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Company Law 266 Assignment

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Submitted By seamon6456
Words 1298
Pages 6
Question 1

Once the company is successfully registered, it becomes a separate legal entity which is different from its directors, owners, and shareholders. The company could have its own right and asset, and also property. Meanwhile, the money and resources of the company could only be used for business purpose. Even the directors can’t use the company’s asset for private uses. (Guides to obligations of proprietary limited companies 2012).

According to the case, the four people want to establish a company which specializing in coffee and coffee related accessories. What they invest in company is no longer belong to their own. They can get the company’s shares depend on their communication result. The money they invest in the coffee company only can use for the operation of the business.

One advantage to set up a company is when the company has debts, Shareholders of a company are not liable (in their capacity as shareholders) for the company’s debts (Guides to obligations of proprietary limited companies 2012). As shareholders, their only obligation is to pay the company any amount unpaid on their shares if they are called upon to do so. However, if a shareholder is also a director, the situation could be different. According to the case, the people who set up the coffee company each own 1000 shares at 2 at $2 a share and all shares are to be fully paid.

Normally, if the coffee company is in debt, the shareholders don’t need to pay anything because they all fully pay the shares. At the same time .Joan, Anna, Prafula and Susanna are the directors of the company, so the situation is complicated.

A director of a company may be liable for debts incurred by the company if the company is trading whilst it is insolvent. It depends on different situations. One situation is when any losses the company suffers from a breach of certain director’s duties, the

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