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An Introduction to Corporate Laws in India

Corporate laws exist to make it easier for corporations to do business. Rules that govern forming a corporation and rules for how to take corporate actions are meant to help business and make things fair for everyone.

By: Sakshi Singh, 1st year BLS LLB student at Thakur Ramnarayan College Of Law, Mumbai

India is considered to be part of the “common law” family, corporate law has evolved somewhat differently from the origin country, and on the contrary, each host country may follow a trajectory that is different from that followed by the origin country of corporate law. Second, it supports the proposition that legal transplants can be challenging unless the local conditions in the host country are similar to that in the origin country. Variations in economic, social, political and cultural factors may bring about dissonance in the operation of a transplanted legal system. Third, a comparison of the historical colonial experience in the functioning of the transplanted legal system and the more contemporary experience in the post-colonial period suggests fragility in the foundations of the transplant. 

WHAT IS CORPORATE LAW?

Corporate law is the body of laws, rules, regulations and practices that govern the formation and operation of corporations. It’s the body of law that regulates legal entities that exist to conduct business. The laws touch on the rights and obligations of all of the people involved with forming, owning, operating and managing a corporation.

The laws touch on the rights and obligations of all of the people involved with forming, owning, operating and managing a corporation.

WHY DO CORPORATE LAWS EXIST

The laws and rules that govern corporations keep all corporations operating on a level playing field. The laws exist to make it easier for corporations to do business. Rules that govern forming a corporation and rules for how to take corporate actions are meant to help business and make things fair for everyone. They make sure that corporations act in predictable ways that others can rely on.

CORPORATE LAW BASICS 

Corporate law refers to the laws, rules, and regulations that pertain to corporations. The laws involved regulate the rights and obligations involved with the business activities of a corporation, including formation, ownership, operation, and management.

PURPOSE OF CORPORATE LAWS 

Corporations are famous for raking in large amounts of money and holding a decent amount of power in a particular market. As they become more profitable and powerful, corporations can start to monopolize markets, meaning they become the exclusive provider of a particular trade, product, or service.

Corporate laws might seem as if they are in place to add hoops for corporations jump through to do business. It is actually quite the opposite. Corporate laws are in place to maintain a fair market so new businesses can enter and compete with others. They keep all corporations on an even playing field by outlawing overly unpredictable business activities and behavior.

Corporate laws are in place to maintain a fair market so new businesses can enter and compete with others. They keep all corporations on an even playing field by outlawing overly unpredictable business activities and behavior.

CORPORATE INSOLVENCY 

Corporate insolvency occurs when a business’s assets are not sufficient enough to cover its debts and liabilities. Basically, it means that the company cannot pay off its debts, either due to not having appropriate forms of payment or they don’t have enough assets.

Should a business run into this problem, there are a couple of options, one of them being liquidation. To liquidate, in business talk, means to convert any asset into cash or cash equivalents. In some circumstances, businesses that liquidate their assets have gone bankrupt and need some cash. In this case, it’s wise to have a lawyer present.

CORPORATE CRIMES 

Then there is the obvious one: when a corporation is accused of breaking a corporate law. Corporate lawyers are equipped to defend entities in court when they are accused of a crime. The following are some of the examples:

A. FALSE CLAIMS: –

When someone presents false information to the government to get money

Corporate fraud: activities that are dishonest or illegal that benefit the perpetrator.

B. ANTITRUST VIOLATIONS: –

 Efforts to monopolize a market, such as price-fixing

C. BRIBERY: –

Offering something of value in exchange for a favor that the recipient would otherwise not do.

D. INSIDER TRADING: –

 Trading stock with non-public and beneficial information.

CORPORATE LAWYERS 

Corporate lawyers work with corporations to make sure all of their transactions are legal by providing advice on their rights and obligations. Essentially, they work to make sure corporations are making decisions that provide the most benefit while remaining legal.

Corporate lawyers need to have extensive knowledge in contract law, tax law, intellectual property rights, bankruptcy, and any other branches of law that might affect the activities that a particular business is conducting. Because these areas of expertise are extensive, and the needs of a corporation in terms of abiding by the law are significant, they usually find the help they need at medium or large law firms. These firms have the resources and diverse talent that corporations need.

CORPORATE LAWYER TRAITS 

Corporations usually prefer to get all the help they need from one firm, which is another reason they go to medium or large firms because they have a wider array of experts. Corporations are constantly running into situations where they would prefer to make a decision with legal advice, so corporate lawyers can also expect to create a relationship with that business and almost act as a lawyer on retainer.

Rather than working with a separate firm, some corporations will decide to hire lawyers as permanent employees that work for them exclusively.

HOW CHANGING CORPORATE LAW CAN HELP 

Corporate law is important because it defines the formal rules that drive behavior. The process of legal incorporation brings a business entity into existence, and as such can be used to help clarify the answer to the question – for what purpose does a business exist?

In recent years, corporate law has been undergoing a transformation. New corporate forms have been created to specifically enable companies to embed purpose in a for-profit legal entity. The corporate forms are different because they require managers to consider the corporate purpose in their decision making, and they include obligations for upholding transparency around the company’s performance in achieving its purpose.

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