Company law is the law which deals with the creation and regulation of business entities. The most common forms of business entity are companies and partnerships.
A company is a group of people which is treated as a legal person, with a separate identity from its shareholding members. It can own property, enter into contracts, sue others and be sued. This contrasts with a partnership, which is not considered to be a legal person and is not able to own property in its own name.
Because of the limited liability of the members of a company for its debts, as well as its separate personality and tax treatment, the company has become the most popular form of business entity in most countries in the word.
Companies have an inherent flexibility, which can let them grow; there is no legal reason why a company initially formed by a sole proprietor cannot eventually grow to be a publicly listed company, but a partnership will generally have a limited numer of partners.
A company has shareholders (those who invest money in it and get shares in return), a board of directors (people who manage the affairs of the company) and creditors (those to whom the company owes money). Company law deals with the relationships between companies and their shareholders, creditors, regulators and third parties.
The process of registering a company is known as company formation. The constitution of a company consists of two documents. The memorandum of association states the principal object of the company. The second document, the articles of association regulates the company’s internal management and administrative affairs, including matters such as the rights and obligations of shareholders and directors, conduct of meetings and corporate contracts.