NDU Term Paper | Business Law


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NDU Term Paper | Business Law by Naja Faysal

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NDU Term Paper | Business Law

  1. 1. Business Law Term Paper Presented To: Ms. Ghanji NDU Spring 2005
  2. 2. Outline I. UP, LLC, and JSC A. Introduction: Small brief and general background information B. Unlimited partnership: Definition and Characteristics C. Joint Stock Company: Definition and Characteristics D. Limited Liability Company: Definition and Characteristics II. Commission agent, Broker and Commercial Representative A. Commission agent B. Broker C. Commercial representative III. Promising notes, Check, and Bull of exchange A. Promising notes: Definition and Characteristics B. Check: Definition and Characteristics C. Bull of exchange: Definition and Characteristics IV. Pledge, Chattel, Mortgage, Garnishment and Bankruptcy procedures A. Pledge B. Chattel C. Mortgage D. Garnishment E. Bankruptcy
  3. 3. I. UP, LLC, and JSC Unlimited Partnership Business operations operate under a variety of legal forms. Partnership is one of these forms commonly used; it is the process when two or more partners joining their assets and skills in order to run a business together for profit-making. They distribute profits, bear losses proportionally to their contribution or participation in the capital. Unlimited partnership is when there is not a maximum number of partners joining the company. This kind of partnership has the following characteristics: First, partners know and trust each other, they become more than just business people, they become a one unit, one heart beat, and one soul for the sake of their business. Each one of them has the responsibility in running and maintaining the success of the company, thus, they should be capable for this mission. They have a joint and unlimited liability in which their personal assets (not only their contribution assets) are put for the company in case of need. Second, the Capital is provided by the partner’s assets, in which there is no minimum capital imposed by law. The capital can be provided in three kinds: Cash, Kind, and Labor. The “cash” is an amount of money or a bank account allocated for the company, the “kind” is any movable and/or unmovable property, and the “labor” is allocating partner’s expertise, work experience, reputation, and time to the company. A shareholding certificate is provided to the capital contributors defining their partnership in the company. This certificate cannot be provided to outsiders contributors unless all the partners of the business agree on this outsider.
  4. 4. Third, the trademark/ trade name by law should necessarily show partner’s individual names. If they are numerous one name should appear followed by the abbreviations: “and Co” or “and partners”. Fourth, the management by law belongs to all partners unless it has been entrusted by the partnership contract to one or more partners, or to a manager from outside the UP appointed by a partner’s resolution. The partners can also choose a manger between them if all partners agree. The power of the manager is limited to the kind of business running, where he has to refer to the partners in taking decisions and making deals with external party other wise he will be completely responsible from his personal interest. Fifth, the UP contract should be written as an official document that should be signed by each partner in front of the Notary Public or the Chief Clerk. Registration should be done within one month of the contract. An abstraction of the contract should also be deposited at the Chief Clerk, and should include all elements that maybe of interest to 3rd parties such as: Capital, Nature of the business, head office, trade name, partner’s names, manager’s name, the extent of his power…etc. Any new amendment should be registered again such as appointment of a new manager, partner’s bankruptcy, incapacity, death… etc. No publication is needed. Sixth, Dissolution causes are common to all partnership companies but there are some special causes for dissolution of UP: The death, withdrawal, or bankruptcy of an active partner who has a tremendous, considerable, and important role in the partnership may cause dissolution of the partnership.
  5. 5. Joint Stock Company Joint Stock Company is a prototype of companies of Capital, it is an association of fund. It has the following characteristics: First, partners are not known to each other, there are no personal considerations. Their liability is limited to the extent of contribution to the capital and not to the JSC debts. The contribution to the capital can be “cash” and/or “kind”, where contributions by “labor” are not allowed. Second, the capital should have a minimum of 30 million L.L. or $20,000, where banks and assurance companies have another minimum. The capital may increase and may decrease under certain circumstances. Third, it should be founded by at least 3 founders enjoying a good reputation in the market. They have to draft the statutes that will become the charter of the company; these statutes should include elements of interest to subscribers. They also have to register and deposit the statutes before the Notary Public. They should insert a notification in the official and local newspapers inviting public to subscribe to the whole capital and providing necessary information about the co. subscription is an official procedure by which subscribers buy a certain number of shares and pay their value as required by law and statutes. They have to convene for a constituent meeting through publication in the press 40 days before the meeting. There is a possibility to get the money back to the subscribers if the co is not completely formed by 6 month. The ordinary meeting for subscribers is yearly where their might be special meeting considering extraordinary events.
  6. 6. Limited Liability Company It is a combination of associations of persons and of funds; it has been created by LD of 1967. It has the following characteristics: First, partners are known; personal considerations and trust relationships take place. Their number is limited to minimum of 3 and maximum of 20. They are not necessary to be traders they can have their own business and be partners. Their liability is limited to their contribution to the capital in which they are not related by their personal debt. Second, the capital is formed by shareholding or parts that cannot be materialized through negotiable instruments. Parts can be sold to 3rd parties with the approval of partners representing ¾ of the capital stock. The capital is a minimum of 5 million LPs; however, this is very low and cannot attract banks. Contributions can be “cash” and “kind” where “labor” is forbidden. The capital is fully paid at the formation stage where 10 % of the net profit should be added to the capital to be capable of absorbing losses. Third, management belongs to all partners and managers are elected from inside or outside the co. A statute should be formed signed by all partners; this statute include all matters that may be of interest to the 3rd party. Dissolution causes are common between UP, JSC, and LLC Fourth, it can take any name not necessary the name of the partners.
  7. 7. II. Commission agent, Broker and Commercial Representative Commission agent Commission agent is an agent who concludes contracts (commercial transactions) in his own name (not in the name of the principal) even though for the account of a principal. He receives merchandise in consignment which means he is entrusted with the possession of merchandise to be sold, but he is not the owner of the merchandise. He is the trader; he gets a commission proportional to the importance of the transactions or quantity of products sold. All expenses and charges related to the transaction shall be due to the commission agents. He has a lien upon the goods in his possession as a guarantee for payment of the commission, expenses and charges. He can represent other principals even though in competition with each other, unless there is a charge to the contrary in the commercial representation. He is the one who deals directly with third parties purchases of the principals products, he is also committed towards third parties and responsible for any defect in the merchandise, but he gets his compensation back from the principal. Then the commercial representatives who would have paid compensation to third parties can go back to the principal to be refunded. Broker Broker is a person employed to make contracts with third persons on behalf of his principal. The contracts involve trade, commerce, buying and selling for a fee called brokerage or commission. A broker is an agent with a special limited authority to procure a customer in order that the owner can affect a sale or exchange of property. A real estate
  8. 8. broker has authority to find a buyer for another’s real estate, but the real estate remains under the control of the owner. Commercial representative This situation is governed by the LD of 1967 and it applies only if an exclusively clause is provided for the commercial representation contract. Commercial agents are two types: A mere agent who carries out commercial transactions of sale usually for the name and for the account a foreign firm of principal. A trader who purchases the merchandise from the foreign firm in order to distribute it in a local market. III. Promising notes, Check, and Bull of exchange Promising notes Promising note is an unconditional promise written by a drawer to a beneficiary to pay a certain amount of money at a specific period of time or upon presentation to the drawer or at a certain number of days after presentation. Bull of exchange Bull of exchange is an unconditional order written by a drawer (debtor of the drawer) to pay a certain amount of money to a beneficiary (holder) at a certain period or upon presentation or at a certain number of days after presentation. The bull of exchange implies the presence of a third party; the drawee where the drawer himself can be the beneficiary. The drawee will become a party to the instrument by accepting and signing
  9. 9. the bull of exchange at the bottom but he has no claim on any one since he is the final debtor. Check Check is a bull of exchange always issued at sight where the drawee is always a bank. It is an unconditional order written by a drawer (depositor) to a drawee (bank) to pay a certain amount of money to a beneficiary. The presentation for payment must take place within 8 days as from the date of issuance of the check. If the check is issued in Lebanon, the presentation for payment must take place within 20 days. If the check is issued in France or neighboring countries, the presentation for payment must take place in 70 days. In case of non-payment of a check, protest has to be submitted within the time-limits of presentation. In case of non payment of the Bull of exchange, Promising note, or check, the holder of any of these 3 instruments has to protest the instrument to the Notary Public, who attests the non payment of the instrument by an official document called a “protest” allowing the holder to have recourses against all the endorsers and the drawer as from the protest. Legal action of a holder against drawer in case of non-payment is 3 years for the bull of exchange and the check. Legal action of a holder against drawee in case of non- payment is 3 years for the promising note, 1 year for the bull of exchange and 6 months for the check. Legal action of a holder against endorser in case of non-payment is 6 months for the promising note, 1 year for the bull of exchange and 6 months for the check.
  10. 10. IV. Pledge, Chattel, Mortgage, Garnishment and Bankruptcy procedures Pledge Personal property, as security for a debt or other obligation, deposited or placed with a person called pledge. The pledge has the implied power to sell the property if the debt is not paid. If the debt is paid, the right to possession returns to the pledger. Chattel The term chattel is used to describe personal property generally, but chattels may also be classified as chattels real and chattels personal. Chattels real describes an interest in land. Chattels personal is applied to movable personal property. Bankruptcy Bankruptcy is a remedy granted not by the Code but by the federal bankruptcy reform act of 1978. When a debtor (voluntarily or in voluntarily) is put into bankruptcy, his nonexempt assets are required to be turned over to a trusty to be sold to satisfy the claims of unsecured creditors. If a secured party has a security interest in some of these assets, then the security interest is threatened. The bankruptcy trustee, created by the federal law, is another third party who may defeat certain article 9 secured parties. It is the trustee’s job to gather and liquidate the debtor’s estate, reduce it to cash, and make a pro rata payment to the bankrupt’s unsecured creditors. Garnishment Garnishment is another important method used by judgment creditors to collect a judgment. A judgment creditor can “garnish” the wages of the judgment debtor or his
  11. 11. bank account or any other obligation owing to him from a third party. In the process of garnishment, the person owing the money to a judgment debtor – the employer, bank of deposit, third party – will be directed to pay the money into court rather than to the judgment debtor, and such money will be applied against the judgment debt. Mortgages A real estate mortgage is an interest in real property, an interest created for the purpose of security the performance of an obligation, usually the payment of a debt. A mortgage is not a debt – only security for a debt. The owner of the estate in land that is being used as security for the debt is called mortgagor; the party to whom the security interest in the real estate is conveyed is called the mortgagee.