Company Law vs Commercial Law

When running a business or studying legal frameworks, you may come across the terms company law and commercial law. While they are closely related and often overlap in practice, they cover different aspects of business regulation. Understanding the distinction between the two can help business owners, legal professionals and students navigate legal matters more effectively.

Both company law and commercial law form part of business law, but they focus on different stages and areas of commercial activity.

What is company law?

Company law refers to the legal rules and principles that govern how companies are formed, structured and operated. In the UK, company law is primarily set out in the Companies Act 2006, which applies to private limited companies, public limited companies and other registered corporate entities.

Company law deals with the internal framework of a business. It covers areas such as:

• Company formation and incorporation

• Directors’ duties and responsibilities

• Shareholder rights and decision-making

• Company secretarial obligations

• Corporate governance and reporting

• Mergers, restructurings and dissolutions

Company law creates the legal personality of a business. It defines how the business is set up, who controls it, how profits are distributed and how key decisions are made. It also protects the interests of directors, shareholders and creditors by ensuring that companies are run in a fair and transparent manner.

What is commercial law?

Commercial law, sometimes referred to as business law or mercantile law, deals with the legal relationships between businesses and third parties. It governs the day-to-day activities of trading, selling goods and services, forming contracts and resolving disputes.

Commercial law focuses more on transactions than on the legal structure of a company. It covers a broad range of topics, including:

• Contract law and the sale of goods

• Agency and distribution agreements

• Terms and conditions of trade

• Intellectual property and branding

• Competition law and market regulation

• Banking and finance transactions

• Consumer protection and advertising standards

Commercial law applies not only to companies but also to sole traders, partnerships and anyone engaged in trade or commerce. It provides the legal framework for buying, selling and delivering products or services, both in the UK and internationally.

How are they different?

The key difference lies in their scope. Company law regulates the internal workings of the company, including how it is governed and who is responsible for its actions. Commercial law, on the other hand, focuses on the external dealings of the business, particularly the relationships and contracts it enters into with customers, suppliers, agents or other businesses.

To put it simply, company law is about how a business is built and managed, while commercial law is about how that business trades and interacts with the outside world.

For example, if a company wants to change its share structure or appoint a new director, it will need to follow company law. But if the company is negotiating a supply contract, licensing a product or dealing with a breach of agreement, it will rely on commercial law.

Do they overlap?

Yes, in practice company law and commercial law often overlap. A business transaction might involve both the company’s internal decision-making process and an external contract. Legal professionals working with businesses frequently deal with both areas and must understand how they interact.

For instance, when a company is selling part of its business, it must follow company law rules for shareholder approval and disclosure, while also navigating the commercial law aspects of the sale contract and warranties.

Why the distinction matters

Understanding the distinction helps business owners identify which rules apply in different situations. It also allows legal professionals to specialise and offer clearer advice.

A company secretary or corporate lawyer might focus on company law, ensuring that the company complies with filing obligations and board procedures. A commercial solicitor might be more involved in drafting contracts, negotiating terms and advising on intellectual property or commercial disputes.

For anyone starting or growing a business, knowing when to seek company law advice versus commercial law advice can save time, reduce risk and improve decision-making.

Final thoughts

Company law and commercial law are both essential parts of the legal framework that supports business activity. While company law deals with how a company is formed, governed and maintained, commercial law focuses on how the company interacts with the market through contracts and trade.

Understanding the difference between the two helps ensure that legal responsibilities are met and that the business operates smoothly both internally and externally. Whether you are managing a business, investing in one or advising a client, a working knowledge of both areas is invaluable for long-term success.