return of shareholders. It reduces the cost that monitor and
control the behaviour.
Corporate governance strategies:
Members of company are responsible to frame various types of strategies and plans
through which firms are able to attain their long term success. This is forecasting process which
is helpful for them to attain their target and objectives as well. They have to record all
transactions which are conducted under business. Also try to implement those strategies
according to the requirement of company. Furthermore, this implementation is beneficial to
attain continuous success. Use appropriate tools and techniques for the purpose of maintain their
performance in international market. Some specific strategies which needs to be follow by
company are as follows-
Provide training- Managers and leaders are responsible to provide proper training session
to their subordinates in order to improve their skill, knowledge and experience. Through which
they maintain quality. Employees are also responsible to attend proper training session which are
conducted for them and company used lots of money and time. Try to educate their subordinates
by providing information of law to them.
Follow all rules and regulation- Staff members of organization are responsible to comply
with rules, regulation and policies which are imposed on them and mentioned under law. Try to
analyse overall performance and take effective decision which are helpful for them. Follow all
rules in order to attain ethical consideration. Through which they try to boost up confidence of
employees.
Clarify rules of firm- Higher authorities have to take open session with other members
and clarify all rules and regulation of firm (Scherer and Palazzo, 2011). Also instruct them to
comply with law accordingly. Furthermore, as staff members are play vital role in formulation as
well as adoption of firm's strategic decision making process. Also receive approval from other
members for the purpose of growth and development.
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Comply with AOA and MOA- Every company needs to maintain Article of association
(AOA) and Memorandum of association (MOA). These are the written document which have to
prepare with the guidance of legal advisor (Introduction to Corporate Law and Governance.
2017). It mentioned rules, limit of members, rule of forfeiture and reissue of shares. Thus, it
defines guidance to members and also bound them to comply with accordingly.
Build governance infrastructure- Board of every company is responsible for take
effective decision of firm. As entity needs specific policies and procedure in order to guide
organizational behaviour. They have to ensures that available resources are effectively use and
able to to maintain performance of company as well.
CONCLUSION
On the basis of above report, it has been concluded that corporate governance is imposed
on each and every types of companies. AOA consists specific rules of form which needs to
follow by members and MOA consists relevant information which are useful in long time.
Process. Shareholders of company conduct meeting which is known as general meeting. In
which they are responsible to take effective decision and positively contribute in decision
making process. Majority shareholders are responsible to take final judgement and implement in
company according to requirement. There are various types of fundamental legal concepts which
are useful to attain their long term as well as short goals and objective. Conduct training session
for employees in order to boost up their level of confidence and improve their wok quality as
well.
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REFERENCES
Books and Journals
Abdi, M. and Aulakh, P.S., 2012. Do country-level institutional frameworks and interfirm
governance arrangements substitute or complement in international business
relationships?. Journal of International Business Studies. 43(5). pp.477-497.
Aguilera, R.V. and Jackson, G., 2010. Comparative and international corporate
governance. Academy of Management annals. 4(1). pp.485-556.
Ammann, M., Oesch, D. and Schmid, M.M., 2011. Corporate governance and firm value:
International evidence. Journal of Empirical Finance. 18(1). pp.36-55.
Balasubramanian, N., Black, B.S. and Khanna, V., 2010. The relation between firm-level
corporate governance and market value: A case study of India. Emerging Markets
Review. 11(4). pp.319-340.
Bebchuk, L.A. and Weisbach, M.S., 2010. The state of corporate governance research. The
review of financial studies. 23(3). pp.939-961.
Boulton, T.J., Smart, S.B. and Zutter, C.J., 2010. IPO underpricing and international corporate
governance. Journal of International Business Studies. 41(2). pp.206-222.
Brammer, S., Jackson, G. and Matten, D., 2012. Corporate social responsibility and institutional
theory: New perspectives on private governance. Socio-economic review. 10(1). pp.3-
28.
Dolzer, R. and Schreuer, C., 2012. Principles of international investment law. Oxford University
Press.
Harford, J., Mansi, S.A. and Maxwell, W.F., 2012. Corporate governance and firm cash holdings
in the US. In Corporate governance (pp. 107-138). Springer Berlin Heidelberg.
Karolyi, G.A., 2012. Corporate governance, agency problems and international cross-listings: A
defense of the bonding hypothesis. Emerging Markets Review. 13(4). pp.516-547.
Mallin, C.A. ed., 2011. Handbook on international corporate governance: country analyses.
Edward Elgar Publishing.
Martynova, M. and Renneboog, L., 2011. Evidence on the international evolution and
convergence of corporate governance regulations. Journal of Corporate Finance. 17(5).
pp.1531-1557.
Muchlinski, P., 2012. Implementing the new UN corporate human rights framework:
Implications for corporate law, governance, and regulation. Business Ethics
Quarterly. 22(1). pp.145-177.
Renders, A., Gaeremynck, A. and Sercu, P., 2010. Corporate‐governance ratings and company
performance: a cross‐European study. Corporate Governance: An International
Review. 18(2). pp.87-106.
Scherer, A.G. and Palazzo, G., 2011. The new political role of business in a globalized world: A
review of a new perspective on CSR and its implications for the firm, governance, and
democracy. Journal of management studies. 48(4). pp.899-931.
Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices.
Oxford University Press, USA.
Online
Introduction to Corporate Law and Governance. 2017. [Online.] Available through:
<http://www.lse.ac.uk/study/summerSchools/summerSchool/courses/law/LL135.aspx>
[Accessed on 31st July, 2017].
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