LEGAL AND REGULATORY FRAME WORK
A company as legal entity which has separate legal identity from its members and is ordinarily incorporated to undertake commercial business. A company is defined in different forms such as:
And unlimited companies
The companies act 1985-2006 is an act which sets out the responsibilities of the companies there directors and there secretary the act only applies to companies that are incorporated under it
In the companies act 1985-2006 defines a company that has been registered under law and ...view middle of the document...
A limited liability company exist on there own right this means that the companies finances are distinct from the personal finance of there owners so if the company falls in to debt the company will be liable not the owners.
A joint stock company or a (jsc) is basically a type of business partnership where capital is formed by individuals of a group of shareholders. In return they get a receipt or a certificate of owner ship of stocks in return for contribution , the shareholders are free to transfer ownership interest at any rime by selling there stockholding to others.
In the case of Salomon v Solomon ltd where aron Salomon was a sole trader as an successful leather merchant who specialized in leather boots he ran as a sole trader for many years, by 1892 his sons became interested in taking part in the business. Salomon decided to incorporate his business as a limited company as Salomon and co ltd. In which case he wouldn’t be responsible for the debt of his company which is a benefit.
The cooperate veil or the cooperate shield is legal fact that a corporation is an entity separate and distinct from its officers and shareholders –
protects shareholders, directors and officers from liability for corporate debts in which case the people and shareholders owners will not be liable but there are exceptions and circumstances under which the cooperate veil can be lifted and the owners could be liable.
The benefits and disadvantages of this are as follows:
• You can be limited by shares which would mean that you would make less profit which is a disadvantage
• The members such as the shareholders are not liable for the debt so if a company falls into debt he or she wont be liable for the debt which is a benefit
• The company is distinct from its members which is another benefit as the members wont be liable for its debt
• Partnerships and sole traders are liable for debts which is a disadvantage for them
• A shareholder has no right of ownership over the property or assets which is a disadvantage
• Although the owner may be in charge and give task’s and jobs to others he is not regarded as the company so he isn’t liable for debt which is another benefit
The cooperate law concept of piercing the cooperate veil describes a legal decision where a shareholder of a cooperation or a company is personally responsible for the debts that the company has even though he has limited liability in which case would only happen if the courts took into consideration for the following factors :
[Factors for Courts to Consider
• Significant undercapitalization of the business entity (capitalization requirements vary based on industry, location, and specific company circumstances)
• Failure to observe corporate formalities in terms of behavior and documentation
• Intermingling of assets of the corporation and of the shareholder
• Treatment by an individual of the assets of corporation as his/her own
• Failure to pay...