Laws governing trade and business are known as commercial law or business law. Business law pertains to banking, bankruptcy, contracts, finance, insurance, partnerships, sales of products, and taxation. There are different contracts with different rights and obligations for the parties, such as agency agreements, contracts for carriage, purchase of goods and sale, and guarantees. A branch of Hong Kong commercial law is corporate law.
Corporations obtain their power here. A corporation’s formation, administration, and termination are dealt with under corporate law. A corporate charter lays out legal provisions regarding dividend distribution, elections of directors, equity raises, insider trading, mergers and acquisitions, and redemptions of shares.
Features of corporate law
Corporate laws operate on certain principles:
- Delegated management:The way corporations conduct their business is governed by a defined structure. Directors and officers comprise the board. Decision-making power is shared and split between these groups. A panel of directors hires officers and monitors their performance. This also involves approving significant decisions taken.
- Officers are responsible for running the company daily. Each day, they handle transactions and make sure the business runs smoothly. The corporation’s business partners can be sure that the actions of its officers and directors are legal in the eyes of the law.
- Investor ownership: Despite owning the corporation, owners don’t run it. The corporation’s profits belong to the investors as well. Owners typically have a portion of the company’s profits and decision-making authority. Owners usually elect board members.
- Legal personality: An entity separate from the corporation pools the owners’ resources. Those assets can be used and sold by the entity. Creditors cannot reclaim them. Therefore, they act independently, as a separate entity.
- Limited liability: A corporation’s assets are at stake only when sued. Neither the plaintiff nor the corporation’s owners can pursue their assets. In addition to limiting liability, corporations also let owners expand their investments.
- Transferrable shares: An owner does not have to shut down a corporation if they no longer have a stake in it. Corporations provide the benefit of transferring ownership without the same drawbacks as partnerships. The ability to transfer ownership can present limitations but allowing owners to make changes enable the corporation to carry on.
It is essential to know and understand every aspect of Hong Kong commercial law if you plan to start a company in Hong Kong. It also would not hurt to know what comprises the corporate law there so that you do not encounter any hassles in your journey.