Every business leader should have a basic understanding of business law. Even if they aren't a specialist, it's crucial to consider the legal aspects when making managerial decisions or defining new strategies.
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| Business Law: The Basic Concepts You Need to Know |
What Is Business Law?
Business law is a branch of private law that governs the rights and obligations of businesses. It covers several areas:
- Corporate Law: This sets the legal rules for creating and operating a business, like the mandatory clauses in an LLC’s statutes.
- Commercial Leases and Contracts: These are strictly regulated in commercial matters, like the 3/6/9 lease system.
- Consumer Law: This imposes protective measures for customers, such as respecting the right of withdrawal for online purchases.
- Tax and Criminal Law: These serve the public interest by penalizing things like VAT fraud.
- Intellectual Property: This helps businesses protect their intangible assets while preventing unfair competition practices.
- Insolvency Procedures: These regulate processes in cases of economic difficulties.
When you’re running a business, you’re inevitably subject to business law. But how much it affects you depends on your role within the company.
The Fine Line Between a Legal and a De Facto Leader for Managers
At first glance, employees don’t have much to do with business law. The inherent subordination in an employment contract excludes them from direct leadership roles and the associated responsibilities. However, certain strategic positions can bring an employee closer to a leadership role—either officially or in practice.
- Legal Leader: This person is named as such in the company’s statutes. They could be the CEO, the manager of an LLC, or the president of an SAS, for example. This role is referred to as a "corporate officer."
- De Facto Leader: This person isn’t named in the statutes but performs duties typically assigned to a legal leader.
- Jurisprudence has refined the concept of a de facto leader. The criteria include independence and freedom of action when making significant management and leadership decisions in place of the legal representative.
Example: A manager who has the authority to sign important contracts could be considered a de facto leader.
With Power Comes Responsibility
As a manager or leader, you have significant decision-making power—and typically, a high salary to match.
- You have the final say in hiring your team and leading your direct reports.
- You steer your department’s strategy, control your budgets, and might even have banking authority.
- You enjoy considerable autonomy in your work, including setting your hours.
In this context, you’re subject to business law as either a legal or de facto leader, meaning you’re responsible for your actions. However, it's up to the person seeking to hold you accountable to prove your status as a de facto leader if necessary.
What Are the Risks Under Business Law?
Your responsibility as a leader can be engaged under business law at two levels:
Civil Liability: If you commit management errors that are separable from your duties and contribute to the company's bankruptcy, you could be sued for filling the liabilities. This means you might have to repay creditors in proportion to your faults.
Criminal Liability: This could be engaged in the course of your duties for things like misuse of corporate assets, forgery, fraud, involuntary manslaughter (for failing to follow employee safety rules), harassment, and discrimination.
What Precautions Should You Take?
You should be impeccable in every aspect! Here are some examples:
- Accounting: Keep your accounts in order to comply with tax obligations. Be cautious with expense reports—both yours and your team’s.
- Terms and Conditions: Ensure your general terms and conditions comply with consumer law. Pay particular attention to legal guarantees like conformity and hidden defects.
- Contracts: Have a legal expert review your commercial contracts and leases to ensure they comply with applicable laws.
- Commercial Strategy: When developing a strategy, like launching a product, make sure you stay within the bounds of fair competition.
Whenever you’re in doubt about your role as a leader or manager, seek advice from your company’s legal advisor.
Business Law
Business law is essential for managing a company. It’s a branch of law that focuses on the relationships a business might have with its broader environment (such as client/supplier relations via contract law, or relationships between partners through legal statutes and shareholder agreements).
Business Law: The Safeguard of Corporate Social Relations
Business law governs the relationships between a company’s partners through corporate law. Corporate law provides a legal framework (via company statutes) for partners, distributing power between the leader and the partners.
For example, decisions to increase or reduce capital belong to the partners. The social rights (shares or interests) they hold allow them to vote and receive dividends proportional to their share in the company’s capital.
Beyond the legal status, partners or shareholders can enter into a shareholder agreement that adds extra contractual rules, such as the terms for transferring social rights (liability guarantees, approvals, preemptions), and specific procedures in case of conflict.
To provide additional protection for shareholders against management uncertainties, some companies (like SAs or sometimes SASs) operate with collegiate bodies such as a board of directors (or supervisory board/executive board).
Moreover, business law permeates all commercial relations of a company through contract law, which sets general rules (like contract formation, the binding force of a contract). Specifically, each contract is linked to a particular regime—referred to as special contracts. For example, a sales contract is a special contract that offers additional legal guarantees to signatories (like hidden defects and conformity).
Business Law and the Competitive Environment
Business law is rooted in the philosophy of free competition. It aims to regulate competitors' opportunistic behavior (like unfair competition actions, counterfeiting actions) and ensure markets align with principles of perfect competition.
Thus, competition law restricts certain commercial practices deemed to cause competitive distortions (cartels, abuse of dominant position). Monitoring is conducted by an independent authority (the competition authority) or by the European Commission when the market impact is European-wide.
Conversely, intellectual property law grants exploitation monopolies to inventors and authors, notably through patents or copyright.
To encourage innovation and prevent opportunistic behavior from competitors, intellectual property law provides additional safeguards for patent holders and authors, primarily through anti-counterfeiting measures.