Business Product Video [Copy]

Business Product Video [Copy]

Published on 10 October 2022
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Transcript
00:00
Effects of Incorporation
00:06
1. Separate Legal Entity
00:08
According to S.20, a corporation formed in accordance with this Act is a body corporate and has the following rights: (a) independent legal identity from that of its members; and (b) continuance in existence until removal from the register.
00:15
The company is a legal person having a distinct entity from its members
00:18
a.) Lee v Lee’s Air Farming: Lee formed company-spreading fertilizers from the air. Held all the shares except one. A director and also an employee-chief pilot. Later Lee was killed in an aircraft crash. His wife claimed for workmen’s compensation under New Zealand law and she could only if could show that Lee was in fact an employee. The privy council held that although lee was the controller of the company, personally he was separate from the company. He could enter into a contract.
00:22
b.) Hew Sook Ying v Hiw Tin Hee: it is a well establish principle of law that limited company incorporated under the companies act & individuals forming the company are distinct legal entities.
00:27
2. Ability to incur its own liability
00:29
A firm has infinite liability. Members' liability is restricted depending on the type of business or the quantity of shares issued under a guarantee.
00:31
Re Application by Yee Yut Ee: Yee was a secretary of a company. The company retrenched its staff and matters concerning retrenchment benefit was referred to industrial arbitration court which had ordered an award. Meanwhile, Yee was appointed as director.
00:36
3. Ability to sue and be sued
00:38
Any wrongdoing to a company can result in legal action being taken against it or being taken against it in its own name. not the employee of the company. In the case of Foss v. Harbottle, shareholders of a firm sued the directors of the company, alleging improper use of the company's assets. It was decided that the harm caused the company harm.
00:46
4. Perpetual Succession
00:47
A company must be legally wound up or removed from the registry before ceasing to exist. Its lifespan is independent of those of its members.
00:49
The only stockholders and directors of the corporation were H & W, according to the real Neol Tedman. left a little child behind. Even after their passing, the business persisted. The issue that arose was that the shares could not be transferred in accordance with the decedent's wishes because the shareholders and directors had passed away. held that in order for the new directors to approve the transfer to the beneficiary, the personal representative of the deceased members should nominate directors.
00:52
No matter how a company's shareholdings change, its identity remains constant.
00:57
5. Companies have unlimited capacity
00:58
According to Section 21, a company must be competent to perform all of the duties of a body corporate and have the complete authority to engage in any type of business or activity.
01:01
the right to sue and be sued; the right to purchase, own, hold, develop, or dispose of any property; and the right to act or engage in transactions.
01:06
Corporate veil
01:11
What Is It?
01:12
The corporate veil shields shareholders from being held personally accountable for the company's debts and other responsibilities by separating the corporate personality from the shareholders' personal identities. But this defense is not impenetrable or unbreakable. when a court finds that a company's operations were not carried out in compliance with corporate law. By lifting the corporate veil, it might subject stockholders to personal liability for the company's debts.
01:20
Lifting of the Corporate Veil
01:21
Due to their existence as independent legal entities in the Salomon case, the shareholders and directors were shielded from personal culpability. In Salomon's case, there are statutory and common law exceptions to the rule. Lift is a word used in law when a court decides not to defend a corporation's individual owners or directors and instead permits a lawsuit or investigation against them.
01:28
Lifting of the veil by statute
01:29
Section 67 (3) allows the officers guilty of the criminal offence. In others situation, the Act makes the officer personally liable for to creditors for debts incurred by the company. Section 169 refer to the requirement of preparation consolidated accounts of financial position of the parent company and its subsidiaries. View from this point, the act is recognize group of related companies function as a single entity.
01:33
Any member of a company who knowingly carries on business for more than six months is personally liable for all debts incurred after that period. Under section 121 (2), any person who is an officer of the company was liable to the holder of a bill or other negotiable instrument if he signs, issues or authorizes to be signed on the company's behalf any bill of exchange, cheque or promissory note not properly or legibly written.
01:38
Lifting of the Veil by the Common Law Court
01:40
In Malaysia, the court will lift the corporate veil when the justice of the case so require which is Hotel Jaya Puri Sdn Bhd v National Union Bar& Restaurant Workers (1980), Aspatra Sdn Bhd v Bank Bumiputra Malaysia Bhd (1988).
01:47
Situation Where the Malaysia Courts did Lift the Veil
01:48
It was for Fraud
01:49
When there is a hint of fraud or when the separate entity principle is being abused, the courts are willing to pierce the corporate veil. Contractual responsibilities are frequently avoided by the businesses. establishing corporate structures that allow dominant shareholders to kick out smaller stockholders. As a result, the court will assist in cases involving fraudulent schemes. A person or company's independent personality has frequently been utilized to hide fraud or allow someone to escape their legal duties.