Company Law Assignment - Corporate Veil
Added on 2020-06-06
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Company Law
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................11.1 The concept of corporate personality and lifting the veil.................................................11.2 Analyse the advantage and disadvantage of incorporation..............................................11.3 The law on promoters and pre incorporation contracts....................................................31.4 Requirement for registration and commencement of trading...........................................3TASK 2............................................................................................................................................42.1 Requirements for the memorandum.................................................................................42.2 Articles of association......................................................................................................52.3 Evaluation of doctrine of ultra vires.................................................................................62.4 Content of prospectus listing particulars..........................................................................7TASK 3............................................................................................................................................83.1 Types of capital................................................................................................................83.2 Issue of shares, class rights and dividends.......................................................................93.3 Law for maintenance of capital and inside dealing........................................................10TASK 4..........................................................................................................................................114.1 Duties and power's of directors......................................................................................114.2 Rules of different types of meetings...............................................................................124.3 law on minority protection.............................................................................................134.4 Rights of shareholders....................................................................................................134.5 Rights on liquidation......................................................................................................13CONCLUSION..............................................................................................................................15REFERENCES..............................................................................................................................16
INTRODUCTIONThe laws which includes partnerships, corporations and other organizations are companylaws. This will have the contribution of all the shareholders, directors, employees and creditors.This report deals with the required personality of the director or employees in corporate worldand the advantages and disadvantages of incorporation. Further, it will include the basicrequirements for the registration of any company and their trading behaviour. The contents ofprospectus and their listing particulars are present in this written document. This document willbe having a discussion on Human and social capital. Lastly, the assignment is dealing with thepower and duties of directors and the rights of shareholders and debentures. TASK 11.1 The concept of corporate personality and lifting the veil.The principal of veil incorporation is knows as the legal concept that differentiated thepersonality of a corporation from the personality of its shareholders. Further it also protects themfrom being personally liable for the company debt and other obligation (Doll, 2017). There isone big issue in the study of corporate law and commercial system related to the concept ofcorporate personality (Arjya, 2017). It also increases the number of concerns related to the way afirm should be treated in the eye of the law. The concept of a company have a separate identityfrom its members and other related persons. Next deal is connected under some circumstancewhich the corporate veil may be assistance. Lifting of corporate veil take place at the time whencorporate personality of the company carried out some illegal or fraud act. Further, it can bestated that artificial person is not capable of doing any fraud. So this is known as the lifting ofany fraud. The concept is changing which is associated with the concept of lifting the corporateveil (Good, Hipwell and Hanwha, 2016). Further, there are two main theory for the lifting thecorporate veil that is altered- ego and other one is self theory. The main characteristic features ofa company is known as the that it has a separate legal entity to distinct from its members. One ofthe most illustrative case related to the lifting the corporate evil is knowns as the Salomon V ASalomon and co. Ltd. 1.2 Analyse the advantage and disadvantage of incorporationA firm is knowns as the separate legal identity from its owner. Incorporation of businesshas many taxes and legal change for the owner of the business. Further business can beincorporated with an unlimited number of shareholders or it may have single shareholder. 1
There are some advantage of incorporation of business that is as follows:Raising capital- Incorporation is basically shown that the owner of the firm are seriousfor their business enterprise. Further they give time and resources in order to enhancetheir business for the important period (Gorbaniuk, Lebiedowicz and Leszczyński, 2017).Here owner can easily enhance its capital by issuing stock of an organisation. Anorganisation which is incorporated have some ability to en-ache the capital by issuingsome stock. It can also attract talented employees, this is done by the offering employeesa stock incentives plan.Continuity: An incorporated business have an unlimited life and it may be last for thecenturies either original owner is passes away or not. Further it can be stated thatincorporated business continue its business as a separate legal identity and they are free totransfer the interest of ownership from owner to owner. Taxes: The incorporate business pay tax more than one time on the same as corporateprofits. There double taxation take place at the time when taxes paid by a business as acorporation. Further they enjoy lower tax as compare to other corporates business (whatare the advantages and disadvantages of incorporation? 2014). This made easy for abusiness to invest in pension plan and other type of benefits. Formalities: Incorporate business have different type of formalities and regulation ascompared to other type of business. There are some formality which need to be fulfil inorder to incorporating the business. Further it need to keep all records of an account sothat all information can be recorded and use as the time of requirement.DisadvantageLifting of corporate veil: For all the purpose it is important for the business to make aseparate entity and to keep look an individual to be behind the corporate veil.Extra paperwork: There are some extra paper work that does not stop filling of two taxreturns. Along with this it need to take care of detailed books and notes in meeting.Lack of ownership: At the time of establishing separate corporate entity it is need to makecredit card and bank accounts separately. Further the personal identity is not enoughbecause business and personal fund cannot be mix. 2
1.3 The law on promoters and pre incorporation contractsFor getting the benefits from the corporate personality it is very important for anassociation person for becoming incorporated as per the companies act, 1956. At the time ofincorporation of association the business come into existence. Then it can start its businessoperations so that it can come into existence. One of the basic reason behind the given businessis that firm need to be incorporation company do not have any legal existence beforeincorporation. One of the basic reason behind is that before incorporation company not have anylegal existence before incorporation (Lopez, Sakhel and Busch, 2017). Further it can be stated that a matter of inconvenience that an association of personcannot be easily perform any type of official business operations in the name of firm beforeexisting into incorporation or problem related to certificate of beginning of business. Whenpromoters enter into a contract then on behalf of this corporation need to be formed so thatpromoter can be consider as a personally liable for meeting the obligation of the corporation(What Is Business Law? 2017). Along with this, for any reason if corporation unable to meet allthe obligation then it may not be formed any contract. Party to the contract is knowns as thepromoter and as per the law it is personally bound as an agent act on behalf on it. Therefore, theadoption of contract is knows as the anticipated by the parties with the contract. If this contract isadopted by the corporation then it need to expect all those rights and liabilities which are set inthe contract. Promoter is the one who is having the control of the affairs of the company in the directmanner or indirect manner. The promoter is the one who used to give advice to the boardmembers of the company over any kind of problems faced by them. The law of promoter willgive the authority that he is not viable to sell his own property to the company until and unless heshows all the relevant facts. The main function of promoter in Syrian law is to conceptualize thebusiness ideas and discover new opportunities for the business. He will prepare the documentsand arrange the funds for the business. He is having the responsibilities for implementing thenew business idea. If the efforts made by the promoter is valid and he is not generating any kindof personal profit from the shares of the company then he is rewarded for his efforts. 1.4 Requirement for registration and commencement of tradingThe basic requirement for starting any company is to select the name of the company.The name will be a long term decision which can not be changed for a certain duration of time. It3
should be based on the products the company are selling. After selecting the name, the ownershave to fill form IN01, and file an application in companies house. The Syrian act of companies6is having some requirements which consist of Application form IN01 (Pasura, 2014.). Thisinclude: The name of the company and the registration office of Syria, where all the liability ofmembers are limited. Apart from this, they have to register for VAT, only if the revenuegenerated by the firm in Syria from last 12 months is more than £83,000. Since, the restaurant isnew, so the merchants will not have to focus on this, because they don't have to apply for VAT.Further, the company have to contact HMRC for setting up their contribution scheme which isnational insurance tax and PAYE (pay-as-you-earn) tax. In Syria, this will be issued within thefirst 5 working days. Trade description act and sales of goods act are the laws made for trading. Small sizeshops can open anytime as there is no restriction of trading hours. For the shops having the areamore than 280 square meters can open on Sundays i.e. for a duration of 6 consecutive hours from10 am to 6 pm, but they must close on Easter Sunday. The shops on airport and railway stations,registered pharmacies, some sea-going vessels which is departing from harbour or port, all areexempted from this. The size of restaurant is quite small, so for them, the trading hours are notfixed. Syrian law ensures that the workers are not doing extra work without getting paid. Theywill make sure that the restaurant owners are paying the required amount of tax if they are tradingmore than the mentioned amount. The most basic requirement for registration is Syria is to havethe accurate and described size of the restaurant which is very essential. TASK 22.1 Requirements for the memorandumThe memorandum of any establishment is the most important written material and itshould be handle with care. This contains some key conditions which the company have tofollow if they want to do business. Three Syrian merchants have to complete a draft, which willbe having all the information regarding their Chinese restaurant. They have to present that to theMinistry of internal Trade and Consumer protection. The purpose of this document is to share theinformation regarding the company or range of enterprises with all the share holders, theircreditors and all other members who are associated with the company. Though, it is veryessential for the new company to file a memorandum, this will further form like a constitution,4
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