第4章+Chapter+4+The+company+form.ppt

Topic list 1. Distinction between sole traders, partnerships and companies 2. Limited liability of members 3. Types of company 4. Effect of legal personality 5. Ignoring separate personality----lifting the veil of the company Sole trdder Salomon v. Salomon Co Ltd. Facts: Mr. Salomon was a prosperous leather merchant, who decided to convert his business into limited company. He incorporated Salomon Co Limited, with himself, his wife and his five children as directors. The company purchased the business and SC Ltd had to pay for the business: The company ran into financial difficulties, and the debenture holders appointed a receiver. The receiver sold off all of the companys assets, which were sufficient to pay off the debenture holders, but nothing was left for the unsecured creditors. Imagine whether S would be awarded the assets owed by SC Ltd ? Why? S was separate from SC Ltd (veil) he was a secured creditor (through the debenture) It established that a company is a separate legal entity a separate legal entity gives rise to many of its characteristics the most important of them is limited liability for the members of the company What is company?(1) Definition of company (2) Definition of legal personality It is a common law principle that grants a company a legal entity, separate from the members who comprise it. It is the veil. (3) Consequences of separate personality (a) Limited liability: limited to the nominal value of the shares who helds. (b) Perpetual succession: any change in its membership cant change the company’s existence and the company ceases to exist only when it is formally wound up. (c) The company owns the business property in its own right: shareholders own shares, they do not own the assets of the business they have invested in (Macaura v Northern Assurance (1925)). (d) The company has contractual capacity its own right and can sue and be sued in its own name: members are not able to bind the company. The rule in Foss v Harbottl