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: Sole trader Partnership Public companies Private companies Limited companies 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 http://en.wikipedia.org/wiki/Companies_Act_2006#Implementation In the companies act 1985-2006 defines a company that has been registered under law and this act. Once you register a company and are incorporated the company and the individual are separate bodies The last significant development in the history of companies was the decision of the House of Lords in Salomon v. Salomon & Co. where the House of Lords confirmed the separate legal personality of the company, and that the liabilities of the company were separate and distinct from those of its owners. A company has two separate identities such as the case below that argues that they separate in terms of the company and the individual. http://en.wikipedia.org/wiki/Company_(law) Such as the case of saloman v saloman & co where the house of lords enabled solomon to not pay off the debts with his personal money which means his got limited liability in which case was a benefit such as if he had unlimited liability he would be liable for his own debt and would have to pay out from his own money. The different forms of companies have different rights and liabilities such as a sole trader would have a different legal structure to a limited or a public limited company. Such as a sole trader you are liable for you own debt and your business as if you fall into debt you will have to pay from you own money so basically a sole trader has got unlimited liability. 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.
Corporations functioning within the jurisdiction of the Australian Commonwealth are governed and regulated by the provisions of the Corporations Act, 2001. Common law principles developed through judicial
A company is separate from its employees, shareholders or members in that the connection between them is usually a mere contract of employment which may be terminated leaving both parties to go their own ways. The same generally applies however to those businesses which are not companies. There is also more importantly usually a separation between the company and its owners.
With a society that is continually modernising and businesses that are forever changing it is of vital importance of the parliament to regulate the way businesses are operated. The parliament have five major functions, to provide for the formation of a government; to legislate; to provide the funds needed for government; to provide a forum for popular representation and to scrutinise the actions of government. The constitution has a vital role within society and has a major impact on the way that businesses interact. Including this legislations are a key way that enables parliament to regulate the behaviour of businesses
As defined by Geringer (1988), a joint venture (JV) is when two or more distinct companies come together and form a new entity. Geringer and Hebert (1991) extend this definition to include IJVs and stated that if the headquarters of one of the partners is outside the country where the JV is set-up or if it has operations in multiple countries, it is an IJV.
This particular statute allows for corporations and such to obtain several, but not all, constitutional rights as any person or persons. In particularly own property, sue and be sued under criminal and civil law, enter contests. Moreover, because corporations and such are considerate as “person”, business has the legal rights for its debts and damages. On the contrary, persons who are employed by a particular association are liable for their own misconduct and law-breaking while acting on behalf of a corporation. In addition, corporation has rights for its own actions, has rights such as: limited free speech and to advertise their product ("The Rights of Corporations," 2009). Likewise, businesses have the responsibility to elect a CEO, provide continuity; increase profits, social responsibilities, and manages recourses effectively (“Functions & Responsibilities of a Corporation").
A company is a form of a business organization. From them companies which are formed for non-commercial purpose such as charities. It is different in terms regulation with listed companies. Charities are not public companies. Therefore they are not subject to listing rules, depending upon countries rule, they may be subject to audit. They are recognized by country’s charity authority, to operate and receive the concessions that charitable statuses confess.
Salomon v Salomon was and still is a landmark case. By confirming the legitimacy of Mr Salomon's company the House of Lords put forward the concept of separate corporate personality and limited liability. Inextricably linked with this ratio is an acknowledgement of the importance of certainty within the law, thus separate corporate personality becomes a concrete principle to which the law must adhere. Salomon v Salomon is followed in subsequent cases, notably Macaura v Northern Assurance Co.[3] and Lee v Lee's Air Farming Ltd[4]. These cases highlight the reality of the separate corporate identity and take it a step further in stressing the distinction between a company's identity and that of its shareholders.
There are two types of limited companies: Private and public. Shareholders own private limited companies. Members of the public cannot buy the shares and the shareholders cannot buy or sell their shares without agreement from the other shareholders. Family owned businesses or larger businesses such as Virgin would fit into this category. Public limited companies have shares on the stock market and can be bought and sold by any member of the public, this way the company can raise further capital and expand their resources. Tesco and British Telecom are such examples. Both these types of limited companies have limited liability, which means the owners of the business are only liable for the amount they invested in the business (unless the debt is so large that the business has to be sold to repay the debt).
In company law, registered companies are complicated with the concepts of separate legal personality as the courts do not have a definite rule on when to lift the corporate veil. The concept of ‘Separate legal personality’ is created under the Companies Act 1862 and the significance of this concept is being recognized in the Companies Act 2006 nowadays. In order to avoid personal liability, it assures that individuals are sanctioned to incorporate companies to separate their business and personal affairs. The ‘separate legal personality’ principle was further reaffirmed in the courts through the decision of Salomon v Salomon & Co Ltd. , and it sets the rock in which our company law rests which stated that the legal entity distinct from its
The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real connection. Throughout the course of this assignment I will begin by explaining the concept of legal personality and describe the veil of incorporation. I will give examples of when the veil of incorporation can be lifted by the courts and statuary provisions such as s.24 CA 1985 and incorporate the varying views of judges as to when the veil can be lifted.
According to Corporation Act 2001 s124(1), it illustrates that ‘’A company has the legal capacity and powers of an individual both in and outside the jurisdiction” . As it were, company as a legal individual must be freely with all its capital contribution shall embrace liability for its legal actions and obligations of the company’s shareholders is limited to its investment to the company. This ‘separate legal entity’ principle was established in the case of Salomon v Salomon & Co Ltd [1987] as company was held to have conducted the business as a legal person and separate from its members. It demonstrated that the debt of company is belonged to the company but not to the shareholders. Shareholders have only right to participate in managing but not in sharing the company property. Besides ,the Macaura v Northern Assurance Co Ltd [1925] demonstrates that the distinction between the shareholders and company assets. It means that even Mr Macaura owned almost all the shares in the company, he had no insurable interest in the company’s asset. The other recent case is the Lee v Lee’s Air Farming Ltd [1961] which illustrates that the distinct legal entities between employee ad director allows Mr.Lee function in dual capacities. It resulted that the corporation can contract with the controlling member of the corporation.
A registered company, as an artificial person is separate from its members and exists only by virtue of the Companies Act under which it is incorporated. When a business is incorporated, it becomes a separate legal entity and, therefore, can be sued and sue without affecting the shareholders personal assets. This was established in “Salomon v A Salomon Co.Ltd”. Separate legal personality is known as the veil of Incorporation. This protects the shareholder and places the responsibility of the company onto the directors. These duties are outlined in the Companies act 2014.
According to Carol Padgett (2012, 1), “companies are important part of our daily lives…in today’s economy, we are bound together through a myriad of relationships with companies”. The board of directors remain the highest echelon of management in any company. It is the “group of executive and non-executive directors which forms corporate strategy and is responsible for monitoring performance on the behalf of shareholders” (Padgett, 2012:1). Boards are clearly critical to the operation of companies and they are endowed with substantial power in the statute (Companies Act, 2014). The board is responsible for directing and steering the company. The board accomplishes this by business planning and risk management through proper corporate governance.
Corporate governance is the policies, rules and regulations, by which a corporation shapes the way corporate officers, managers, and stakeholders perform their duties to create wealth for the entity. According to Lipman (2006), good corporate governance helps to prevent corporate scandals, fraud, and potential civil and criminal liability of the organization (p. 3). Most companies, whether formal or informal, have some type of corporate governance for the management to follow. Large companies will have a formal set of rules and regulations, while small companies frequently have spoken rules often due to lack time to form any type of formal policies. There is often no corporate governance with family owned companies.
1.LIABILITY: There are no limits on liability with a sole proprietorship, the owner is responsible for all the businesses debts and obligations. The earning power of a sole proprietor can be limited due to lack of capital. The sole proprietor is only able to obtain personal credit to expand the company, the bank will not treat the company as its own entity