...TABLE OF CONTENTS Marking scheme........................................................................................i Turnitin Report.........................................................................................ii Introduction...............................................................................................1 Importance of separate legal entity..........................................................2 Lifting veil of corporation.........................................................................4 Conclusion..................................................................................................7 References..................................................................................................8 Introduction In Malaysia, the legislation governing the formation and operation of companies is the Companies Act 1965. Section 14(1) of the Companies Act 1965 states that company are incorporated under the law which begins with the two or more people association as they use their names to become the subscriber in memorandum and all requirement of the registration are complied. Hence, then the company is formed, then it’s called “incorporated”. After being issued with a certificate of incorporation, a company has a legal status separate from the members. In law, the company is treated as a person. Whatever happen in the company, the members of the company should not receive any impact as it was distinguished from company. Wrong...
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...secured creditor. This event will be brought to the court or the Supreme Court. They all think that creditors cannot recover their entire debt contract with the company, so not with Mr. Salomon. After a series of the appeals, it is considered by Salomon v Salomon & Co Ltd is a company, with separate legal personality qualification, so also can’t say Mr. Salomon owned by the company. The company and Mr. Salomon have two legal persons in the law. So it is has the right to enter into a contract. The principle in Salomon are a company must be an independent legal person, but from other members or shareholders. The principle of Salomon must also know the veil of incorporation of the company. If a company will formally merge, courts usually don’t see the veil to find out the cause of the company or who is in control of the company. Veil of the incorporation is to protect the company’s chairman, lest they had made a mistake by the prosecution. As separate legal person qualification, the company will...
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...“The veil of incorporation can be lifted only where a company is ‘a mere facade concealing the true facts’.” Written under exam conditions (45 minutes); Words: 380 The general rule in company law comes from Salomon case, which establishes a maxim that a company is a separate legal entity distinct from its members. The liability of a company’s member is therefore limited by shares or by guarantee, which means that the company’screditors cannot seek satisfaction from the members, even if the company has insufficient funds to pay its own liabilities in full. Since a company is trated as a separate legal entity, the metaphor of « corporate veil » separating the members of the company from the corporate body has arisen. Lifting the corporate veil refers to the possibility of looking behind the company personality to make the members liable, as an exception to the Salomon rule. Different cases permitted us to identify the traditional categorisation of veil lifting : attribution of characteristics, single economic unit, agency, tort and mere façade concealnig the true facts. Arguably, only mere façade is a true ground for lifting the veil of incorporation. The mere façade test is applied by the courts when the corporate structure is beeing misused by the person, or persons, who control it to evade obligations or liabilites to which they are otherwise subject. Control and impropriet must be estabished, remembering that it is not improper to organise one’s business affairs...
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...corporate veil Salomon v Salomon Separate entity concept + limited liability concept ( corporate veil, which ensures that shareholders are not personally liable to creditors for their company’s debts, even though: ❖ all the company’s shares are beneficially owned by one person; and ❖ the sole purpose of the company was to obtain the benefit of limited liability. Macaura v Northern Assurance: Where a member transfers property to his company, he loses any proprietary interest in the property. [A company owns property distinct from the property of its members.] LIFTING the corporate veil Incorporation for a fraudulent/improper purpose ❖ Gilford Motor v Horne: If the company was formed for the primary purpose of avoiding existing contractual obligations, the corporate veil is lifted. ➢ *H resigned from his position as managing director of GM. ➢ *H started a business under his name which competed with GM. ➢ *H discovered that the former service agreement provided that he would not, at any time, solicit customers of GM. ➢ *A company was incorporated in the name of H’s wife, which then conducted the business. ➢ *Although H was not a shareholder of the company, he conducted its affairs. ➢ *The company sent circulars to GM’s customers, seeking their business. ➢ The company was formed for the purpose of avoiding existing contractual obligations ( it was a “mere cloak or sham” used as a device ( corporate veil was lifted. Agency relationship...
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...Table of Contents Introduction 2 Case study- fact 3 Salomon v A. Salomon and Co. Ltd. (1897) AC 22 3 Effects in incorporation 4 1. Perpetual Succession 4 • The case of Re Noel Tedman Holdings Pty Ltd. (1967) QdR 561: 4 2. Business property 4 • In the case, Macaura v Northern Assurance Co. Ltd. (1925)AC619: 4 3. Limited liability 5 The veil of incorporation 5 Judicial lifting 6 1. Public interest 6 2. Fraud 6 3. Agency 7 4. Group enterprise 7 Statutory lifting 7 1. Membership numbers 7 2. Misdescription 8 Trading 8 1. Fraudulent 8 2. Wrongful 8 3. Taxation 8 4. Dividend payments 9 Conclusion 9 References: 10 Introduction An organization is a legal entity by itself. Under Companies Act 1965, it expresses that a incorporated organization is a corporate that has a separate legal entity or simulated lawful individual and exists freely. in other terms, an organization is existed independently from the individuals, officers, workers and the proprietor of the organisation. An organization is made when it is enrolled under the Companies Act. It appears from the date specified in the endorsement of joining. It might be noted in this association that Section 11 gives that a relationship of more than ten persons carrying on business in keeping money or an affiliation or more than twenty persons carrying on some other kind of business must be enlisted under the Companies Act and is regarded to be an illicit affiliation...
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...corporate veil Salomon v Salomon Separate entity concept + limited liability concept ( corporate veil, which ensures that shareholders are not personally liable to creditors for their company’s debts, even though: ❖ all the company’s shares are beneficially owned by one person; and ❖ the sole purpose of the company was to obtain the benefit of limited liability. Macaura v Northern Assurance: Where a member transfers property to his company, he loses any proprietary interest in the property. [A company owns property distinct from the property of its members.] LIFTING the corporate veil Incorporation for a fraudulent/improper purpose ❖ Gilford Motor v Horne: If the company was formed for the primary purpose of avoiding existing contractual obligations, the corporate veil is lifted. ➢ *H resigned from his position as managing director of GM. ➢ *H started a business under his name which competed with GM. ➢ *H discovered that the former service agreement provided that he would not, at any time, solicit customers of GM. ➢ *A company was incorporated in the name of H’s wife, which then conducted the business. ➢ *Although H was not a shareholder of the company, he conducted its affairs. ➢ *The company sent circulars to GM’s customers, seeking their business. ➢ The company was formed for the purpose of avoiding existing contractual obligations ( it was a “mere cloak or sham” used as a device ( corporate veil was lifted. Agency relationship...
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...The Limited Liability Act 1855 was the first Act in the UK legal system that identified the concept of limited liability, which illustrated shareholders would only be liable up to their invested amount of money as capital in the company, later on this Act had been replaced by Stock Companies Act 1856 and consolidated with Companies Act 1862 (CRHK, 2014).Until 1897, the decided legal case of Salomon v A Salomon & Co Ltd, the concept of separate legal personality had been ingrained around the world, which means assets and liabilities are owned and being responsible by the company; shareholders only owned shares of the company and would not be responsible for the company's liabilities. This separation is identified as corporate veil (Morris, 2014). When company registered as a limited company, they would be eligible for the principle of “limited liability”, which liabilities can be limited by shares or limited by guarantee.Throughout the past 100 years, the real benefits of limited liability have been supported by empirical researches done in financial aspects,whereas it can lead to promotion of investment diversification, better investment policies and liquidity in equity market, both shareholders and the company would be beneficial from this issue (Bratton & McCahery, 1997). Shareholders are highly protected by the limited liability, only in some rare circumstances; shareholders would be liable for the action of the company. The first issue is when shareholders have...
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...Critically analyse as to what extent the corporate veil has maintained a separate legal identity between a corporation and its incorporators and critically assess as to whether t ‘piercing of the veil’ doctrine has served its purpose. The case of Saloman v Saloman established the principle that the company is a separate legal identity from its share holders or owners. This simply means at law the company is viewed as a separate being from its incorporators. A company may incur a debt and only the company will be liable for that debt its incorporators will not have to reach into their personal assets to relieve the company of that debt even if they are in sole control of that company. This principle has coined the term “the veil of corporation”. The veil of corporation has been a strict rule in company law, however there have been instances where the courts are willing to pierce this veil and view a company and its incorporators as a single entity. The extent to which the courts will uphold the principle in Salomon will be discussed below. In Macaura v Macaura Macaura exchanged his timber and estate for shares in a company, the timber was insured in his name and subsequently got burnt, Macaura neglected to have the timber insured in the company’s name hence the insurers said he had no claim to the timber. Macura followed the decision in Soloman however my point of focus is on Lord Wrenburys statement “The corporator even if he holds all the shares is not the corporation”...
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...agent nor a trustee of a company” To: Barrister Shaheen Ahmed (ShD) Date: 07.04.2014 Introduction The main inspiration for forming a corporation or company is the limited liability it offers to its shareholders. This policy allows the shareholders to lose only what he has contributed as shares to the corporate entity and nothing more. However, there is a major exception to the general concept of limited liability. There are certain circumstances in which courts will have to look through the corporation, that is, lift the veil of incorporation, and hold the shareholders of the company personally liable for the obligations of the corporation. The veil policy is raised when shareholders shape the distinction between the corporation andthe shareholders. It is an important aspect of the law that although it is a separate legal entity, a company or corporation can only act through human agents that it is comprised of.Under the company law or corporate law, a corporation is specifically referred to as a legal person who is a subject to rights and duties and is capable of owning real property, entering into contracts, and having the ability to sue and be sued in its own name. Also, if we want to state a corporation in different way then we can say that a corporation is a juristic person that in most cases is legally treated as a...
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...Piercing the Corporate Veil The whole objective of piercing the corporate veil is to prevent companies from using the guise of corporate personality to commit illegal and fraudulent and illegal acts. It can perhaps be said that the catalyst of the birth of this concept came about in Solomon v Solomon & Co. Ltd, wherein the concept of the company’s separate legal personality was upheld. The decision came in for severe criticism from some quarters. Otto Kahn Freund called the decision ‘calamitous’ and also proposed the abolition of private companies. There have been times when Indian courts have been slightly conservative in applying the doctrine, calling for its implementation only when it is explicitly provided for in the statute. Nevertheless, this doctrine has found acceptance in a majority of Indian courts, with the Supreme Court noting that lifting the corporate veil is becoming more translucent in modern jurisprudence and that’s its frontiers are unlimited. There are various circumstances under which courts have gone on to lift the corporate veil, such as making the holding company liable for failure to disclose the accounts of its subsidiary company, especially when it appears that the holding and subsidiary are parts of the same concern. Other instances where courts have gone on to lift the corporate veil are where the medium of the company has been used in committing fraud and illegal conduct, determination of enemy character of the company, liability for ultra vires...
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...Companies Act 1965, a company may sue and be sued in its own name. However, under the rule in “Foss vs. Harbottle”, a company should sue the other party under its own name if the company has a right under contract against the party. On the other hand, under the rule of “Jones vs. Lipman”, a court can set aside the separate legal entity of a company and look to the members of the company which is known as lifting the veil. This can be applied if a person is using his company to evade legal obligation. Looking at the facts of the case, Wonbin had signed a contract with Bake Chef Sdn. Bhd. to avoid soliciting of clients which means Wonbin had breached the contract. Therefore, Bake Chef Sdn. Bhd. can sue Wonbin under its own name because the company has the right under the rule of “Foss vs. Harbottle”. In the case of Ramos, Wonbin had also signed a contract with him to sell him the house. Even if Wonbin transfer the title to his company, under the rule of “Jones vs. Lipman”, the court can set aside the legal entity of Cake Mart Sdn. Bhd. to look after Wonbin after lifting the veil of the company. In conclusion, it is advisable for Bake Chef Sdn. Bhd. and Ramos to sue Wonbin because they have the rights to do so under the contracts they had signed with...
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...section 163 (4) of the Companies Act, No 71 of 2008 codified the common law approach in piercing the corporate veil i.e. to what extent did the 2008 Act brought some certainty regarding to the grounds in which the courts will disregard the juristic existence of a company. To achieve this I’m going to first explore the position of common law in this field of law. As a point of departure, the company is equal in law to a natural person. This is one of the cornerstones of South African company law, and has been since 1897 handed down in the Salomon case namely that a company is a legal entity distinct from its shareholders. It allows a company to perform juristic acts in its own name, as well as to sue and to be sued. Further, members and directors enjoy protection against personal liability. The corporate veil is a fundamental aspect of a company law and is a protective stratagem for those who exist behind it . Although this fundamental rule has a considerable influence in company law, it cannot be absolute and, as such, according to the case of Lock harts ltd v Excalibur Holdings ltd it can be saved for certain exceptions (where the courts may disregard the separate legal personality of the company) Herron CJ in Commissioner of Land Tax v Theosophical Foundation described lifting of the corporate veil as an ‘esoteric’ label, stating further that authorities in which the veil of incorporation has been lifted have not been of such consistency that any principle can be adduced. This...
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...Introduction In acting as advisors for the Pilot’s Association Australia and Airlines Union Australia, we seek to explore the legality of the various actions of the Jetair Ltd.’s Board of Directors which ultimately lead to the hiring of a new staff body in New Zealand by JetairNZ Ltd at a lowered salary and the subsequent redundancy of Jetair Ltd.’s Australian-based senior managers and pilots. The outcomes sought by the various employee associations seek for firstly, the imposition of the Australian-based wage of Jetair Ltd.’s former senior managers and pilots upon the New Zealand-based staff of JetairNZ Ltd. The second outcome sought by the employee associations seeks for the retrenchment of the senior managers and pilots made redundant by Jetair Ltd. The third concern is with regards to ‘excessive’ remuneration of Jetair Ltd.’s board. In examining these concerns, there are a number of legal areas that must be examined: firstly the relationship between Jetair Ltd. and JetairNZ Ltd. as a related body corporate and the various duties owed to both companies by their Board of Directors; the duties owed by the Board of Directors to both companies and the body corporate as a whole and the possibility of conflict of interest; the duty of care owed by the Board of Directors to their employees and the company as a whole; and finally the exploration of the remuneration of Jetair Ltd.’s Board of Directors as a reflection of the current financial situation of the company. The argument...
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...THE DOCTRINE OF PIERCING THE CORPORATE VEIL: ITS LEGAL AND JUDICIAL RECOGNITION IN ETHIOPIA Endalew Lijalem Enyew ♣ Abstract: Upon acquisition of legal personality a company enjoys certain attributes such as limited liability. While the separate legal personality of a company enables it to enjoy rights and assume obligations quite different from its members, the limited liability of shareholders refers to the fact that the company alone is liable for its debts. However, such privilege of limited liability may not always exist when the legal personality of a company is abused and used for illegitimate or unlawful purposes and other reasons. This article examines some of the grounds by which the corporate veil can be pierced under Ethiopian law and the role of courts in recognizing the doctrine. Based on the analysis of the relevant legislative provisions and some court cases, it is found that Ethiopian company law, though not sufficient, provides some clear grounds of piercing the corporate veil and certain possible grounds which may call for the application of the doctrine. It is also argued that Ethiopian courts should apply the doctrine of piercing the corporate veil, through the purposive interpretation of the statutory provisions, if doing so produces equitable results and fairness. Key Words: Company, corporate veil, piercing the veil, Ethiopia DOI http://dx.doi.org/10.4314/mlr.v6i1.3 _____________ Introduction The separate legal personality of a company renders...
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...PERSON VERSUS RESPONSIBILITY FOF THE DIRECTOR’S ACTIONS. Introduction: For a very long time a company has been treated as a corporate entity or a juristic person. In fact the concept of limited liability stems from this premise. Despite being an artificial person a company is wholly a creature of human beings, by human beings and for human beings. It solely rely on humans to conduct and transact any business. This research paper seeks to examine the concept of juristic personality, its advantages and its relationship with its owners. It delves into how decisions are made by this juristic personality, its liabilities and liabilities of those running it. The paper shall seek to examine if this veil of juristic person exists permanently or it can be lifted. What are the consequences of lifting that gown of juristic personality? The Concept of juristic personality. Companies and corporations are said to be legal or juristic personalities. This arises from the incorporation process. A corporation is a word that is said to have been derived from a Latin word corpus which means among other things “body”. An incorporated body becomes what is known as a “corpora coporata” in Latin or corporate body. The idea of a juristic person in law refers to an entity recognized in law as an artificial person. What this means is the entity recognized is given rights and responsibilities that arise from the law. The idea here is to separate the entity’s rights from the rights of those who owns it...
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