Busting up the Jargon of Company Law

Company law has lots of confusing terms that only a business law attorney could understand, and it can often scare away the average person who wants to incorporate a business, or otherwise deal with any legal aspects of a business. This article will help you understand the A–Z of company law jargon and make it less scary so that you can focus on what’s important: starting up!

Capital: This is the cash that is going to be used to start up or run the business, this money that you will invest in the business is either your own or borrowed.

Contract: This is when one signs a legal document. When you start a business, you are allowed to enter into contracts and sign them on behalf of the company. This contract will be between your company (not you!) and the other entity. Often times, it is most advisable to get a legal expert such as a contract lawyer, to draw up such legal contract documents.

Director: A director is a person/people who is in charge of running a business. In a big business, there will be a Board of Directors that are normally appointed by shareholders. In a smaller business, where there is only one shareholder (YOU!), one can appoint oneself as the director.

Incorporation: This is jargon for the process of starting a business and registering it as a legal entity, such as a legal company that is registered with the relevant government body.

Insolvency: This is term used to describe a business that cannot pay its debts. The type of business you set up will determine what happens in this situation, you might have to pay nothing or everything. Speak to a business litigation attorney to get proper advice.

Limited liability: This is a type of business where the amount of responsibility an owner has if something goes wrong is determined beforehand. It protects the owner from financial destruction if the business goes insolvent or gets nailed in a law suit.

Office: This is legal jargon for where the business is based. For a business to be registered, it needs a registered office so that there is an address for legal purposes.

Private: This means that the public cannot buy shares and be shareholders in the business. Members of the public can buy a portion of the business if the owner is willing to sell some. One is also allowed to convert a private company into a public company if one wants to.

Proxy: This is a term used for someone who acts/does things on the owner’s behalf, in other words they have the legal right to speak for the business owner. This term is often applied to a lawyer who carries out the owner’s decision.

Shareholders: This is the term used to who owns a business. When a single person owns the business there is only one shareholder who owns 100% of the shares, unless there is a business partner who owns a portion of the business.

Use of Latin: There is wide use of Latin when dealing with the law; this can become confusing and below are some common Latin terms that one might see when setting up a business:

  • Bona fide: This means “in good faith” and is used to say that a person is telling the truth.
  • De facto: This means “in fact” and is used when what is happening on the ground must take precedence over the legal situation.
  • De jure: This means “in law” and is the opposite term to de facto.
  • Ex gratia: This means “out of grace” and is used to describe a service that is performed for no charge.
  • Prima facie: This means “at first sight” and is used when something that looks like it is true, but is actually false/wrong.
  • Quid pro quo: This means “something for something” and is used to describe a situation when a service is billed/charged for (or if one service will be exchanged for another).

One needs to be careful with jargon. If someone says something that you don’t understand, ask them what they meant so that you don’t get caught out in the long run. They should have used simpler language at the end of the day; it doesn’t make you look stupid for not knowing an overly technical word. If in doubt about using jargon, remember this: jargon is not used to replace everyday language as it causes confusion, but rather to communicate very technical and specific information.


Further resources to help you include:

http://www.businessballs.com › glossaries/terminology






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