Law - Chapter 7

• Under what act is a company registered, according to these notes?

  Companies Act 2006
• Relative to its shareholders and directors, what is a company?

  A separate legal entity
• What are the key characteristics of a company as a separate legal entity?

  • It is an artificial person
  • Its members have limited liability
  • It has the ability to hold property
  • It continues in existence (continual succession)
• What liabilities may a company have as a separate legal entity?

  Liabilities in tort and crime
• In general, how easy is it to successfully prosecute a company for a criminal offence?

  Extremely difficult
• What case clearly demonstrated the separate legal personality of companies?

  Salomon v Salomon & Co Ltd 1897
• In Salomon v Salomon & Co Ltd 1897, what was Salomon's original business?

  Leather merchant and boot manufacturer
• In Salomon v Salomon & Co Ltd, how did Salomon sell his business to the company?

  Shares, debentures, and cash
• In Salomon v Salomon & Co Ltd, what did the liquidator claim?

  Salomon should bear liability for the debts
• In Salomon v Salomon & Co Ltd, what did the House of Lords decide?

  The business belonged to the company
• What happens if a company has been formed in compliance with the Companies Act formal procedures?

  It is a legal entity in its own right
• What is a key consequence of a company being distinct from its members?

  Members may enjoy limited liability
• In the event of a winding up, what are members asked to contribute?

  Identifiable amounts to the business' assets
• In a company limited by shares, what is the amount owed by a member at winding up for fully paid shares?

  If the member's shares are fully paid, there is no further liability to contribute.
• In a company limited by shares, what is the amount owed by a member at winding up for partly paid shares?

  Any outstanding amount of the nominal value of any share which has not been paid either by the original or a subsequent holder of the shares.
• In a company limited by shares, what is the amount owed by a member at winding up for share premium?

  Any unpaid premium (over the nominal value) will also be owed unless the shareholder at the time is not the original shareholder (since the amount of premium is a debt that does not pass with the shares).
• In a company limited by guarantee, what is the amount owed by a member at winding up?

  The amount they guaranteed to pay in the event of a winding up.
• What is the 'veil of incorporation' a result of?

  The law stated in Salomon's case
• What does the 'veil of incorporation' separate?

  Members and the company
• In general, why does the law sometimes 'lift the veil'?

  To expose sharp practice
• In Firestone Tyre & Rubber Co Ltd v Lewellin 1957, who was deemed to be the agent of whom?

  English subsidiary of American holding company
• In Re H and others 1996, what was alleged to have been committed by H?

  Evasions
• In Smith, Stone & Knight Ltd v Birmingham Corporation 1939, who was the owner-occupier?

  The holding company
• What does the court not lift the veil for, even if the holding company remains solvent?

  Unpaid creditors of insolvent subsidiary
• When does the court not lift the veil?

  When a claimant proceeds against asset-poor subsidiary
• In Daimler Co Ltd v Continental Tyre & Rubber Co (GB) Ltd 1916, where was the company registered?

  England
• In Daimler Co Ltd v Continental Tyre & Rubber Co (GB) Ltd 1916, why was trading with the company illegal?

  The company was an enemy alien
• In Ebrahimi v Westbourne Galleries 1972, what was the revealed company in the nature of?

  A partnership
• In Gilford Motor Co Ltd v Horne 1933, what did the employee form?

  A company
• In Re F G Films Ltd 1953, where was the film produced?

  India
• In Gilford Motor Co Ltd v Horne 1933, why was the veil lifted?

  The company was a sham
• In Re F G Films Ltd 1953, what was the exposed company considered?

  A sham company
• Under the Company Directors Disqualification Act 1986, who is liable for the company's debts?

  Disqualified directors and the company
• Under which sections of the Insolvency Act 1986 is fraudulent and wrongful trading legislated?

  ss 213, 214
• What can persons be held personally liable for if they are knowingly parties to carrying on business with the intent of defrauding creditors?

  Fraudulent trading
• What can directors be held personally liable for if they carry on business knowing the company will undergo insolvent liquidation?

  Wrongful trading
• What certificate must a public company obtain before trading?

  A trading certificate
• What is the result of a public company failing to obtain a trading certificate?

  Personal liability for the directors
• What are the types of limited companies?

  • Public companies
  • Private companies
• What is relatively rare as a type of company?

  Unlimited companies