Understanding the Legal and Economic Aspects of Business in Commercial Law
Meaning and Significance of the Company in Commercial Law
We can summarize the importance of the company concept in commercial law with three key reasons:
- The historical evolution of commercial law demonstrates a long-standing association between commercial law and company law.
- The notion of business, along with the entrepreneur and market activity, defines the scope of commercial matters and the current concept of commercial law.
- The concept of the company helps identify and organize the core content of commercial law, including:
- The status of the entrepreneur, both individual and collective, and their legal standing.
- The regulation of foreign activity.
- The regulation of crucial elements of the company and industrial property.
- The legal systems governing business transactions of the company.
The Concept of Business
In commercial law, we encounter two challenges: first, a lack of consensus on the legal definition of a business, and second, the absence of a unified legal framework for businesses in the Spanish legal system. This necessitates addressing two key questions:
1. The Economic Term of Business
Economics describes a business as an organization of capital and labor dedicated to producing or brokering goods and services for the market to generate economic results. Modern economic doctrine, and increasingly legal perspectives, recognize that a company’s purpose extends beyond serving the owners’ interests to encompass the interests of stakeholders like workers, consumers, creditors, and collective interests such as sustainable development and environmental protection.
2. The Legal Concept of Business in Commercial Doctrine
Three main theses are currently debated regarding the legal concept of a business:
- The Atomistic Theory: This theory posits that no single legal concept of the business unit exists. Instead, the law regulates various aspects of the company, including its subjective, functional, purposeful, and labor components.
- The Argument for Coincidence Between Economic and Legal Concepts: This perspective argues that the law hasn’t regulated the company as a single unit, mirroring the economic concept.
- The Emerging Legal Concept: This thesis, aligned with recent commercial legislation, advocates for the development of a unified legal concept of the business within our national law.
Legal Aspects of the Business and the Company
1. Goodwill
A company, as an economic organization of production, possesses a value exceeding the sum of its individual components. This added value, termed goodwill, encompasses both tangible and intangible elements and becomes particularly evident when the company is the subject of legal transactions.
2. Modes of Company Transmission
The transmission of a company can occur inter vivos (between living persons) or mortis causa (upon death). This can involve the transfer of company ownership or the granting of rights, receivables, or real rights related to the company.
3. Atypical Contracts Concerning the Company
Our legal system doesn’t explicitly regulate atypical contracts related to the company. The legal framework for these contracts relies on the agreements established between the contracting parties.
The Sale of a Company
1. Approach
The acquisition of a company can have implications for competition law. If the purchase involves publicly traded securities, the buyer is obligated under securities market law to launch a takeover bid (OPA).
2. Regulation, Object, and Form
The sale of a company is regulated by a combination of Commercial Code provisions on commercial sales, civil law standards on contracts, and the specific agreements between the parties. The contract’s object is a functioning business organization intended for continued operation by the purchaser. The form of the contract adheres to the general principle of freedom of form, although written documentation, preferably in a public document, is recommended.
3. Obligations of the Parties
The buyer’s primary obligation is to pay the agreed-upon price. The seller’s obligations can be categorized into four areas:
A. The Obligation of Delivery
The seller must deliver all essential elements of the company to the buyer, enabling the continuation of the business under the same legal and productivity conditions.
a1. Credits
Business credits can be transferred according to general legal rules.
a2. Liabilities
The buyer’s assumption of debts incurred by the seller’s business is governed by general legal rules. Only contractual debts, not non-contractual ones, are transferable. The debt assumption agreement must be clear and explicit, as per legal precedent. The assumption doesn’t release the seller from their obligations; creditor consent is required for the seller’s release.
a3. Contracts
The assignment of contracts necessary for the company’s operations must adhere to general legal rules, requiring a dual agreement between the seller and buyer, and between the buyer and the third-party contractor.
a4. De Facto Relationships
De facto relationships, pertaining to the fulfillment of obligations to do or not do something, are transferred to the seller.
a5. Books
The seller must retain the accounting books and make them available to the buyer as needed.
B. The Obligation of Cooperation
The seller is obligated to assist the buyer in ensuring the smooth operation of the acquired company.
C. The Obligation of Non-Competition
The seller is obligated not to compete with the buyer. While not explicitly regulated, this obligation is often addressed through contractual agreements. Legal doctrine and jurisprudence suggest that the non-competition obligation is subject to territorial and temporal limitations.
D. The Obligation of Warranty
The seller is obligated to provide a warranty, compensating the buyer if defects or eviction affect the entire company or essential elements of its operation. Additionally, the seller must provide individual warranties for significant assets within the company.
The Leasing of a Company and Commercial Premises
1. The Leasing of a Company
The lease of a company is an atypical contract not specifically governed by the Commercial Code. The applicable rules are those of the Civil Code concerning the lease of assets. These rules should be applied flexibly, considering the lessee’s acquisition of entrepreneurial status. The tenant’s primary obligations include paying rent, operating the company, and maintaining its productive state. The landlord’s obligations include transferring the use of the business, including the right to dispose of assets, ensuring proper maintenance, cooperating with the tenant, and refraining from competition.
2. Distinguishing Between Leasing a Company and Leasing Commercial Premises
Our law distinguishes between leasing a company and leasing commercial premises for non-residential use. The former, governed by the Civil Code, applies when the tenant receives the economic organization, including the premises, production elements, and continues the operation of the business. The latter, subject to the Urban Leasing Law (LAU), applies when the contract concerns the establishment of the renter’s own business, industry, or trade within the premises.