Corporate law (also known as business law or enterprise law or company law or trade law or commercial law) is the body of law that applies to the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales.
It studies how shareholders, directors, employees, creditors, and other stakeholders such as consumers, the community, and the environment interact with one another. Corporate law is a part of a broader companies law (or law of business associations). It is often considered to be a branch of civil law and deals with issues of both private law and public law.
Other types of business associations can include partnerships (in the UK governed by the Partnership Act 1890), or trusts (like a pension fund), or companies limited by guarantee (like some community organizations or charities). Under corporate law, corporations of all sizes have separate legal personality, with limited or unlimited liability for its shareholders. Shareholders control the company through a board of directors which, in turn, typically delegates control of the corporation’s day-to-day operations to a full-time executive. Corporate law deals with firms that are incorporated or registered under the corporate or company law of a sovereign state or their subnational states. The four defining characteristics of the modern corporation are:
- Separate legal personality of the corporation (access to tort and contract law in a manner similar to a person)
- Limited liability of the shareholders (a shareholder’s personal liability is limited to the value of their shares in the corporation)
- Shares (if the corporation is a public company, the shares are traded on a stock exchange)
- Delegated management; the board of directors delegates day-to-day management of the company to executives
In many developed countries outside of the English speaking world, company boards are appointed as representatives of both shareholders and employees to “codetermine” company strategy. Corporate law is often divided into corporate governance (which concerns the various power relations within a corporation) and corporate finance (which concerns the rules on how capital is used).
The law includes within its compass such titles as principal and agent; carriage by land and sea; merchant shipping; guarantee; marine, fire, life, and accident insurance; bills of exchange (negotiable instruments), contracts and partnership.
It can also be understood to regulate corporate contracts, hiring practices, and the manufacture and sales of consumer goods. Many countries have adopted civil codes that contain comprehensive statements of their commercial law.
In the United States, commercial law is the province of both the United States Congress, under its power to regulate interstate commerce, and the states, under their police power.
Efforts have been made to create a unified body of commercial law in the United States; the most successful of these attempts has resulted in the general adoption of the Uniform Commercial Code, which has been adopted in all 50 states (with some modification by state legislatures), the District of Columbia, and the U.S. territories.
Various regulatory schemes control how commerce is conducted, particularly vis-a-vis employees and customers. Privacy laws, safety laws (e.g., the Occupational Safety and Health Act in the United States), and food and drug laws are some examples.