[Name]: Yong Yee Luenn
[Student ID]: TP 022725
[Intake number]: UC2F1210AF [FI]
[Module code]: BM054-3.5-3-CL
[Subject code]: Company Law
[Lecture’s name]: Nadiah Suki
[Assignment title]: Individual assignment
[Submit date]: 15th January 2014
Table of Content
1) Salomon v. Salomon & Co. Ltd
2) Symington v. Symington’s Quarries Ltd
3) Daimler Co Ltd. v. Continental Tyre and Rubber Co.
4) Gilford Motor Co v. Horne
5 )Adams v. Cape Industries plc
6) Hochster v De La Tour
As attorney on behalf Caca and Maba, I will tell them the legal effects of incorporation will provide advantages and disadvantages as below: Advantages of Incoporation:
1) Corporate veil and limited liability
As stated in Companies Act, a corporate is independently functioning. It is a legal person and distinct from its members included shareholder and directors. Beside this, corporate veil also protect shareholders to lose upmost the amount they had invested if the company is sued and judgment is against the company. In the case Salomon v. Salomon & Co. Ltd, it was judge that a company must be regarded as a separate person from any member of the company. It stated “the company at law is a different person altogether from the subscribers to the memorandum….nor are the subscribers as members liable in any shape or form, except to the extent and in the manner provided by the Act” 2) Perpetual succession and transferable shares
Changes of shareholder or director are allowed as the company considered going concern. The share of any member was movable and transferable. In the case Symington v. Symington’s Quarries Ltd, it was judge that a partnership business carried on by three brothers who decided to transfer it to a private limited company. A resolution was passed in general meeting by the votes of board of director consist of the three brothers together with other members having nominal interests that agreed the eldest brother to be sole director. The other two brothers petitioned for a winding up under the just and equitable provision and the court so ordered As application of Symington v. Symington’s Quarries Ltd stated that “In such a case it is quite obvious that all the reasons that apply to the dissolution of private companies, on the grounds of incompatibility between the views or methods of the partners, would be applicable in terms to the division amongst the shareholders of this company, ...” In conclusion, incorporation is a legal entity, which has privileges and responsibilities to the rights of the person who form the corporation. Whereby, members of Bloomies Sdn Bhd were not liable to any general proposition that the company is liable for. As example if Bloomies Sdn Bhd was unable to settle a loan from bank, Caca and Marba not personally liable to the loan. Incorporation is liable for its contracts and agreements, while the shareholders and directors are not liable for such liability. Unless, if they personally signed any agreement with the Bank to be guarantor. With respect to limited liability it can be stated as a general proposition that a company is liable for its contracts and torts, while its shareholders have no such liability. Besides this, they have rights to transfer their shares.
Disadvantages of Incorporation
Incorporation brings certain disadvantages. One of the significant factors were setup cost of a corporation is very high and liable to double taxation. Besides this, formal operating to keep records and hold meetings in compliance of rule and regulation as required by the law will incur additional expenses. Furthermore, a register company requires registered office and need to follow formal procedure which is a complex process. On the legal side, I will advise Caca and Maba to beware of...
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