Personality
Tutorial Ques 4
Prepared by :
Chris Lim Sor Yeung
LEB110047
The problem :
Issue 1 :
Whether there exists a separate legal personality between Woody and the company he incorporated?
Statutes :
Companies Act 1965
- Section 14(1)
- Section 16(5)
Case laws :
-Salomon v Salomon & Co Ltd
-Lee v Lees Air Farming Ltd
-Macaura v Northern Assurance Co.
-Abdul Aziz bin Atan v Ladang
Rengo Malay Estate Sdn Bhd
Application :
The company incorporated by Woody, in itself is
capable of being sued. Therefore, the company
should be sued for the inability to pay off the
debts instead of Woody.
Salomon v Salomon
Mr Aron
Salomon
Leather
merchant and
boot
manufacturer
Salomon v Salomon
Decision of HoL:
Incorporation of the company created a separate
person, even though the business of the company was the
same and the same persons managed the business and the
same hands received the profits, the company was not an
agent or trustee for the members. The members were
not liable in respect of the companys obligations.
Application :
A corporation or body corporate is a legal person created
and recognised by the law. In this sense it is an artificial
legal person as opposed to individuals who are known as
natural persons. Thus, after the incorporation of the
company, a separate legal personality had been
established and Woody as a member of the company need
not be liable for the companys obligations.
Application :
Although Woody is the principal
shareholder of the company, the
company and him are still separate
legal personalities.
Macaura v Northern
Assurance Co.
Application :
Assets of a company belonged to the
company, thus the owner and
shareholders of the company do not
have insurable interests over the
assets but the company itself.
Application :
Even if all the shares in a company were
transferred from the existing member to
another member, the transfer would not
change the company to another entity.
Employment done by the company did
not change as the company still exists.
Issue 2 :
If there exists a separate legal
personality, whether the veil of
incorporation can be lifted in this
circumstance to make Woody
personally liable for the debts?
Fraud
Agency
Group Enterprise
Control by Enemy of State
Situations under the Companies Act
1965
- s36 (number of members below two)
Application of s36 :
1. 2nd January 2012 father in law died, Woody became the
sole shareholder, number of members fell below the
statutory minimum.
2. Carried on business up to 1st July 2012 and suffered a loss
of RM16,000. (Loss incurred still within six months period
to be borne by the company)
3. After 1st July 2012 (after six months of which the
members fell below the statutory required number of
members), the company borrowed a sum of RM10,000
from the creditors and suffered further losses Woody as
the sole member of the company who continued to carry
on the business after a period of six months of which the
number of members fell below two, would be the person
liable for the sum of RM10,000 contracted during such
period.
Conclusion
1992
Woody
Needs to indemnify the creditors the
sum of RM10,000
Guilty of an offence for operating a
company below the statutory
minimum number for a period of
more than six months
- pay a penalty of RM2000
- default penalty under s370
THE END
THANK
YOU =D