The term “Limited liability” is generally used to describe a situation where a person is excused entirely or in part from incurring a debt after taking an action which would have required under the prevailing rules of the legal system that they pay money. The doctrine of limited liability as it relates to corporate law is central to the principle that a company upon incorporation assumes a corporate personality independent of its members. This means that a new legal person is created at law and accordingly has its own assets, liabilities and rights, inter alia, to enter into and be bound by its own contracts. In some respects, the name, “Limited liability” Company is greatly misunderstood. It is a common faux pas to think that the liability of the company for its various debts is limited and that the doctrine was created as a loophole by which the company can get out of its contractual obligations. This is however not the case as on the occasion of insolvency, a company must liquidate all its assets to meet the demands of the creditors. Where the value of these assets is insufficient, the company will call on the unpaid share capital of its members or the amount which they have agreed to contribute to the assets of the company in an event of it being wound up . It is the liability of these members that is limited and not that of the company. There are also exceptional circumstances where courts will allow creditors pierce the “corporate veil” making it mandatory for shareholders to satisfy creditors’ claims. Hence for the shareholder, limited liability means participation in a company with limited risk. For the creditor however, it means the very real risk that in the event of bankruptcy he could remain unpaid for g... ... middle of paper ... ...panies and subsidiaries- The corporate veil [1991] company Lawyer 12(1) pp 16-17 Ireland P (2010), “ Limited liability, shareholder rights and the problem of corporate irresponsibility”, Cambridge journal of Economics, vol 34, pp837-856 Ibid Hatfield was one of a long series of fatal rail accidents in which Rail track’s working practices and safety record was implicated. Blankenburg,S and Plesch, D (2007) “Corporate rights and responsibilities: restoring legal accountability” Retrieved on 12th of February 2012 from http://www.stwr.org/multinational-corporations/corporate-rights and responsibilities- restoring-legal-accountability-html Ireland P (2010), “ Limited liability, shareholder rights and the problem of corporate irresponsibility”, Cambridge journal of Economics, vol 34, pp837-856 ibid ibid
Vicarious liability is a common law concept that refers to the liability that arises when one party, such as an employer, is legally liable for the acts or omissions of another party, such as an employee. This is because employers have a duty to take reasonable care for the safety of their employees and those of others who come into contact with them and their business.
Liability – The general partners are all responsible for the debts and obligations of the business, but the limited partners are only liable up to their invested amount.
Limited Liability Companies (LLC) is “a form of business organization with the liability-shield advantages of a corporation and the flexibility
Formal corporate bankruptcy proceedings generally take on two distinct forms: Chapter 7 (liquidation) and Chapter 11 (reorganization). Under Chapter 7 liquidation, the firm is shut down by a court-appointed trustee, and the firm’s assets are liquidated and the proceeds distributed in accordance with the absolute priority rule. Chapter 7 is also referred to as a “cash auction” procedure. In Chapter 11, an organization remains in control of its business operations (known as a ‘going-concern’), but is subject to the oversight of the bankruptcy courts.
The main legal issue before the court arises, in determining whether liability should be extended to reach assets beyond those belonging to the corporation and whether the corporate veil should be pierced with regard to personal liability to others.
Question at Issue - How are the engineer and railroad negligent? What could have been done by the engineer and railroad company to prevent the accident? Would more training have invoked a different preventative response from the engineer? Are the current railroad safety regulations sufficient? Are there any warnings on the road before it curves towards the track? If you didn’t know the area would you clearly be able to spot a train? What if a car was stalled on the tracks? Would a train
Tort is a wrong that involves a breach of civil duty owed to someone else.
The re-use of an insolvent company is protected by UK insolvency law. It helps to protect the interests of investors and creditors are not damaged by a lack of transparency relating to the director's involvement with an insolvent company, and continued involvement with its phoenix.
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").
Debt financing has both advantages and disadvantages. Debt financing is a business’ way to start up, expand, or recover by borrowing money from a preson or company. The money borrowed has to be paid back along with the interest that was accrued during the length of time the loan was carried out. This option is great for company’s that do not want investors. Debt financing is beneficial because the loaners do not often get involved with the company or any decision making within the company. The downfall is the risk that is assumed with the debt which is, the company may not be able to pay back the loaner. In that case, the loaner would go after the owner or partner personally. There are many forms of debt a company is allowed to take on, such as ‘venture’ debt, even if they are a high-risk corporation. ‘Venture’ debt is a form of senior debt ...
Companies will be considered in financial distress when all of their liquidity has to be used to pay their outstanding debt. Companies can file bankruptcy to deal with and manage the lack of liquidity. When a company files bankruptcy the company is protected and bondholder or creditors cannot sue them for money that is owed. According to the authors of Fundamentals of Corporate Finance, “In principal a firm becomes bankrupt when the value of its assets equals the value of its debt.” (Ross...
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).
By definition, ‘legal personality’ means the company is distinct from its members and it is not the agent of those shareholders. When there is an insolvency of the company, the members of the company is not liable for that as there is a separate legal entity. Salomon is a landmark case which first set out this principle and it is mainly about limiting the liabilities of the whole in order to protect the corporate groups by structuring themselves in ways when the company went insolvent. Since then, most of the traders are trying to attain the benefits from the Salomon principle by choosing their company limited by shares. As a matter of fact, the separate nature of the corporation from its members has been recognized in the 17th century and the early example would be seen in Foss v Harbottle. Although the courts were avid to apply this principle, it is notable that they deviated ever so often from that by ‘piercing the corporate
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.
The concept of limited liability promotes recklessness and irresponsible risk taking. The argument for the return of unlimited liability is also an argument for separate legal personality to be taken less seriously. It is believed that, should it happen, would “eradicate the problem of corporate irresponsibility and unaccountability by identifying corporations more closely with their shareholders, encouraging a shift towards the older concept of ‘the company’ as an aggregation of