MBA Week 1: Corporate Law

The first topic of my first week of my Eccentric MBA: corporate law! This is part of a self-paced self-taught online programme of study, all explained on the MBA organiser page.

And of course I’ve had a big deadline on so have had far less time to spend on this than I’d hoped. But I did expect this to happen and the important thing is to keep going.

And one way of speeding up is to give only the most impressionistic, anecdotal account here rather than writing my thoughts at length, so that’s what you’re getting.

So what did I notice in a very rapid skate over corporate law?

I was well aware that a key point of a limited liability entity is that the investors are never on the hook for more than they paid in, but I hadn’t appreciated the point that it was also material that the property of a joint stock company could not be seized to settle the debts of the individual members. And of course these days there are many exceptions both ways, especially when things have gone wrong.

I do like the analysis of the role of the shareholders, the board, and the management as essentially the principal-agent problem.

Note to self: Germany has some really interesting business structures that are fascinating – including here a two-tier board structure – but not my direct focus here.

Relatedly, goodness but it’s easier to find stuff about the US context than the UK one. I don’t need to know about the Delaware General Corporation Law (for now).

There is a lot of overlap in corporate law with all the other topics of law on my curriculum. I’m taking a narrow focus here and will look at the others later.

Key elements for the UK are the Companies Act 2006, insolvency legislation, and the UK Corporate Governance Code and accompanying guidance.

As so often in law and with quasi-legal policies, the really material stuff is the procedures and rules for dealing with things when it’s gone wrong. If everything’s going well and everyone’s happy there’s often little for law and policy to do – until it goes wrong. In this context going wrong is generally insolvency and irreconcilable disputes between the key stakeholders.

Having said that, there is an awful lot you have to do as a board to follow the law, including around reporting. And you comply with those requirements because it will become a very big problem if things go wrong and it turns out you haven’t. And indeed this is exactly the sort of problem that can lead to the piercing of the corporate veil and individuals being on the hook for corporate woes. Which some people will find even worse than a negative comment in an annual performance review.

What I’m taking as my main upshot from a lot of detail is that the regulations around reporting and audit for premium listed companies are complex, detailed, really matter, and are a whole area of expertise that I don’t have and will need to seek out when needed.

Mercifully, my accounts and tax return as a sole trader at present are much more straightforward, and well within my existing expertise. In particular I am aware that I really need to get my tax return finished this weekend.

There is more regulation and guidance on what investors are expected to do than I expected: I had naively thought you just pay your money for the shares and then vote at the AGM if you care to, and it’s up to the board and directors to make sure the law is followed.