Company Law Course Wrap Up
MGMT3046 Company Law: Course Wrap Up
November 2012
We have come to the end of formal instruction in Company Law, so it is useful at this point to review the main learnings from the course. This will be somewhat long! Unit1 Salomon v Salomon and the corporate veil. This is a foundational case in company law which enunciated the principle of the separateness of company and its members (shareholders and officers). The principle makes it quite clear that the separation of the company from its members will always hold; it is only in exceptional cases that the corporate veil will be lifted, such as in instances of fraud or other illegality. This means that a company may contract in its own name and, similarly, be held liable for breaches committed in its name. As mentioned before, shareholders and officers of the company will not usually be held liable for acts committed by the company. This leads directly to the concept of limited liability. Since a company is a separate legal entity, it follows that its members will not be liable for its debts. As a distinct legal entity, a company’s assets belong to it and not its members; its liabilities belong to it and are not the responsibility of the members. In the event of the company becoming insolvent or bankrupt, a shareholder’s loss would only be limited to the amount of unpaid shares he has outstanding in the company. In this way, a shareholder is afforded limited liability. Conversely, unlimited liability companies impose unlimited liability on its members. Ultra Vires. Ultra vires describes acts undertaken beyond (ultra) the legal powers (vires) of those who have purported to undertake them. The three main applications of ultra vires were: o whether the company acted outside is capacity; o whether the company’s agents acted in excess of authority; and o whether the company’s act was contrary to statutory provisions. This proved to create great difficulties for creditors as they might provide goods and services to
November 2012
We have come to the end of formal instruction in Company Law, so it is useful at this point to review the main learnings from the course. This will be somewhat long! Unit1 Salomon v Salomon and the corporate veil. This is a foundational case in company law which enunciated the principle of the separateness of company and its members (shareholders and officers). The principle makes it quite clear that the separation of the company from its members will always hold; it is only in exceptional cases that the corporate veil will be lifted, such as in instances of fraud or other illegality. This means that a company may contract in its own name and, similarly, be held liable for breaches committed in its name. As mentioned before, shareholders and officers of the company will not usually be held liable for acts committed by the company. This leads directly to the concept of limited liability. Since a company is a separate legal entity, it follows that its members will not be liable for its debts. As a distinct legal entity, a company’s assets belong to it and not its members; its liabilities belong to it and are not the responsibility of the members. In the event of the company becoming insolvent or bankrupt, a shareholder’s loss would only be limited to the amount of unpaid shares he has outstanding in the company. In this way, a shareholder is afforded limited liability. Conversely, unlimited liability companies impose unlimited liability on its members. Ultra Vires. Ultra vires describes acts undertaken beyond (ultra) the legal powers (vires) of those who have purported to undertake them. The three main applications of ultra vires were: o whether the company acted outside is capacity; o whether the company’s agents acted in excess of authority; and o whether the company’s act was contrary to statutory provisions. This proved to create great difficulties for creditors as they might provide goods and services to