Company Law A - Separate Legal Personality

Flashcards on Company Law based on lecture notes.

Separate Legal Personality

A company is a legal entity separate from its shareholders and continues in existence until removed from the New Zealand register.

Liability of Shareholders

Except where the company's constitution provides for unlimited liability, a shareholder isn't liable for the company's obligations just by being a shareholder.

Salomon v A Salomon & Co Ltd: Decision

The court decided in favor of Mr. Salomon, establishing that Salomon Ltd was a real company and must be treated as such.

Salomon v A Salomon & Co Ltd: Question

The question was whether Salomon Ltd was a company at all, and whether it was validly constituted under the statute.

Lee v Lee’s Air Farming Ltd: Facts

Mr. Lee was both the controlling shareholder/governing director and an employee aircraft pilot of Lee’s Ltd.

Lee v Lee’s Air Farming Ltd: Decision

The court determined that the positions of governing director and employee were not mutually exclusive, so Mrs. Lee was entitled to claim compensation.

Macaura v Northern Assurance Co Ltd: Key Proposition

Neither a simple creditor nor a shareholder in a company has any insurable interest in a particular asset which the company holds.

Gilford Motor Co Ltd v Horne: Reasoning

The company was formed as a device to mask the carrying on of a business, effectively a cloak or a sham.

Gilford Motor Co Ltd v Horne: Decision

The court held that the covenant was enforceable; the company had been used as a 'cloak' to breach a non-compete.

Prest v Petrodel Resources Ltd: Evasion Principle

The court may disregard the corporate veil if a legal right exists against the person in control, independent of the company, and the company is used to defeat this right.

Prest v Petrodel Resources Ltd: Concealment Principle

The interposition of a company to conceal the identity of real actors will not deter courts from identifying them.

Company Groups - Related Companies

The subsidiaries and holding companies can be considered a ‘group’ of companies.

Holding (Parent) Company

A company that controls another company.

Subsidiary Company

A company controlled by another company.

Lonrho Ltd v Shell Petroleum Co Ltd: Key Point

Each company’s assets must be disclosed which the party giving the discovery has or has had in his possession, custody, or power.