Law Case Study
Autor: Rachel • November 21, 2017 • 947 Words (4 Pages) • 569 Views
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The law applicable in this case is Companies Act 1965 (CA 1965). Section 4(1) of CA 1965 define company as a company incorporated pursuant to this Act or pursuant to any corresponding previous enactment.
The principle of law used is under section 16(5) of CA 1965. The section stated that a body corporate is a legal person that is created and given recognition by the law. It is artificial person that is recognized by law as having power and liabilities like an individual. In the case of Solomon v Solomon, where S was a sole trader in shoe manufacturing business, he changed his business to company and sold the business to the company of f39, 000. The business did not do well and after sometime become insolvent. The asset of the company were not enough to pay to the creditors, so the creditors tried to claim from S stating that S and the company were in fact one and the same. However, the court held that the incorporation of the company made the company and members are two separate legal entities.
Lifting the veil of incorporation is where in certain situation court will ignore a separate legal personality of a company and look to the members of the controllers of the company to make them responsible for the debts of the company. Under section 36 of CA 1965, retrenchment of staff, stated that where the membership of a company falls below 2, that member has 6 months to find another member. If after 6 months still carrying business with one member, that member is liable for the debt of the company.
Mat, Din and Bad merge into business and formed a company and become the only directors and shareholders in the company. After one year, the premise was burgled Din and Bad were killed in the tragedy. Thus, Mat continuous the company’s business alone.
According to section 36 of CA 1965, retrenchment of staff, if after 6 months the company still carrying business with only one member, that member is liable for the debts of the company. Hence, the court will lift up the veil and look to the person behind the company who carry on the business. Thus, in this case, Mat is the only one who is carrying the business.
As a conclusion, according to section 36, retrenchment of staff, carrying business with only one member after 6 months, the member will be personally liable with the company’s debt. Therefore, Mat will be personally liable under section 36 CA 1965, because he is the only one member left in the company.
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