Liability of David towards Nu Shampoo Pty Ltd and Standard Bank

Commercial and
Corporations Law
Student Name
5/5/2019

Contents
Question 1..................................................................................................................................1
Issue........................................................................................................................................1
Laws.......................................................................................................................................1
Application.............................................................................................................................2
Conclusion..............................................................................................................................3
Question 2..................................................................................................................................3
Issue........................................................................................................................................3
Law.........................................................................................................................................3
Application.............................................................................................................................5
Conclusion..............................................................................................................................5
References..................................................................................................................................6

Question 1
Issue
 What is the liability of David towards Nu Shampoo Pty Ltd. regarding breach of the
trade restraint clause
 What is the liability of David towards standard bank regarding failure to repay the
loan?
Laws
The corporation is one of the types of business structure that are available to people. It
has many features. One of the important features of corporations is a separate legal
personality. Here separate legal personality refers to a different identity of the company from
its promoters, members, directors as well as from officers (Anderson, 2008). Because of this
feature, a company may carry its business activities similar to a natural person. Principle of
Separate legal personality has been provided in the case of Salomon v Salomon & Co Ltd
[1897] AC 22, which is one of the leading cases in the history of Corporations Act. In this
case, a person Salomon formed a company and transferred his shoe business assets to the
newly incorporated company by him. He received company’s shares and debentures in return.
Here Salomon was playing three roles namely, the seller of assets, a major shareholder of the
company and managing director of the company (Hannigan, 2012). As he was a secured
debenture holder, he asked his claim at the time of insolvency of the company and the court
held his claim valid. In the reasoning of the decision, the court held that no matter how many
roles Salomon was playing in the company and irrespective of his control on the affairs of the
company, this is to conclude that Salomon & Co, Ltd was a different legal entity.