Receive complimentary lifetime digital access to the eBook with new print purchase. This statutory supplement combines the most useful statutes for courses in contracts, commercial law, secured transactions, commercial paper, sales, bankruptcy, debtor-creditor law, and corporate reorganizations and contains the recent changes made by the Small Business Reorganization Act of.
Commercial Debtor-Creditor Selected Statutes It calls for altruism, solidarity, and economic welfare that diverge from competition, division, and meritocracy. Family law usually regulates marriage, divorce, custody or filiations, succession, inheritance, wills and gifts, along with all the relevant rights, obligations, privileges and entitlements. Its rules are usually translated through two main patterns, namely the status and the contract.
However, this law always disregards the status of grandparents, siblings, in-laws, cousins, nieces, nephews, aunts, and uncles as family members. In terms of contract, family law regularizes two types of contracts: The explicit contracts and the implicit contract. The explicit formal contracts might be bilateral or unilateral, such as marriage, and testamentary will. However, there is a hidden and overlooked contract that is usually concluded implicitly between family members.
This contract encloses the shared rules, values, beliefs, perceptions, and expectations among family members. It underlines the unspoken roadmap that leads family members in their interrelationships; it reflects in their behaviors and attitudes. Moreover, it promotes and persists as the family culture, enclosing traditions, creeds, rituals, and resources, transmits throughout generations.
For instance, catholic and protestant teachings permeated the general culture that provides a moral and sacred basis for family law in the western world. Similarly, Islamic Sharia teachings are one of the main sources of law in the Arab world and many countries in the Far East, e. Indonesia, Malaysia. Although, depending on the jurisdiction, the perception of this principle is more often restricted towards the best interest of the minor, or the rights and duties of marriage and equality between spouses.
Also, the latter is perceived if a married couple seeks to change their matrimonial regime. However, it is worth nothing, all social measures taken in Quebec seek to protect the general interests, and do not aim at protecting the family itself. They are usually developed in response to particular crises, or perceived problems, such as issues of poverty, gender inequality.
Also, in England, for instance, the interest of the family is highlighted within the Ibid. C: Beardbooks, at The authorization is special and for a specified time; it may be amended or revoked.
Art CCQ: If the spouses disagree as to the exercise of their rights and the performance of their duties, they or either of them may apply to the court, which will decide in the interest of the family after fostering the conciliation of the parties.
A spouse may be authorized by the court to enter into the act alone, however, if consent cannot be obtained for any reason or if refusal is not justified in the interest of the family. Particularly, the interest of the family always prevails in the first generation or over generations, whenever a risk threatens the family reputation and legacy. Art CCQ: The family patrimony is composed of the following property owned by one or the other of the spouses: the residences of the family or the rights which confer use of them, the movable property with which they are furnished or decorated and which serves for the use of the household, the motor vehicles used for family travel and the benefits accrued during the marriage under a retirement plan.
The payment of contributions into a pension plan entails an accrual of benefits under the pension plan; so does the accumulation of service recognized for the purposes of a pension plan. Accordingly, the family patrimony reflects the consecration of the personal, physical, emotional, and financial assets by sharing the property accumulated jointly, during the period of union or marriage, irrespective to whom the formal title belongs.
Seeing, it was introduced in order to protect the creditors against any withdrawal, based on the separation of patrimony between spouses. It helps judges not to vacillate between the institution of enrichment without The earnings contemplated in the second paragraph and accrued benefits under a retirement plan governed or established by an Act which grants a right to death benefits to the surviving spouse where the marriage is dissolved as a result of death are, however, excluded from the family patrimony.
Property devolved to one of the spouses by succession or gift before or during the marriage is also excluded from the family patrimony. For the purposes of the rules on family patrimony, a retirement plan is any of the following: — a plan governed by the Supplemental Pension Plans Act chapter R The division of this shared property, determined previously, takes place only when they separate or if one spouse dies. So, each spouse is endowed with the so-called Ibid.
In addition, the informal, emotional decisions, which reveal sometimes irrational, are the foremost traits in common between both institutions.
In addition, it recognizes the right of each spouse to share the cumulative riches during the period of marriage, regardless of the legal title of the property. Despite the latter, the family in terms of patrimony or property is reduced to married couples, irrespective of the offspring or any other family member. As such, the legal recognition of this institution shall be customized to the distinctiveness of this enterprise, and extend the family concept to all family members tied to the family business as well.
Consequently, it shows the natural legal path that guarantees the stability of the family, as well Ibid. However, seeing the family is not a legal person, so the patrimony may be appropriated to the family, for the purpose of business continuity, as it will be explained later on. Inheritance law is implemented upon the death of the person.
However, in the Arab countries, religious rules are mandatory, and their principles are imperatively applicable in terms of inheritance, where Islamic systems govern the Islamic communities. However, it is necessary to distinguish between common law countries. For instance, in England, where monarchy norms and primogeniture prevail, the property ought to be exclusively transferred to males in the family; so as to avoid the division and the coparcenary of the property with the females.
Consequently, the property remains in the family. Such a preference has been eliminated nowadays. While in the United States, Canada, and Australia, history shows that gender discrimination has never taken place in terms of inheritance. Referring to the family business context, inheritance law has a great impact on ownership transfer and succession, as well as on the productivity and longevity of the family business.
Considering that, it is hard for them to accept that time is running out on them, or they are reluctant to yield control to the younger generation. At the end, these delays expose the inheritance and estate taxes most often as burdensome, which may hinder heirs from expanding the family business and impede its economic development. Pursuant to the section 70 5 of the Income Tax Act ITA , a person who dies is deemed to have sold all capital assets at fair market value immediately before death.
On the other hand, section allows the estate tax, where estate consists 26 U. In this section, two specific provisions were enacted for the express purpose of easing the transfer of the family business at death. It set the top rate at 40 per cent. Subsequently, the legislator takes into consideration the financial challenges and the burden of taxes on closely held companies in general, on family members, and on family businesses specifically.
Yet, family business owners may resort to some legal techniques that guarantee the longevity of the enterprise, and alleviate the burden of levies. This tax regulation allows business owners to transfer their family legacy smoothly to their offspring, while retaining control over the business. Seeing, parents, as founders, deal differently with their business than successive generations.
It also allows business owners to have a source of income from the freeze shares dividends. The estate-freeze is considered one of the legal and financial techniques that recognize the main challenges faced by a multigenerational family business. Therefore, its characteristics can be easily integrated into the family enterprise system, so the latter can stay in the market and operate over generations in harmony with its nature and identity.
It echoes mostly in terms of corporate ownership structures, Ibid at The civil law system, however, fluctuates between concentrated ownership, controlling stockholder, and the institutional shareholder, explicitly the banks in Germany. In fact, it can even act independently from the latter; as the legal power is mainly in the hands of the board of directors and management.
Also, the principles of corporate law are the same in both systems but the main difference resides in the implementation and the legal treatment of these principles. In addition, legal forms vary in terms of fiduciary institutions; namely Trust common law system , fiducia and foundation civil law system , and Waqf or entails Islamic tradition.
Generally, jurisdictions recognize some of these legal forms in addition to many others, but each country determines their characteristics differently.
Usually, all of them lead the path in large corporations, but some other legal forms possess one or more of them depending on their specific requirements. Yet, notwithstanding the variation of business legal forms, it is convenient to emphasize the dissimilarities between jurisdictions, rather than the likenesses.
It is endowed with the capacity to enter into legal relationships autonomously, and a unique patrimony, undivided into distinct universalities of rights. This patrimony embraces all assets and reveals responsible for its own debts and liabilities.
In business, the juristic personality is allocated to some legal forms, combined with the limited or unlimited liability, along with a patrimony distinct from all owners partners or shareholders patrimonies. The former encloses the corporation and limited liability companies.
The liquidation protection shields the capital of the company, by prohibiting the owners to withdraw the assets provided to the company as its property. In addition, personal creditors of the owners cannot foreclose on these assets. This rule guarantees the going concern of the company against individual owners or creditor damages.
For instance, in Canada and in England, partnerships are not juristic persons; only the corporation has a legal entity distinct from its shareholders. In the United States, a partnership like other companies is a legal entity, separate from its partners, unless all parts are under the ownership of one person, so the legal entity is disregarded.
In Belgium, Germany, Italy, and Switzerland, a partnership is not endowed with legal personality, except for limited partnerships. Since family along with all related characteristics, enrobe the business. Thus, the patrimony by appropriation arises and the classic ownership system fades in respect of this institution.
The common purpose of the assets determines the patrimony. This purpose-patrimony is governed by a predestined protective legal and management systems that allow its limited liability,and guarantee the purpose fulfillment.
For instance, in Germany, the patrimony by appropriation is bestowed to individual entrepreneurs only. This rule shifts the patrimony from being a subject through the legal personality, to an object distinct from its parties.
Correspondingly, the patrimony by appropriation reiterates in terms of partnerships, whereas general, limited, and undeclared partnerships are not endowed with the legal personality anymore, except the joint-stock company.
It is considered a relief that resorts to the concept of the collective ownership shared between all partners without being individual owners of the assets provided in full or in part to the partnership.
See also supra note at The limited partnership alike any other company, it has an autonomous patrimony, as much as it is appropriate, is distinct from the individuals who established it. It is bestowed with the separate entity without being a legal person within the meaning of the law. However, it is worth mentioning that the collective ownership is different from the joint ownership.
Conversely, the collective ownership is a particular co-ownership due to the allocation of assets aiming at accomplishing the collective objective of the group. It belongs to the group as a whole, and no one as a member of the group can affirm any personal ownership. Accordingly, for instance, the creditor of individuals as members of the group could not enforce their rights against the collective assets,contrary to the joint ownership. Therefore, they cannot transmit their rights and their shares to a third party without the full consent of other partners.
The concept of these institutions resides in the release of some patrimonial assets from the self-ownership to put them under the fiduciary control and administration, for the benefits of a third party. The major concerns for creating any type of fiduciary relationship are most often identical, particularly within the family context.
Indeed, the settlor is always driven by altruism, seeking to preserve the longevity of the family legacy by keeping the assets within the family. As such, a fiduciary institution is considered one of the convenient legal vehicles that protect the family business from any fragmentation or demise, under the control of future generations.
In addition, the fiduciary institution allows the settlor to deviate from the rules of inheritance or succession laws, and alleviate inheritance and estate taxes, so as to plan the estate in a subjective manner.
Also, It could help family owners to act efficiently in order to protect the interest of incompetent beneficiaries, who are unable to manage their wealth knowingly. We can refer to four main fiduciary institutions that lead the way: Trust, Fiducia, Foundation, and Waqf Entails.
It is usually established by a settlor, an individual or any other legal entity, through which the legal title of some assets ownership is transferred to a trustee s , to manage it and act for the benefit of the beneficiary ies , third person s , who can be individuals or otherwise. As such, there are seven major categories of trust 1 The express trust: The settlor expresses his intention to create a trust through a "declaration of trust" through which the Trust is created.
This legal institution is extensively applicable in the common law system. See art CCQ. In the United States, Trust is a legal person, whereas the property is vested to the trust, and trustees have limited liability for the debts of the trust. Trusts, of course, are not legal persons and cannot sue or be sued. Actions involving trusts must be brought, or defended, by their trustees just as actions against estates must be brought against the estate trustees subject to the relieving provisions of Rule 9.
There are no similar provisions applicable to inter vivos trusts. An action against a trust - named as such - is a nullity unless, perhaps, by analogy to Rule 9, it can be saved by treating the reference to the trust as a shorthand reference to the trustees. However, obviously, the trustees must be served and a failure to do this is not a mere technicality that can be cured simply by inserting the names of the trustees in the style of cause during the trial without their consent. Trustees, prima facie, incur personal liability when, as such, they are parties to litigation and, generally, with respect to obligations and liabilities they incur on behalf of their trusts.
Depending upon the circumstances, they may, or may not, be entitled to be indemnified out of their trusts' assets. Sharlow J. While a trust is not a person at common law, it is deemed to be an individual under the Act. Within Investments Ltd. However objectionable in principle, the practice of treating trusts as if they had legal personality - or at least as if references to them by names such as those used in this case refer to the trustees - appears to be endemic and it has rarely received judicial criticism.
For this reason I have declined Mr. In Europe and the United States, a foundation is an institution that combines the characteristics of both corporate and trust.
It is considered a vehicle for estate planning and building wealth with purpose. In these jurisdictions, the foundation is a legal person that has a separate personality along with all relevant features.
A foundation shall be established based on an irrevocable act of property appropriation, wholly or partly offered by the owner, for the benefit of the society, and seeking sustainability. Its property has a separate and autonomous patrimony distinct from that of the settlor or any other person, or even the patrimony of the legal person that created it. In the first case, the foundation is governed by the provisions of this Title relating to a social trust, subject to the provisions of law; in the second case, the foundation is governed by the laws applicable to legal persons of the same kind.
Besides, a foundation shall not make a gift to an unqualified donee, as the income of a foundation shall not be used for any personal benefit of any of its members, shareholders, or governing officials. It guarantees the perpetuity of the family values, principles, and wealth as well as its stand within the society as a responsible servant.
Accordingly, the legislator recognizes, indirectly, the right for each family to protect and preserve their wealth across generations, provided they help and support their communities; which is, as mentioned previously, one of the main responsibilities of families in business.
It may not have the making of profit or the operation of an enterprise as its main object. As such, fiducia is based on contractual obligations and rights. It does not admit the separation between the legal and equitable ownership, rather it acknowledges the autonomous patrimony devoid of the legal personality, to be functional. So, it does not entail the formalism of the common law trust.
The fiduciary trustee is entitled with the property ownership without the legal title. It generates a personal right on the property, not any right in rem. See also Laverdure v Du Tremblay, [] A. English law is relevant only in so far as it is compatible with arts. This title includes all the necessary powers, which allow him to administer the fiduciary goods as effectively as possible. Yet, it is worth mentioning, the legislator differentiates between several types of purpose for a fiducia.
It may be constituted for: 1- Personal purposes: For the benefit of a specific or determinable person,or for the benefit of several persons successively, that may not include more than two ranks of beneficiaries of the fruits and revenues, in addition to that of the beneficiary of the capital; 2- Private or social utility purposes: Whereas, a private trust has for its object the creation, maintenance or preservation of a thing or the use of property appropriated to a specific use, whether for the indirect benefit of a person, or in his memory, or for some other Supra note at Since, it exists for the benefit of its beneficiaries, and is not owned by one person.
This legal institution is of great value for the family enterprise in view of its characteristics such as the patrimony by affectation, the type of property, and the interrelationships between parties. In addition, the absence of capital and inherited taxes proves ideal for protecting the multigenerational aspect of the family business.
They recognize the patrimony concept, as it is granted to various Islamic institutions. However, Muslim scholars approve the legal personality of the latter based on the patrimony notion. As such, they consider that the separate patrimony automatically generates the legal personality. Accordingly, the concept of the patrimony by appropriation does not exist in their analysis. The institution of Islamic waqf is one of four charity institutions applicable in Islam, namely 1 Alms Sadaka, an optional act offered as a gift to deprived people , 2 Zakat one of the five pillars of Islam , is the Islamic Tax to be paid once per year to needy Muslims by every productive adult person.
According to Muslim scholars, waqf is a long-lasting endowment offered by a Muslim owner. So, the appropriation right is concluded, for charity or religious purposes waqf for charity. In our context, waqf for progeny is considered a great institutional mechanism that allows the settlor to deviate subjectively from mandatory Islamic inheritance rules.
It grants him the ability to bestow some benefits to specific members of the family, or even non-family inheritors providing that the settlor seeks justice and acts in good faith with God. However, it is convenient to accentuate that Islamic schools of thoughts have different interpretations for waqf. By principle, waqf is irrevocable and limitless for all scholars, except for the Maliki School, which permits establishing it for a limited period.
The former excludes family from the charity concept, providing that charity Trust maintain the public character, contrary to Islamic Theology that gives priority to supporting the family. In addition, it is worthy to note that laws in Arab and Muslim countries recognize the legal personality of waqf.
However, there is a divergence between Islamic scholars upon this point. By contrast, Hanafi and Shafii schools consider that all properties on earth belong to God, as well as waqf ownership, it belongs only to His Majesty. The administrator trustee is the vicegerent who should act as a steward; particularly, ownership endows the owner with the right of disposal. However, this right cannot be allocated to any person, neither the founder nor the administrator except with explicit permission from the court.
However, companies in both common law i. The roles of the chairperson and chief executive officer CEO are combined. As such, decisions are concentrated and self-supervision develops. However, the German dualistic model aims at binding all parties with various conflicts of interests together. It is based on the co-determination and the two-tier board structure. The latter is endowed with a casting vote. Its members are chosen for five years, by one-third in small companies to one-half in companies that exceed 2, employees of the members are elected by employees; and the others are elected by shareholders.
Generally, the pluralistic structure emerges in the Japanese structure. Its board is considered the largest, as it comprises around fifty directors. The pluralistic structure is translated through the The supervisory board includes professional advisors to the company, such as lawyers and accountants, as well as representatives from other stakeholders such as the banks and other firms.
The president and the board of directors represent the formal authority in the company. Still, meetings with the board are rare, and the decisions are rubber-stamped.
Moreover, the selection of board members and election of officers is usually done by the latter, and then approved by shareholder votes by clapping their hands at the shareholders' meeting. The former embraces those who run the business, while the latter is of two categories: Grey and Independent directors. Grey directors have significant business relationships or relational ties with the company.
They can be customers, suppliers, advisors, and others. The independent directors consist of neutral directors who have no single existing, previous tie, or contractual arrangement with the business. While in France and Lebanon, for instance, the notion is not legally recognized, since any director to be elected and appointed shall firstly be a shareholder. Despite the legal dissimilarities between countries and governance legal cultures, family companies face the same problems all over the world; due to the fact that the decision-making process, primacies, and structures within a family business are far detached from what is actually stipulated in hard or even soft laws.
This is to say that the legal principles and rules are quite inconsistent with the typology of the family business governance. In addition, the rubber-stamping decisions made by silent family members as owners or directors, in order to legitimize the decisions of executives, besides other aspects, play a major role in the functionality of this enterprise.
Besides, same family members, mostly, combine between the three levels of control, such as ownership, governance, and management. Additionally, family business governance has no one model that fits all; as governance could be informal and formal. Moreover, the notion of independent directors, in many cases, is not always required. Particularly when the enterprise is small or is in its developmental stage. However, even when the family business becomes more complicated in terms of ownership and structure, the notion of independent directors is not easily receptive, considered as a serious breach of family privacy.
Therefore, only the legal recognition of the distinctiveness of the family business from its non-family counterparts could allow the establishment of an appropriate governance system that fits the enterprise taxonomy. Foundation Press, with Thomas H. Little Brown and Company, with Thomas H. Economics of Contract Law. Edward Elgar, Mikva ", 83 University of Chicago Law Review Todd Henderson.
Meltzer ," 74 University of Chicago Law Review Universal Studios, Inc. Scripps-Howard Broadcasting Co. LaCroix, Jonathan S. Law Faculty Resources. Librarian Resources. Douglas G. Baird Theodore Eisenberg Thomas H. Learn more about this series. Close Sign in Create an Account. Please Wait
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