Corporations Law assignment: Lee's Business Expansion

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Question 1:
Part a
It is legal to enforce Dozey’s charge against Sleepy Head Pty Ltd.
Facts: Dozey, a sole trader owns a business called ‘Sleepy Head’. He incorporated a company called ‘Sleepy Head Pty Ltd’ later, and this company purchased the business ‘Sleepy Head’ from Dozey with a substantial block of shares and debentures secured by a charge over all of the company’s assets from Dozey. ‘Sleepy Head Pty Ltd’ was not successful and went insolvent and it is taken care of by the liquidator.
Legal issue: Dozey is a secured creditor of the company ‘Sleepy Head Pty Ltd’ and would like to enforce his charge against the company, but the liquidator, who is taking care of the insolvent company, rejected his claim.
Relevant Case Law: Salomon v Salomon & Co Ltd [1897] .
Discussion: According to the case of Salomon v Salomon & Co Ltd [1897], upon the incorporation of a company, it becomes a separate legal entity from its founders, directors, members and controllers. Debts entered into using the company’s name belong to the company and not to the founder or controller or the director or anyone else who authorised the debt . Thus, even though Dozey is the founder of ‘Sleepy Head Pty Ltd’, they are legally two different entities and their debts are separate. Therefore, Dozey should be treated as the company’s secured creditor for the company’s debenture and he is entitled to enforce his charge against Sleepy Head Pty Ltd for his claim.

Part b
It is not legal to enforce Risk Ltd for the insurance under the assumption that Dozey did not transfer ownership of the stock to ‘Sleepy Head Pty Ltd’.
Facts: Dozey sold his business ‘Sleepy Head’ to ‘Sleepy Head Pty Ltd’ with an insurance with Risk Ltd against fire, theft and the like in the sum of $1...

... middle of paper ...

...s are as follows :
1. Decide whether the company requires a constitution and if so, draft it,
2. Obtain written consent from ease proposed director and new security for the new company,
3. Reserve a name for the company,
4. Locate registered office,
5. Locate a principal place of business,
6. Determine the company’s share structure and members,
7. Complete a Form 201, ensure it is signed and lodged with ASIC
8. Pay registration fee,
9. Receive from ASIC the certificate of registration – company has full legal capacity and powers of an individual: s 124. The company remains in existence until it is deregistered: s119

Corporations Act 2001, viewed 19 December 2013,
Harris, J, Hargovan, A, & Adams, M, 2013, Australian Corporate Law, 4th ed, LexisNexis Butterworths, Australia

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