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What is Corporate Law?

What is Corporate Law?

Corporate law deals with general and specific matters pertaining to corporations, such as incorporation, public listing and delisting, mergers and acquisitions, and shareholders rights. In the eyes of the law, corporations are regarded and treated as single entities, and this branch of law deals more with corporations themselves than with the individual people who make up the workforce of a company.

Corporate Law Defined

Corporate law is the body of law that pertains to companies and the people involved in running and financing them. Companies or corporations have a unique place in law because, although they can comprise hundreds or thousands of workers, they are considered a single entity with a separate legal personality that is distinct from those of its shareholders, directors, owners, or financers. In legal terms, a corporation is considered to be an artificial person, but a person nonetheless, and in business matters a corporation is able to claim many of the rights that individuals have.

Who is Corporate Law For?

While corporate law might seem, on the basis of the name of this branch of law, to be specifically for corporations, many corporate solicitors represent smaller businesses and companies as well as large ones. Corporate law is therefore for businesses of all sizes, including corporations, companies, sole traders, and partnerships.

Corporations, Companies, and Businesses

There are several different kinds of business entities, distinguishable for the most part by where the entity’s financing comes from, where its profits go, and who is liable for its debts.

  • Sole traders or partnerships are financed and run by one or a few people, who split the profits between them, and are personally liable for any debts incurred.
  • Companies and corporations are entities that are legally considered to be separate from the people who own, finance, and run the organisation. Profits are shared amongst owners or shareholders, and when a company or corporation goes bankrupt, shareholders and directors are not personally responsible for the debt.
  • Private companies are owned by individuals or small groups of people, who are typically involved in running the company. Private companies raise funds via loans or investment capital, and the owners of the company share in its profits. A private company is not a corporation, but does share some characteristics, one of which is the limitation of personal liability.
  • Public companies or corporations are listed on the stock exchange, and are partially or fully financed by shareholders, who share in its profits in proportion to the amount they have invested.

All of these different organisations can be termed “businesses” but only private and public companies are corporations, as only they have the legal right to be considered separate entities with personalities separate from those of shareholders and directors.

However, while all of these organisations differ widely in terms of structure and how they are viewed and treated under the law, they are all relevant to corporate law, and matters pertaining to these organisations may all be dealt with by a corporate solicitor.

Examples of Corporate Law Matters

Corporate law encompasses a wide range of situations and matters relating to how corporations operate and interact. Examples of matters that corporate solicitors deal with include:

  • Providing legal advice for sole traders, partnerships, companies, and corporations
  • Paperwork and other matters involved with registering or incorporating a new company
  • Helping a corporation enter onto the stock exchange
  • Helping a sole trader or partnership secure finance from venture capitalists or private equity holders
  • Restructuring a corporate entity to reduce or eliminate the negative impact of an unprofitable company or department
  • Structuring and acting on corporate mergers and acquisitions, including buying and selling companies and company assets, and both public and private transactions

What do Solicitors do in Corporate Law?

The role of a corporate solicitor can vary depending on the type and size of the organisations they deal with. For example, a corporate solicitor who typically works with smaller businesses is unlikely to deal with large-scale mergers and acquisitions; instead, they might be more involved with providing legal advice for small businesses and companies as they grow, helping business owners complete and file paperwork, and facilitating the legal processes involved in acquiring financing from private individuals.

Corporate solicitors who work with companies and corporations, on the other hand, may be involved in much larger and more complicated legal transactions, such as those that involve selling or purchasing companies or company assets. These kinds of large-scale transactions can take several months and hundreds of hours to prepare for and complete, and can involve assets and organisations worth millions of pounds.

In one single acquisition transaction, for example, a corporate solicitor may start out by doing what’s called “due diligence”, in which they investigate the accuracy of information passed along by the corporations and individuals involved in the transaction. This information might include things such as the financial position of the companies involved, the value of their assets, and the existence of outstanding legal claims or debts that might affect the transaction. Once this stage has been completed to the satisfaction of all parties involved, bids are made and negotiated on before being accepted or refused. If accepted, there’s a whole new set of processes to go through to legally acquire the newly purchased company.

A related corporate law matter called equity finance refers to the equity that a purchaser uses to buy a business. In corporate law, solicitors involved in this kind of work typically work to ensure that the purchaser is financially able to make the purchase. This is another kind of due diligence, but is one which applies to organisations at all levels, including sole traders and partnerships as well as companies and corporations. It can be a very complicated process, however, as such purchases can alter the structure of a company, which in turn alters its legal and tax status.

Corporate solicitors also provide legal advice to all kinds of organisations, on a wide range of subjects, including risk assessment and risk management, tax planning, and restructuring.

Legal and Court Processes

What happens when organisations become involved in litigation, and how are corporate solicitors involved in these processes?

Organisations of all sizes can become involved in litigation for a wide range of reasons, including:

  • Breach of contract, such as employee contracts, warranty, or a legal agreement between two organisations
  • Shareholder disputes, for example where shareholders sue company directors for mismanagement or non-action
  • Disputes relating to agreements between two or more parties, including organisations and individuals
  • Disputes relating to events that occur during merger and acquisitions processes

As in other forms of litigation, the initial role of the corporate lawyer is simply to provide advice—for a plaintiff on whether a valid claim exists, and for a defendant on how they can best fight or settle any claim made against them. If legal proceedings go ahead, the lawyers role is then focused on gathering witnesses and evidence, and on developing strategies, to support their client’s case. As well as this, they must also advise their client on the best way to resolve the case, including alternative methods of dispute resolution as well as via the courts system. Throughout a case, regardless of how it is conducted and settled, a corporate lawyer will be involved in representing their client at meetings and hearings, and completing the paperwork required to document evidence and keep legal proceedings moving through the system.

Note that in some cases, the role of a corporate lawyer can change depending on their status as a solicitor or barrister. While some lawyers involved in civil law do perform both roles, this is by no means the norm, particularly in the field of corporate law. Therefore, if a business has engaged a corporate solicitor and then decides to pursue a legal matter in court, they may also need the services of a corporate barrister. This also depends on the size of the firm—larger law firms tend to employ specialist solicitors and barristers, but this is not necessarily the case for smaller ones.

Alternatives to The Courts System

As in family law and many other branches of the legal system, in corporate law there are alternatives to litigation, designed to facilitate the resolution of disputes involving businesses and corporations, without having to enter the courts system. Alternative methods of dispute resolution such as mediation and binding arbitration can save both money and time for all parties involved.

Both the court system and organisations themselves tend to favour alternative methods of dispute resolution, not only to save time and money, but also, in the case of organisations, to prevent causing damage to business reputations and relationships.

In corporate law, in particular in relation to contractual disputes, the preferred method is typically arbitration. This method is what amounts to a private court, where the arbitrator overseeing the procedure makes a legally binding judgement after both parties involved have put forward their arguments.

Mediation, in which the parties involved negotiate to settle their dispute, does not necessarily produce a legally binding result, and is often inadequate for resolving complicated corporate disputes. This process involves the use of a trained media who facilitates communication between the parties, but does not make a judgement as to the outcome of the negotiations.