1.1 Explain The Concept Of Corporate Personality And Lifting The Veil Case Study
Part A: Company formation
1.1 Explain the concept of corporate personality and lifting the veil
According to the scenario, Emily, the sole shareholder and director of OMG Ltd was a private company. Private company defined in s.4 (1) as any company that was not a public company and prohibited from making any offer to the public to subscribe for any securities of the company (s.755) and that there was no minimum share capital requirement for private companies. Also, a private company can only have one member (s.7 (1)). Private company was an independent legal person and legal entity, therefore, if the company winding-up, the shareholders did not have to bear the liability owing to limited liability.
In Salomon v Salomon & Co Ltd (1896), it …show more content…
Comparing to the sole proprietorship, the public company’s advantages and disadvantage would be the following.
Advantage:
1. First, legal entity. As mentioned above, the public companies had their legal entity. Also, if the owners or directors were dead, the companies would keep going to continuity.
2. Second, limited liability. The owners only would loss the amounts what they invested. They didn’t need to bear the liabilities when company was bankrupt.
3. Third, easy to raise the funds. Comparing with sole trader, it could raise the funds in the public. Therefore, their capacity was higher than sole trader. Also, they had more and easy types to finance the loan, such as debenture, preference shares, and ordinary shares.
Disadvantage:
1. Frist, loss of control. Public company had their own a board of director to control the company. Therefore, the owners would loss their control of daily operation.
2. Second, public. The public company would compliance with regulation annual report. The audit needed to ensure the company’s financial statement and report was accurate. It also needed to announce the annual report to the …show more content…
First, the promoter was people who take the essential steps to establish a company. The promoter could not make any undisclosed profit during the process. They must act with loyalty and good faith to the company. For example, they should make the best interests to the company, not for their own. Also, they needed to fully disclosure their profit to an independent board of directors for their consent if the company was incorporated. If not, all the material would be made to original shareholders or restore the profit. There was an example that can share, Gluckstein v Barnes. (1900)
Second of all, the pre-incorporation contract. Before the incorporated period, the company was not a legal person and legal capacity to enter into a contract. It was not legal binding. However, the promoter needed to enter into contract being of setting up. Such as rental, raw materials, fixed
1.1 Explain the concept of corporate personality and lifting the veil
According to the scenario, Emily, the sole shareholder and director of OMG Ltd was a private company. Private company defined in s.4 (1) as any company that was not a public company and prohibited from making any offer to the public to subscribe for any securities of the company (s.755) and that there was no minimum share capital requirement for private companies. Also, a private company can only have one member (s.7 (1)). Private company was an independent legal person and legal entity, therefore, if the company winding-up, the shareholders did not have to bear the liability owing to limited liability.
In Salomon v Salomon & Co Ltd (1896), it …show more content…
Comparing to the sole proprietorship, the public company’s advantages and disadvantage would be the following.
Advantage:
1. First, legal entity. As mentioned above, the public companies had their legal entity. Also, if the owners or directors were dead, the companies would keep going to continuity.
2. Second, limited liability. The owners only would loss the amounts what they invested. They didn’t need to bear the liabilities when company was bankrupt.
3. Third, easy to raise the funds. Comparing with sole trader, it could raise the funds in the public. Therefore, their capacity was higher than sole trader. Also, they had more and easy types to finance the loan, such as debenture, preference shares, and ordinary shares.
Disadvantage:
1. Frist, loss of control. Public company had their own a board of director to control the company. Therefore, the owners would loss their control of daily operation.
2. Second, public. The public company would compliance with regulation annual report. The audit needed to ensure the company’s financial statement and report was accurate. It also needed to announce the annual report to the …show more content…
First, the promoter was people who take the essential steps to establish a company. The promoter could not make any undisclosed profit during the process. They must act with loyalty and good faith to the company. For example, they should make the best interests to the company, not for their own. Also, they needed to fully disclosure their profit to an independent board of directors for their consent if the company was incorporated. If not, all the material would be made to original shareholders or restore the profit. There was an example that can share, Gluckstein v Barnes. (1900)
Second of all, the pre-incorporation contract. Before the incorporated period, the company was not a legal person and legal capacity to enter into a contract. It was not legal binding. However, the promoter needed to enter into contract being of setting up. Such as rental, raw materials, fixed