Chapter 4 Company law.ppt

Chapter pany law
1 Corporate personality
2 Conditions pany
pany formation
4 Corporate capital
5 Corporate governance
6 Financial and accounting affairs
7 Corporate merger and division
8 Corporate dissolution and liquidation
1 Corporate personality
Separate existence
Legal person
Illustration: B cannot enforce the property of pany
A and B entered into a rice sales contract, by which A should deliver 50 tons of grade 1 rice to B, and in return B should pay a price of RMB 100000 to A. B made the payment and A used such money to register pany with C and D. However A failed to deliver the specified rice, thus the contract was cancelled on the basis of fraud on the part of A. A was ordered to return the foregoing money to B. The problem is such money was invested in pany. Can B enforce the property of pany? No, B cannot do so. pany enjoys separate personality, and pany rather than A owns such property. B can only enforce the property of A. If A has no other property, B may request to enforce A’s shares rather than the property in pany. Such practice is designed to secure the separate and perpetual existence pany.
Illustration: Salomon v Salomon & Co Ltd(1897)
￡1 shares
b. Corporate assets as security for ￡10000 loan
: ￡9000
=￡39000
Sells business for ￡39000
Salomon
pany
Other creditors
No security
Loan: ￡8000
Liquidation: remaining assets ￡6000
Salomon took all the remaining assets.
What shall the unsecured creditors do?
House of Lords: No more obligation to pay.
Illustration: Macaura V Northern Assurance Co Ltd(1925)Macaura and nominees owned all shares. Owed no debt to others. Macaura insured corporate timber in his name. Timber was destroyed by fire.Can he pensation?House of Lords: No. He wasn’t owner of timber.
Illustration: Tunstall v Steigmann (1962)
Mrs Steigmann ran pork shop, leased her next door shop to Mrs Tunstall. She wanted to occupy the shop herself. She could do so if she intended to occupy it herself