English for Law

10. Company Law

& READING AND TRANSLATING

Types of Companies, Incorporation and Legal Personality

Companies under225 Romanian Law

A commercial company may be established in one of the five legal forms
provided by Company Law no. 31/1990, as republished and subsequently
modified, namely:
a) general partnership226
b) limited partnership227
c) limited partnership by shares228
d) limited liability company229
e) joint stock company230
Stockholders in a SRL are referred to as "associates" and their equity interests231
are referred to as "social part" while stockholders in a SA are called
"shareholders" and their equity interests "shares".
In both SRL and SA the liability of an associate/ shareholder towards 232 third

225 în cadrul, în cazul, sub incidenţa

226 Societate în nume colectiv (SNC)
227 Societate în comandită simplă (SCS)
228 Societate în comandită pe acţiuni (SCA)
229 Societate cu răspundere limitată (SRL)
230 Societate pe acţiuni (SA)
231 proprietate de drept

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parties in case the company incurs debts233 is limited to his investment to the
registered capital234 of the company and neither an associate nor a shareholder
can be called on to contribute beyond the amount of his contribution.

Incorporation and legal personality

The company, in the terminology making the concern of company law, is the
legal entity created by process of law and existing only by virtue of the law. The
legal concept that underlies company law is the idea of corporation – an entity
established by process of law in order to be a nominal, artificial party to legal
relationships. In the USA, Canada and Australia "corporation" has replaced
"company", but in Britain and EU documents in English, the term company is
used.
Registered companies are brought into existence by registration of documents,
of which the most important is called a "memorandum of association", with a

public official called a registrar235 of companies. The most important legal

characteristic of a registered company is that it is "incorporated" and has "legal
personality". The law is concerned with relationships such as contracts,
ownership of property and duties of care, which are entered into by "persons",
who have the duties and rights attached to the relationships they enter into. The
types of relationships studied in law are based on the transactions and activities
of human beings who are described as "natural" or "real" persons but legal
principles are concerned with the nature of the legal relationship, such as
contract or the ownership of property, and can be applied to any other entity, not
only human beings. For the purposes of the relationships in which their

233 intră în datorii

234 capital social
235 registrator

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participation is recognized, entities other than human beings are said to have
"legal personality", sometimes called "juristic" or "juridical" personality.
"Incorporation" is a legal process by which an artificial entity is created with
legal personality. The Companies Act 1985, s.13(4), says that as from the date
of the certificate of incorporation given by the registrar a company "is then

capable forthwith236 of exercising all the functions of an incorporated

company". On formation a company becomes a legal person separate and
distinct from its members. The principal effect of this is that, in the case of
limited liability companies, the members are in general not liable for the
company's debts. A company has separate legal capacity, and can therefore
contract on its own behalf when conducting business.

I. Explain – in your own words, in English – the structures underlined in

the texts above.
stockholders= a stockholder is the owner of one or more shares of a
corporation's capital stock. A stockholder is considered to be separate from the
corporation and as a result will have limited liability as far the corporation's
obligations.

shareholders=is an individual or institution (including a corporation) that legally

owns one or more shares of stock in a public or private corporation.

equity interests= equity interest, defined as the amount of equity a single person

holds in a business, is a common concept to the small business world

incurs debts= to lose money, owe money, or have to pay money as a result of doing
something.
registered capital= the amount of capital that a company is officially allowed to get
from selling shares

legal entity= an individual, company, or organization that has legal rights and
obligations
registrar= an official whose job is to keep official records, especially of births, deaths,
and marriages

ownership= the act, state, or right of possessing something

liability= the state of being legally responsible for something

own behalf= in my own name, in a personal capacity

conducting business = is the way of managing, a business, affair

II. Answer the questions, considering the second text:

a) What is a company, from a legal point of view?
A: The company is the legal entity created by
process of law and existing only by virtue of the law.
b) What is 'corporation'?
A: The corporation is an entity established by
process of law in order to be a nominal, artificial
party to legal relationships
c) How are registered companies brought into existence?
A: Registered companies are brought into existence by registration of
documents, of which the most important is called a "memorandum of
association", with a public official called a registrar of companie.
d) What legal characteristic does a registered company have?
A: The most important legal characteristic of a registered company is that it
is "incorporated" and has "legal personality".â
e) What kind of relationship within a company is law concerned with?
A: The law is concerned with relationships such as contracts,
ownership of property and duties of care.
f) What is the opposite of 'juristic personality'?
A: The opposite of juristic personality is any organization that is
a single natural person, a human being.
g) What is the effect of the fact that on formation a company becomes a legal
person separate and distinct from its members?
A:The effect of this is that, in the case of limited liability companies, the
members are in general not liable for the company's debts and the company can
contract

on its own behalf when it conducting business.

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 Ioana Horea

? COMMUNICATION DRILLS

Put the fragments below in their right places in the texts, finding notions
related to setting up a company:
a) wide legal capacity
b) the company's name
c) the purposes for which it was formed
d) registration under the Companies Act
e) it is a public company
f) the members' other assets

Company
g) An association of persons formed to conduct business or some other
undertaking, which has a legal personality distinct of that of its members. A
company may be formed by registration under the Companies Act, but also
by special Act of Parliament (statutory company) or by royal charter
(chartered company). The liability of shareholders and directors is generally
limited.
Registrar
An official/civil servant responsible for compiling and keeping a register, e.g.
the Registrar of Births and Deaths, the Registrar of Companies.
Company's registry (House)
h) The office of the Registrar of Companies. The registrar will enter the
company's name in the companies register and issue a certificate of
incorporation.

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Incorporation
i) The process of forming an association that has corporate personality legally
distinct from that of its members. A corporation has wide legal capacity, it
has its own rights and liabilities. The company is usually incorporated by
registration under the Companies Act (1985).
Public limited company
j) A type of registered company that can offer its shares to the public. Its
memorandum of association states that it is a public company
and its authorized capital is at least the authorized minimum (£ 50 000).
Limited liability company
k) A type of registered company in which the members are not liable for
the company's debts. If creditors are not paid the liability of its shareholders is
limited to whatever sum remain unpaid on their shares; liability does not
extend to the members' other assets

Memorandum of association
l) The primary constitutional document of a company that must be drawn up and
signed by two or more founder members when a registered company is
formed. It states the company's name and registered office, the purposes for
which it was formed, the amount of its capital. American law: articles of
incorporation.
Juristic person
An entity such as a company recognized as having legal personality, i.e. rights
and duties in the same way as a natural or human person.
Natural person
A human being, as opposed to an artificial or legal person as the company.

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