Veil of Incorporation
Introduction
The term “registered company” means a company starts its operation or formed by registration under Companies Acts 1965(1). A registered company is explained by the law as a person, a human being. This artificial person can own land and other property, enter into contracts, sue and be sued, have a bank account in its own name, owe money to others and be a creditor of other people and other companies, and employ people to work for it (2). Section 16(5) of the Companies Act 1965 states that on and from the date of incorporation specified in the certificate of incorporation the subscribers to the memorandum together with such other persons. (Anon., 1973) This is because it may become members of the company and it shall be a body corporate by the name contained in the memorandum. Company should have the ability to practicing all the functions of an incorporated company. For example a company can sue and being sued under the company name. Besides, company can have eternal lifespan and also a common mark with power to hold land. This act also stated when a company being wound up the part of the members has to responsible by contributing the assets to the company. In Salomon’s case, Salomon starts his business as sole trader. His son inherent his business and decided to start as a limited company, called a Salomon and Co Ltd. Mr. Salomon sold his business to the new corporation for almost £39,000, of which £10,000 was a debt to him. He asked the company to issue a debenture of £10,000 to him. (Meng, 2011) When the sudden decline in the business and unable to pay interests to Salomon he decided to transfer the debenture to B. B is here a secured creditor. When the company went into liquidation, the liquidator argued that the debentures used by Mr. Salomon as security for the debt were invalid. They argued that the floating charge should not be valid, and Salomon should liable for the company's debts.
The general rule is that there is a veil between the
The term “registered company” means a company starts its operation or formed by registration under Companies Acts 1965(1). A registered company is explained by the law as a person, a human being. This artificial person can own land and other property, enter into contracts, sue and be sued, have a bank account in its own name, owe money to others and be a creditor of other people and other companies, and employ people to work for it (2). Section 16(5) of the Companies Act 1965 states that on and from the date of incorporation specified in the certificate of incorporation the subscribers to the memorandum together with such other persons. (Anon., 1973) This is because it may become members of the company and it shall be a body corporate by the name contained in the memorandum. Company should have the ability to practicing all the functions of an incorporated company. For example a company can sue and being sued under the company name. Besides, company can have eternal lifespan and also a common mark with power to hold land. This act also stated when a company being wound up the part of the members has to responsible by contributing the assets to the company. In Salomon’s case, Salomon starts his business as sole trader. His son inherent his business and decided to start as a limited company, called a Salomon and Co Ltd. Mr. Salomon sold his business to the new corporation for almost £39,000, of which £10,000 was a debt to him. He asked the company to issue a debenture of £10,000 to him. (Meng, 2011) When the sudden decline in the business and unable to pay interests to Salomon he decided to transfer the debenture to B. B is here a secured creditor. When the company went into liquidation, the liquidator argued that the debentures used by Mr. Salomon as security for the debt were invalid. They argued that the floating charge should not be valid, and Salomon should liable for the company's debts.
The general rule is that there is a veil between the