Thursday, March 25, 2010

Cases For Company Law

Today, I learnt a few cases for the Company Law. There are Salomon v. Salomon Co. Ltd, Lee v. Lee’s Air Farming, Macaura v. Northern Assurance Co and Abdul Aziz Atan v. Ladang Rengo Malay Estate.

The case I choose is Salomon v. Salomon Co.Ltd.

Summary:
Mr Salomon was a leather boot and shoe manufacturer. He turned his business into a limited company. His wife and 5 eldest children became subscribers. Mr Salomon took 20 001 of the company’s 20 007 shares. After the company was set up, the board directors had made a decision that to borrow money which is 10 000 from Salomon in the mortgage of the whole company’s asset. After 1 year, the Salmon & Co Ltd cannot make the assets equal to the debt and go into liquidation. In this case, the assets of Corporation compensate the secured debt of Salomon himself, and the other unsecured creditors will get nothing.

Lesson Learnt In This Case:
In law, legal person is not a real person but is a suppositional incorporation in law. The independent corporate personality is the nature and character of a legal person. Therefore, all the assets and debts are owned by the corporation but not the shareholder and the shareholders only enjoy the assets when the company go into the liquidation and compensate all the debts of secured creditors.

The limited corporation can enjoy the limited liability which means that the shareholders are responsible for the debts only the capital and practically they invest into corporation except the particular conditions.

My Opinion:
In my opinion, this is good news for the incorporation especially for the shareholders. This is because they do not have the responsibilities on the debt of the incorporation. Unfortunately, it is a disaster for the creditor especially unsecured creditors. Due to the failed in incorporation, the unsecured creditors may face problem to get back their money. This will affect the unsecured creditors’ business operation.

Prepared by,
Fong Yok Yan (1071120015)

No comments:

Post a Comment