Company Law Case Study
There are two significant principle of Company Law – the Salomon Principle and the Duomatic Principle. People have different points of view about whether these principle are antithesis of each other. However, I think they are two different kinds of principle, which they should not be used to compare with each other.
First of all, Salomon Principle is about the separation of legal entity, which a limited company is a separated existence from its shareholders or its directors. It means that the company is considered as an artificial person at law with a separate legal personality, which it has its own rights and liabilities. A limited company can take legal action, make contracts, own property, as well as be sued as a person. The company will
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In this case, the company has only one asset, which was a house in Kowloon. Leung said that he and the members of the company had made an oral agreement to buy all of the shares and property. However, the company had never agreed and Leung disputed that it was because the company was controlled by two person. Although it was agreed that the directors were not represented as agents of the company, Leung wondered that either the company was a trustee that held the house on trust for the members, or it was the doppelganger of them. Finally, it was held that Good Profit Development Ltd did not hold any property as an agent or trustee of its shareholders or directors, since the company was not a second-self of its members as a separated entity. The agreement of purchasing the shares in Good Profit Development Ltd had nothing to do with the company, which there was no relative of contract, and there was no cause of action against the company (Stott, …show more content…
The company’s memorandum gave the company power to provide pensions to its employees and ex-employees. The two directors bought a pension policy for a retiring director’s benefit, which they signed the proposal form and cheques. This decision was intra vires, but it was deficient in the consent of shareholders in general meeting. It means that it was an unauthorized act of the board of directors. Therefore, the liquidator denounced this act and sought for declaration a year later (Stott, 2011). It was held that the decision was intra vires the company and there was no misfeasance had been proved. Although the decision had not been taken by the board, this irregularity action had been obtained unanimous assent of the two directors - the only shareholders of the company (Ottley,
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