Four Legal Terms Every Startup Should Know

1. Commercial register

Once incorporated, the competent Commercial Registry Office will issue a document called “Commercial Register”, which is, by and large, the document that is enforceable vis-à-vis third parties and banks. The commercial register includes the main information and particulars of a company such as the name, type of legal entity, governing law, duration, issued and paid up capital, the name of the founders, scope of activity, headquarters, branches (if any), the board of directors or management as well as their signatory matrix.

2. Articles of Association

Are often referred to as the “by-laws”; which is basically considered as the constitution of the company. This means that the founders and shareholders of the company are required, by law, to follow each and every provision in the by-laws.

In addition to the same information that is included in the commercial register, the by-laws sets out other information regarding the company, such as the identity of the shareholders, the number of shares, name of the auditor, quorum and voting requirements for the General Assembly meetings of the shareholders, matters to be adopted by the Ordinary General Assembly meeting and the Extraordinary General Assembly meeting, transfer of shares mechanism, pre-emption rights and method of distributing dividends.

3. General Assembly

Partners or shareholders must convene on an annual basis (usually within the first quarter following the end of the relevant financial year) to approve the decisions made by the directors or managers to, among others, approve the financial statements of the company, appoint or reappoint an auditor, decide on the remuneration of the management. This meeting is called an “Ordinary General Assembly”.

With respect to other substantial matters such as increasing or reducing the capital of the company, the amendment of the Articles of Association of the company or the termination and liquidation of the company is adopted in a special meeting of the shareholders or partners of the company that is called the “Extraordinary General Assembly”.

4. Board of Directors

 

This term will particularly apply for startups that choose to incorporate a joint stock company, where the company is managed by a board of directors that cannot be less than 3 directors including the Chairman of the company. It is worth noting that the term “Board of Directors” do not apply to limited liability companies as this type of company is managed by one or more persons that are called “Managers”.