Business Law

Kevin Duindam
Flashcards by Kevin Duindam, updated 10 months ago


Business Law

Resource summary

Question Answer
What two relationships does a company deal with? Legal Relationships & Business Relationships
What does Business Law deal with? Contracts and Comanies
What does Regulatory Law deal with? Authorities and Permits
Corporate Law = ? Company Law
What exactly are Profits? Revenue (sales/turnover) - expenses
Give Synonyms for 'Obeserve the Law' Abide By - a statute Comply with - rules adhere to - regulations respect - provisions
give synonyms for break the law infringe a statute breach rules violate regulations disobey provisions
Legal Disputes can be caused by? Payment claim against defaulting customers claims of employees against unfair dismissal disagreement with tax authorites
what are the two types of solutions of legal disputes? Negotiations resulting in a settlement Law-Suit resulting in a judgement
Name at least 5 Business Activities Opening a Business, offering a certain good or servicem concluding a contract, posting an ad, taking a loan, hiring or firing an employee
the _________ of the existence of possible legal requirements is the fundamental first step awareness
How do companies come into exsitence? Register on the Commercial Register
GmbH is a separate legal entity = ? Legal Person
The Foundation of a GmbH requires ___________ which is a _________ process registration & formal
Do the shareholders (= owners) have obligations created by the GmbH? No Liabilities
In a GmbH, who appoints the Managing Director? The Shareholders
Can a Managing director be a shareholder? Yes
What are the Constitutional documents of a GmbH Formation deed Articles of association List of shareholders Application to the commerical register All documents are publicly available
What are the 5 articles of association of GmbH? Basics (name, object, seat, capital) Managing director Shareholders meeting and resolutions Appropriation of profits Change of shareholders
What documents that are non-mandatory of a GmbH are not publicly available? Employment agreement of managing directors Management rules Additional shareholders agreements
The registered share capital of a GmbH must be a _______________. To be paid by ____________ to a bank account of the GmbH. Minimum of 25,000 euro & The Shareholders
An UG minimum starting capital can be as low as? Could be 1,- euro
May the registered share capital be used up by the GmbH? Yes
May the Registered share capital be repaid to shareholders? No
If the capital is gone, what happens to the GmbH? The GmbH is over-indebted and bankrupt
How to finance through shareholders  1. Contribution of original registered share capital  2. Future share capital increase(s)  3. Payments to the GmbH‘s reserve (Rücklage)  4. Shareholder loans
Why take an Open Credit when you finance a GmbH by Loans? the Overdraft/creditline helps with the ongoing financial needs
How do Annuity Loans work? Equal installments at fixed intervals Installments include interest and principal, the latter permenently rising
How does a Fixed Term loan work? Interest p.a. repaid regularly (month/quarter/year)  Interest rate is fixed or variable  Principal repaid at end of fixed term
What are two securities for the benefit of the lender: Mortgage (Grundschuld) Ownership transfer of (or: Title transfer of) goods for security (Sicherungsübereignung)
What are the rights of Banks (lenders)?  Reporting obligations of GmbH (borrower) to bank.  Approval rights of banks for certain business activities of GmbH
_________ is an alternative to the „classic“ bank loan Leasing
Instead of taking a bankloan and buying an asset, what could a GmbH do? the GmbH could lease (rent) the asset from the manufacturer resp. from the manufacturer‘s leasing company
What types of representation can a GmBH have? Individual (= single) power of representation, or  Joint power of representation = only with one of the other managing directors or with a „Prokurist“
Does the Representation of a GmbH need to be in the Commerical Register? Yes
Prokurist = Small managing director
Employees authorized through a power of attorney (poa), poa must come from ______/_______ managing directors prokurists
I need to reformulate/make questions from slides 39-44 Yes
Can a shareholder represent the GmbH? No. Only Possible if: shareholder is also a managing director (typical of small and medium-sized businesses), or managing directors have authorized the shareholder (who is not also a managing director) by way of a power of attorney
Name a few of the Shareholders resolutions.  Appointment / dismissal of managing directors  Consent to important transactions (cf. management rules)  Instructions to managing directors (e.g. budget)  Consent to transfer of shares  Amendment of articles of association  Exclusion of shareholder  Topics of ordinary shareholders‘ assembly
Ordinary shareholders‘ assembly:  Approval of ______________ for preceding business year  Profit appropriation (___________, reserve, carry forward)  the _________ of managing directors‘ actions  Appointment of ________ for the running business year financial accounts reserve approval auditor
Financial statements = balance sheet , profit and loss statement, explanatory notes [+ management report]
The disclosure of financial statements are to be filed with __________ within ____ months from end of the business year. Federal Gazette 12
Are the Financial Statements available at Yes
Do you get fined if you file your Financial Statement late? If so, how much? Yes Between 5,000 and 25,000 euro
When selling and transfering shares in a GmbH, is a Notarial recording necessary? Yes
Restrictions on transfer ability will be in the _________ of association: articles
Consent of shareholders is often required during the _______ and ________ of shares in a GmbH. sale transfer
after the sale and transder of shares in a GmbH: Commercial register needs to be informed by filing a new _____________, but that is no validity requirement for the sale and transfer of the shares shareholders list
M&A stands for? Mergers & Acquisitions = business sales
The extensive investigation of a business and legal situation of target by buyer is done by showing good _________ before the purchase contract is negotiated and signed Due diligence
Larger transactions (= combined turnover of target and buyer exceeded EUR 500 mln in the previous year) require approval by who? what could be a reason they are denied? The German Cartel authority. Approval will be denied if acquisition by buyer of target would create or strengthen a dominant market position
I could not put any of the diagrams our professor puts on the whiteboard up here. Please don't forget to check them while studying. :)
Aktiengesellschaft = Joint Stock Corporation
In an AG, Shareholders elect and dismiss the members of the supervisory council using what type of vote? Majority vote
In an AG, the _____________ elects and dismisses (by a majority vote) the members of the board of directors and controls the board members supervisory council
The Initiative for election of works council must come from ______, because the _________ has no obligation to initiate the election employees employer
Election of works council may be made in a business with at least how many full time employees? 5
Protection Against Unfair Dismissal in german is the..? Kündigungsschutzgesetz (KSchG)
Kündigungsschutzgesetz (KSchG): If the dismissal is _______ ______ to the KSchg, the employer needs a valid reason for the _________. subject to or governed by termination
The Kündigungsschutzgesetz (KSchG) applies to an employee if..?  business has more than 10 full-time employees, and  employee is employed for more than six months
Who enjoys stronger protection against dismissal? apprentices, disabled and pregnant employees
What are the three valid reasons for dismissal and give examples Personal reasons - inability to work due to long-term illness  Behavioural reasons, breach of workplace rules like frequent late arrivals, dismissal normally requires prior warning letter  Operational reasons - shut down or downsizing of business, requires selection of dismissed employees based on social criteria (age, duration of employment, family to maintain)
The word for Kündigung in English is..? Termination
A Termination (Kündigung) means: Unilateral withdrawal from a contract against or without the will of the other party
Give an example for this statement: "Kündigung“ applicable to „contract for a continuing obligation“ (Dauerschuldverhältnis), e.g. Service agreement, lease agreement
Ordinary Termination requires: No cause Notice Period Contract has fixed term: Right for ordinary termination during the fixed term is excluded
Extraordinary Termination by Good Cause means what? Continuation of contract has become absolutely unacceptable (unzumutbar), e.g. counterparty repeatedly or seriuosly breached the contract, or criminal conduct of counterparty against terminating party
With Extraordinary termination. How long is the notice period? No notice period required. Effective Immediately
Contract has fixed term. Does this effect extraordinary or ordinary termination? Right for Extraordinary Termination cannot be excluded if someone is in the fixed term
Does termination require a delcaration? And if so, when? Declaration is only valid when received by the party to whom the termination is declared
Termination of a contract comes up under which branch of Business Law? Labour Law
Ordinary termination becomes effective upon _______ of notice period end
When the contract ends, will the termination become effective? Yes
Name 4 Benifits of Competition: Consumer welfare gains  Lower prices  Better quality  Better selection  Easy access to goods and services
What is the purpose of competition law? and what does it lead to? To protect for healthy competition it leads to better quality, selection and prices
What is a Cartel? What is an exemption when this happens? When several companies co-ordinate to restrict or eliminate competition. This can be about prices or quality. When the overall quality will improve and the consumer benifits.
There are no cartels within a group of companies, i.e. where companies are directly or indirectly controlled by a parent company. What influence can they have on eachother? Parent company may arrange for price fixing by subsidiaries or for market allocations between subsidiaries
6 areas of competition/cartel law Cartels Business- cooperations Abuse of dominant position Merger control State aid Public procurement
Are EU competition law and german competition law similar? Yes they are strongly harmonized, priority of EU competition law for cases having relevance for trade between inside EU
Applicable Law and competition Authorities: Enforcement through cartel authorities (European Commission / German Federal Cartel Office = Bundeskartellamt) that have _________ powers and make _________. Investigative Decisions
Name 3 Types of Cartels  Price fixing between competitors  Market allocation between competitors  Customer allocation between competitors
Name Three Legal Consequences for Cartels  Legally invalid agreement = freedom of contract is restricted by cartel law  Fines for participating companies (up to 10 % of turnover of preceding year), but reduced fine for companies informing the authorties about a cartel (= leniency policy), smaller fines to management also possible  Damage claims of customers of cartel against cartel members
Regarding the regulation of the law of advertising. When a company imitates the advertising slogans or the product design of a competitor. This is _______. Prohibited
Competitors, or consumer protection organizations may demand immediate stop of any infraction. Non-compliance results in..? In a court procedure with injunction (court order prohibiting the infraction)
What are the 4 main points of a Contract?  Object of contract (sold assets / services: scope, quality)  Price, way of payment, payment guarantees  Liability for breach (= risks and their legal treatment)  Duration of contract
___________ power of each party often determines the outcome of negotiations Bargaining
Small suppliers come under economic pressure to enter contracts. Why? Because larger buyers can look for many different suppliers. Giving them more bargaining power to say yes or no to a good/bad price from a small supplier.
A Bank extending a loan to a company will mostly request a security. For example, securities can be in the form of a __________ or in __________. mortagage movable property
How is the security dealth with in terms of Possession and Ownership? Bank will acquire indirect possession and ownership, but direct possession remains with the debtor of the secured payment obligation who may continue to use the movable assets
When discussing collateral for the seller: Retention of title. Retention of title (§ 449 BGB) ______ ____ ____ ______ in order to apply, it is no automatic right needs to be agreed
Retention of title terms can be found where? Such agreement may be validly made in seller‘s standard business terms (AGB)
Retention of title: What happens in tne case of buyer‘s insolvency? Seller may reclaim the purchased item (as buyer has not yet become the owner), unless insolvency administrator chooses to pay the purchase price in full
What would happen in case of buyer‘s insolvency, if seller had delivered to buyer, buyer had not paid, and the delivery had been made without retention of title having been agreed ? Seller could not reclaim the purchased item, and could only demand payment from the insolvency administrator, which is only a quota of seller‘s claim (mostly below 5 %) and which will be made after several years only.
In the area of competition/cartel law An example of Merger control = Business purchases
In the area of competition/cartel law An example of State Aid = Subsidies
In the area of competition/cartel law An example of Public Procurement = Purchases by the state
In the area of competition/cartel law An example of Cartels = Price Fixing
In the area of competition/cartel law An example of Business Cooperations Research Cooperation, Joint purchasing
In the area of competition/cartel law An example of Abuse of Dominant Position Microsoft, Deutsche Telekom
What are main points in the negotiation of a commercial sales agreement? Also state which actual circumstance highly influences the outcome of the negotiations. what is sold? ; Quality Additional services Price; way of payment; time of payment risks involved ; security warranty of seller term of contract → these are highly influenced by the bargaining power of the parties involved in the negotiations.
When you negotiate a contract with a company and you want to obtain information on that company, which important information should you try to obtain? (disregard the company's own website or brochures released by company) Does the company/ the person your negotiating with have the power to conclude a contract? Is it even a valid contract? → excerpt of commercial register Business and legal information (financial information) → balance sheet
How do you obtain information about a company?
What is a b2b contract? / What is a b2c contract? b2b = business to business b2c = business to consumer → c ≠ customer, because a customer could also be a business
Briefly describe two ways for the solution of legal disputes. By way of Settlement → Negotiations between two parties that result in the conclusion of a settlement By way of Judgment of court / Court judgment → Law-suit resulting in a judgment. BUT: A Law Suit can also result in a settlement
Name three basic legal forms of doing businesses. Sole trader businesses Partnerships Coperations
Explain the Chart 523f3f6f-7e2c-4357-aca0-57a5a70b4f0b.png (image/png) Business Law governs the legal relationship between businesses, dealing with main areas of commercial law between businesses, such as contracts and companies. Regulatory Law governs the legal relationship between businesses and the state/the government/ authorities, dealing with main areas of commercial law between the government and companies, such as permits and authorities.
List five areas of German Business Law in addition to corporate law, competition law, labor law, contract law, and general commercial law. Accounting Law Intellectual Property law Transport Law International Sales Law Insolvency Law
A companies business activity is restricted by many legal provisions in the area of environmental protection, competition, etc. State how that part of commercial law is generally referred to. Regulatory Law
List the profit taxes payable by a GmbH. Also,indicate for each such tax the percentage of the GmbH's profits. Also give the proper term for such percentage. Corporate income tax (GmbH is a Corporation) → 15% of all profits Solidarity surcharge → 5,5% of the corporate income tax (= 0,825% of profits) Trade tax (depends on the municipality/where the country is located) → approx. 14%
Broadly state what are the “profits” of a GmbH on which it has to pay taxes. Revenues (sales/turnover) – Expenses → defined in the income tax act and the corporate income tax act
With respect to profit taxes payable by a GmbH: Briefly outline the four most important milestones in the ordinary tax procedure applicable to such taxes. - quarterly prepayments - for profit taxes tax returns - to be filed after end of tax year tax assessment notice – preliminary taxes determined by tax authorities → either GmbH has to pay additional taxes (residual payment) or receives a refund tax audits – by tax authorities for the company (at regular intervals) → can lead to an amendment to a preliminary tax notice → higher rates or refund
What applies in terms of the time for payment of the corporate income tax by a German GmbH? quarterly prepayments of corporate income tax, which are assessed by the tax authorities on the basis of the company's proftis of previous years → tax assessment notice
Consider this scenario: In December 2015, a German GmbH has made one sale for EUR 20.000 plus Value Added Tax (VAT) to a German customer and has purchased goods from a German supplier for EUR 5.000 plus VAT. The respective invoices were fully settled in December 2015. Prepare a chart in which you list the necessary VAT payments regarding this scenario. MAKE THE CHART YOURSELF Payment of €950 VAT Refund of €950 Payment of €3.800 VAT Payment of €950 VAT Payment of €3.800 VAT Purchased Goods = 5.000€ → VAT = 950€ Sale = 20.000€ → VAT = 3.800€
Complete the following Text. The German Trade Tax is a tax on ______, , whereas the Value Added Tax is a tax on _______/_______ profits sales/consumption
For the formation of a GmbH, is the signature of all relevant documents by the persons involved in the foundation process and the payment of the agreed capital to the GmbH sufficient? No → needs also to be registered in the commercial register.
Are the shareholders of a GmbH liable for obligations created by the GmbH? No → liability is limited ► only corporation itself is reliable for its obligations – not the shareholders! ►excerpt for the shareholder assuming personal liability to a creditor by contract
Which documents on the constitution of a GmbH are publicly available? How can they be obtained? Formation Deed List of shareholders Application to the commercial register / excerpt from the commercial register Articles of association (= agreement between shareholders) →
List keywords for typical contents of the articles of association of a GmbH. Basics (name, object, seat capital) → what is it supposed to do? Managing directors → power of representation (single/joint?) shareholders meetings and resolutions appropriation of profits Change of shareholders
Is it correct to assume that a GmbH with a registered share capital of EUR 100.000 has at least net assets in the value of the minimum statutory share capital of EUR 25.000? No → registered share capital only represents share capital that was paid by shareholders ►gives no indication of the actual money (net assets) a company has
List the four main ways in which shareholders of a GmbH can fund the GmbH Contribution of registered share capital → Repayment by GmbH prohibited Future share capital increase(s) → Repayment by GmbH prohibited Payment to the GmbH's reserve → Repayment by GmbH possible on the basis of a shareholders' resolution Shareholder loans → Repayment-obligation (not in insolvency cases)
Which two types of bank loans for the financing of a GmbH can be distinguished with respect to their respective purposes? Open credit → overdraft/ credit line for ongoing financial needs (high interest rate) Investment loans → Funding/ Financing of one specific investment Annuity loan (Equal installments at fixed intervals) Fixed Term (interest is repaid regularly, interest rate is fixed/variable, principal repaid at end of fixed term)
Complete the following text: When a GmbH signs a loan agreement with a bank by which the bank agrees to grant a loan to the GmbH, the bank is the i_________ and the GmbH is the ii ________. The bank will in many cases charge iii _____ as a one-time payment of the GmbH. If under the loan agreement the repayment of the loan will be due after three years, these three years are called the iv _____ of the loan, and it means that the GmbH will at the end of that repay v_______ . As opposed to that, such loan agreements as a rule provide that the GmbH regularly has to pay vi______ during that three year period. i creditor/ lender ii borrower iii fees iv term v principal vi interest
Which financial milestones characterize a fixed term bank loan? - interest p.a. repaid regular (month/ quarter/ year -> as the contract says) - interest rate is fixed or flexible - principal repaid at the end of the fixed term - fees/ costs
Briefly describe what an annuity loan is. - it is an investment loan by which a company finances a specific investment - equal instalments at fixed intervals - amount of instalment: stable and unchanged (fixed), include interest and principal -> interest is decreasing, because it is calculated from the outstanding principal, principal is rising
Is an open credit loan better for a GmbH than an investment loan? -> that depends on the purpose, the loan is used for! - investment loan: lower interest rate, often bound to a specific purpose, lower interest rate than OCL - open credit loan: very flexible, repayable at every time! -> so interest is only paid for that specific time frame, money is automatically granted by the bank, can be used for any business purpose, higher interest rate than investment loan
Assume a GmbH has been granted a loan by a bank and the only repayments that the GmbH has to make to the bank are 36 monthly rates in the amount of EUR 1,260 each. Does this mean that it is a loan which comes without interest? -> That could be an annuity loan. - An annuity loan is a loan, where the interest is paid at a part of regular instalments
) Briefly describe how in a major loan agreement between a bank and a GmbH, the bank often tries to protect its repayment claims? - the bank will often ask for a security for its loan: - ownership/ title transfer of movable assets for security: GmbH is possessor, bank is the owner - mortgage: security of real estate (GmbH remains owner!) - certain obligations of the GmbH to the bank: - reporting obligation concerning the financial status - approval rights of the bank for certain business activities of the GmbH - maintenance of a certain equity figure
Which negative consequences does a GmbH typically faces, if the GmbH fails to comply with the terms of a loan agreement that the GmbH had signed with a commercial bank? - the bank declares an extraordinary termination of the loan agreement, mostly with immediate effect -> the GmbH has to repay the principal and compensation for the lost interest immediately - the bank may foreclose and may action of the security
Does the only shareholder of a GmbH have the authority to act for the GmbH? - No, because the GmbH is represented by its managing director(s) only - Exceptions: the shareholder is the managing director or: the shareholder has been granted poa by the manager
Name and briefly define the two types of personal authority of managing directors of a GmbH that are of primary practical relevance. - individual (single) power of representation : - one managing director has the power to represent the GmbH in legal transactions acting alone - joint power of representation: the managing director has only with another managing director or a prokurist the authority to represent the GmbH in legal transactions
Assume a GmbH has a "Prokurist". Briefly state what that means. - Prokura authorizes its holder (Prokurist) to represent the GmbH in all is business transactions except the sale and encumbrance of real estate (that only with specific authorization) - Prokurist = "small managing director" - individual or joint power of representation/ prokura possible - no external restrictions by internal consent requirements
Assume that RTR GmbH has today appointed Mr. Patrick Linn as their Prokurist. May Mr. Linn make use of the prokura or does he have to wait for an official registration of it before he may make use of it? - the registration in the commercial register is mandatory, but only declaratory and not constitutive -> a registration that does not give rise to a certain right but is only a declaration of an already existing right. -> The Prokura comes into existence when Mr. Linn was appointed.
Consider the following scenario: The management rules of a GmbH provide that the managing directors need the consent of the shareholders for any acquisition of machinery with a price above EUR 25,000 + VAT. On 30 April 2015 the managing directors have signed a contract with company XYZ under which the GmbH purchases machinery for a price of EUR62,000 + VAT form company XYZ. The contract states that delivery of the machinery and payment of the purchase price shall occur on 15 May 2015. If the managing directors have signed this purchase contract without having obtained the consent of the shareholders of the GmbH, what are the possible consequences? - the company is bound to the purchase contract with company XYZ about the machinery for 62,000 + VAT - the MDs have the authority to validly represent the GmbH in contracts/ business transactions with third parties - there are no external restrictions trough consent requirements of shareholders for certain actions -> even though the MDs did not act in line with the internal consent requirements, the contract is valid - internal consequences for the MD caused by his breach of the internal restrictions of the man. rules: - personal liability of the MDs vis-á- vis the GmbH for the financial losses of the GmbH, caused by the contract - may be good cause for extraordinary termination of the MD'S service contract by the GmbH - might qualify as a criminal offence (German Criminal Code: breach of trust) -> MDs might face criminal charges
The transfer of shares in a GmbH is subject to a specific form requirement, which is (i)________________. If the articles of association provide that the sale and transfer of shares in a GmbH requires the consent of the shareholders, then a transfer of shares which is made without such consent (ii)____________. - > (i) notarial recording; (ii) is void/ invalid
What does "M&A" stand for, and what is meant by it? It stands for "Merges and Acquisitions"and business sales are meant by it.
Assume a shareholder in a GmbH wants to sell and transfer his shares in the GmbH to another company. (i) List the main documents that are typically required for such sale and transfer. (ii) How can the other company proof it is the new shareholder? (iii) To which extend does the transfer depend on or involve official registrations? (i) purchase and transfer contract (must be made by way of notarial recording), consent of the shareholders (ii) purchase and transfer contract, mostly (iii) It does not depend on any official registration -> it is valid without any registration, but the commercial register must be informed by filing a new list of shareholders. Notes: - A Prokurist is still recorded in the commercial register but the prokura is already revoked. However he still concludes contracts on behalf of the GmbH. -> the former prokurist is still treated as if he is a prokurist (everybody may rely on the correctness and completeness of the commercial register) -> the contract is binding for the GmbH, but internal consequences for that person.
„Due diligence “: (i) What is a due diligence within the framework of an M&A transaction? (ii) What is the legal basis of a due diligence? (i) Company to be investigated (background check of business and legal situation by the “would-be-buyer” before purchase contract is negotiated (ii) There is no legal basis for a due diligence because the buyer initiates a due diligence by intents in purchasing seller’s business. Then seller has to agree or the transaction / due diligence will not take place Agreement between seller and buyer
What does “cartel clearance” mean within the framework of an M&A transaction that is subject to German law? Machtdominanz = approval of German cartel authority for an M&A is required if the combined turnover of target and if combined turnover exceeds 500bln in the previous business year. An approval will be denied if acquisition by buyer would create or strengthen a dominant market position.
Briefly describe the three main steps involved in the making of the financial statements of a GmbH, and indicate for each step the responsible person(s). i. Preparation – Managing Director ii. Audit – Auditor iii. Approval – Shareholders (4. Publication – MD)
5. From which number of employees onwards must a company organize as an AG? -There is no minimum number of employees.
The shareholders of a GmbH plan to list the company on the stock exchange. What is your very brief comment on this? -GmbH cannot be listed on stock exchange only stock corporations That’s why they first have to change the legal form of the company into an AG.
What is the name of the representative body of an AG (German and English)? board of directors / Vorstand
Which bodies of an AG are referred to as the administration bodies? What are the principal functions of such organs? -Supervisory council Dismisses / appoints members of the board of directors Controls board of directors Board of directors Represents the AG Manages the AG
How may a person become the member of (i) the board of directors of an AG, (ii) the supervisory council of an AG? (i) Elected by supervisory council by majority vote (ii) Elected by shareholders by majority vote
Briefly explain what the so-called workplace co-determination is about Exercised by works council: Consultation and information rights o informing employees about rights, dismissals, … o “co-determination of employees”
Assume a GmbH has been founded in 2011. In which year at the latest must it have a works council? Time doesn’t matter. Company needs at least full time 5 employees. Employees have the right to create a works council, no matter how long the company is existing, as long as the company has at least 5 full-time employees
In which case does an employee of a GmbH enjoy protection under the KSchG (do not explain the types of cases for dismissals)? -More than 10 full-time employees Contract existed more than 6 months
What is the purpose of competition law? -To protect the competition in the economy.
What is the relationship between competition law and freedom of contract? Freedom of contract is restricted by competition law.
Name the six main areas of competition law and characterize each of them by a keyword or by a typical example 1. Cartels – price fixing 2. Merger control – business purchase 3. State aid – subsidies 4. Business corporations – joint purchasing 5. Abuse of dominant position – Microsoft, telecommunication … 6. Public procurement – State purchases on the market
What are the two primary legal effects of a prohibited cartel? Legally invalid agreements - Penalties / fines for participating companies and smaller fines to management -> imposed by cartel authority - Damage claims of customers against cartel members
State what is meant by a “leniency programme” in competition law. -Reduced fines for cartel members informing the authorities about the cartel
Name three types of illicit cartel agreements. Also, state which particular case such normally illicit agreements do not constitute a cartel. i. Price fixing between competitors ii. Market allocation (market split) between competitors iii. Customers allocation between competitors These illicit agreements do not constitute a cartel if the parties that enter into such an agreement belong to a corporate group.
Briefly state the basic elements of “freedom of contract” i) Contracting parties may decide whether or what not to conclude a contract ii) Contracting parties may decide on contents of contract iii Freedom of contract is restricted by mandatory statutory law
Consider a purchase contract which says nothing about warranty rights of the buyer for defects of the purchased object. Does the buyer have such warranty rights? -Yes, everything which is not covered by the contract IS covered by statutory law which is either flexible i,e it can be the contract OR mandatory, ie applied to the contract and cannot be circumvent by the clauses in the contract
May a contract, e.g. a lease contract, deviate from the provisions of statutory law? - It depends on the statutory law a) In case of flexible statutory law, the contract may deviate and then takes procedure b) In case of mandatory statutory law, the contract may not deviate
Outline the relationship between the rules set out in a purchase contract and the statutory law on purchase contracts. - Everything which is not covered by purchase contract is caught up by applied statutory law - Rules set out in purchase contract may deviate from statutory law if it is flexible, in case of mandatory statutory law contract may not deviate
. State in keywords how the seller of goods can protect himself against bankruptcy of the buyer - Prepayment of the buyer - Retention of the title (security assets) - Guarantee of payment - Bank guarantee - Insolvency insurance
Briefly explain what “retention of the title by the seller” means and which benefit it conveys on the seller should the buyer turn bankrupt. - Insurance for seller in case of buyer’s insolvency - Seller may reclaim purchased item, unless insolvency administrator chooses to pay the purchase price in full - Needs to be agreed in contract in order to apply (may be eventually done in seller’s AGBs)
What would happen in case of buyer’s insolvency, if seller had delivered to buyer, buyer had not paid, and the delivery had been made without retention of title having been agreed? The seller couldn’t reclaim the purchased item, and could only demand payment from the insolvency administrator which is only a quote of the seller’s claim, mostly below 5% and which will be made after several years.
Is a parent company, organized as an AG, liable for the payment obligations of its 100% subsidiary, which is organized as a GmbH? Basic rule says no, but possible if AG enters into a guarantee agreement (guarantee of parent) with seller and becomes liable for debts and obligations of subsidiary
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