Corporate law consists of four major modules, and each of these modules serves a distinct function.
- 1) State statutory law - enables corporations to be organized, provides corporations with various endowments, and facilities corporate transaction.
- 2) State judge-made law
- 3) Federal law, such as the Securities Acts adn Sarbanes-Oxley;
- 4) Private ordering, or "soft law," such as stock-exchange rules for listed companies.
State law - corporations are creatures of state law. State statues govern the birth of corporation, as well as their adolescence, death, etc.
(193-201) - One element that will often figure into the decision where to incorporate an enterprise is which state's law the decision makers want to govern the corporation's internal affiars. Although, as shown in the preceding Note, a corporation's internal affairs may be goverened by four ..., often state law swill be paramount. The law permits an enterprise to incorproate in any state it chooses - if an enterprise incorporates in such as state, the question may arise, whose law governs the corporation's internal affairs - the state of incorproation, or a state, if there is one, where the corporation does mot of its bueisns.
- The normal rule is that the law of the state of incorproation will govern the corproation's interna affiars - Internal Affairs Doctrine In VantagePoint Venture Partners v. Examen, Inc., 871 A.2d 1108 (Del. 2005)
- Some states, however, have adopted provisions in their corporate statutes under which designated sections of the statutes are applicable ot the internal affiars of certian corporations in another state.
Over the body of predominantly state law which governs corporate life exists a federal law overlay. This overlay affects small and closely held coroprations through federal regulation of securities, proscriptions on insider trading, general anti-fraud rules which apply to the actions of "any person ... in connection with the purchase or sale of any security," and the reorganization and liquidation provisions of the federal bankruptcy law.
For publicly held corporations, the federal overlay is much more extensive. That overlay includes not only regulation of securities issuance and insider tradition but also of takeover bids (tender offers) for the shares of public corporation, the SEC continuous disclosure system, etc.
Federal Regulation includes
- Trust Indenture Act of 1939
- Investment Company Act of 1940
- The Public Utility Holding Company Act of 1935
- Sarbanes-Oxley (SOA) of 2002