LEGAL 101
As a legal concept, administration is a procedure under the insolvency laws of a number of common law jurisdictions, similar to bankruptcy in the United States. It functions as a rescue mechanism for insolvent entities and allows them to carry on running their business. The process – called “under administration” or “business rescue” – is an alternative to liquidation or may be a precursor to it. Administration is commenced by an administration order.
A company in administrative receivership is operated by an administrator (as interim chief executive with custodial responsibility for the company’s assets and obligations) on behalf of its creditors. The administrator may recapitalize the business, sell the business to new owners, or demerge it into elements that can be sold and close the remainder.
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due.
D&O (directors & officers) insurance protects the personal assets of a company’s directors and officers, as well as that of the company itself. D&O insurance pays for legal defence costs, settlements and awards when defending directors and officers from a valid claim.
D&O insurance policies protect directors, officers and their spouses from alleged wrongdoing in the scope of their duties. The policy also protects these individuals’ assets and estates, as well as a company’s assets. Many of the decisions that directors and officers make may be subject to allegations of harm.
Legal advice is the giving of a professional or formal opinion regarding the substance or procedure of the law in relation to a particular factual situation. The provision of legal advice will often involve analyzing a set of facts and advising a person to take a specific course of action based on the applicable law.
Legislation is law which has been promulgated by a legislature or other governing body or the process of making it. Before an item of legislation becomes law it may be known as a bill, and may be broadly referred to as “legislation”, while it remains under consideration to distinguish it from other business.
Key Contract means any contract or other arrangement to which a company is party for which breach, non-performance, cancellation or failure to renew could reasonably be expected to have a Material Adverse Effect.
A finance agreement is a document that outlines how a particular business plan or project is to be financed. It usually takes the form of a contract between a lender (the financer) and a borrower (the business). Many businesses don’t have the funds right away to implement a project they have been planning.
Governance has been defined to refer to structures and processes that are designed to ensure accountability, transparency, responsiveness, rule of law, stability, equity and inclusiveness, empowerment, and broad-based participation.
Abuse of power or abuse of authority, in the form of “malfeasance in office” or “official abuse of power”, is the commission of an unlawful act, done in an official capacity, which affects the performance of official duties.
Abuse of power takes place when a person in authority makes the wrong use of the power bestowed on it to commit an unlawful act for personal gains or other reasons. Abuse of power at the workplace is also referred to as “malfeasance.”
A dereliction of professional duty or a failure to exercise an ordinary degree of professional skill or learning by one rendering professional services which results in injury, loss, or damage.
Fraud is an intentionally deceptive action designed to provide the perpetrator with an unlawful gain or to deny a right to a victim. Types of fraud include tax fraud, credit card fraud, wire fraud, securities fraud, and bankruptcy fraud. Fraudulent activity can be carried out by one individual, multiple individuals or a business firm as a whole.
Collusion is a non-competitive, secret, and sometimes illegal agreement between rivals which attempts to disrupt the market’s equilibrium. The act of collusion involves people or companies which would typically compete against one another, but who conspire to work together to gain an unfair market advantage.
Money laundering is the illegal process of making large amounts of money generated by a criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. The money from the criminal activity is considered dirty, and the process “launders” it to make it look clean.
Money laundering is a serious financial crime that is employed by white collar and street-level criminals alike. Most financial companies have anti-money-laundering (AML) policies in place to detect and prevent this activity.
Certain business practices that limit or prevent competition are against the law. It is important that businesses understand their rights and obligations at all times and, in particular, when dealing with wholesalers, suppliers and other businesses.
Anticompetitive practices include activities like price fixing, group boycotts, and exclusionary exclusive dealing contracts or trade association rules, and are generally grouped into two types:
-agreements between competitors, also referred to as horizontal conduct
-monopolization, also referred to as single firm conduct
Bribery is defined as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official, or other person, in charge of a public or legal duty.
Corruption, as it is defined by the World Bank, is a form of dishonesty or a criminal offense which is undertaken by a person or an organization which is entrusted with a position of authority, in order to acquire illicit benefits or abuse power for one’s private gain.
Undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person. This inequity in power between the parties can vitiate one party’s consent as they are unable to freely exercise their independent will.
The act of doing something that is not allowed by a law or rule.
Lacking usual or normal mental clarity or coherence. Not endowed with reason or understanding. Not governed by or according to reason irrational fears.
A company director, has a fiduciary duty to act “with the care, diligence and skill which can reasonably be expected of a person who manages the affairs of another“. Directors act together for and on behalf of the company and its assets in the best interest of all the stakeholders.
A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties. Typically, a fiduciary prudently takes care of money or other assets for another person.
When a company carry on its business recklessly, with gross negligence, with intent to defraud any person, or for any fraudulent purpose.
If your company’s business starts to show signs of insolvency, such as difficulty obtaining working capital, increasing arrears in accounts payable or your creditor days ballooning, take a moment to make a “sober” assessment of your company’s trading prospects. While during difficult times when you’re trying to turn the company around deciding whether to stop trading is the elephant in the room, this conversation may save you from incurring personal liability in the event of your company’s insolvency.
An offtake agreement is an arrangement between a producer and a buyer to purchase or sell portions of the producer’s upcoming goods. An offtake agreement is normally negotiated before the construction of a production facility—such as a mine or a factory—to secure a market for its future output.
A pyramid scheme is a business model that recruits members via a promise of payments or services for enrolling others into the scheme, rather than supplying investments or sale of products. Some multi-level marketing plans have been classified as pyramid schemes.
Pyramid schemes are not only illegal; they are a waste of money and time.