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Company Law - Essay Example

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Introduction The concept of separate corporate personality is of great importance in company law. In most cases, it is used to protect the interests of people involved in the running of the company. There are certain sections of this legal piece of law that are specifically designed to protect the interests of the company owners…
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Company Law
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"Company Law"

Download file to see previous pages The essay starts by outlining the essence of the law of separate corporate personality. This will be followed by an outline of the case of John who is an employee of Diamond Car Sales as well as application of this law to the case. The essay will also look at the circumstances under which the corporate veil can be pierced. The main body of the paper will give a critical analysis of the facts that can lead the court to pierce the issue of corporate veil in certain instance. Essence of separate corporate personality Cillers et al (2004), state that an association of persons or an organised body can acquire legal personality by way of separate Act. Thus, when the company is formed as a separate entity, it acquires the capacity and authority to have its own rights and duties (Gibson, 1988). Thus, once the company has been incorporated, it can be viewed as a separate or independent person with rights and liabilities that it chooses for itself. This is reflected by the case of Salomon v Salomon& Co [1897] AC 22 (Hl). Salomon is the sole owner of the once glamorous company and he decides to turn the business venture into a limited company having realised that it had great potential. As such, Salomon got ?10 000 in debentures from the shareholders which were acquired through a bond of the company’s assets. ...
This may involve creating a brand name for the company that is used as a source of identity which makes the company different from other enterprises. In as far as the aspect of corporate personality is concerned, it can be noted that the aim of the law is concerned with protecting the interests of the company since it is treated like an individual person with legal rights. For instance, Diamond Car sales built a strong corporate personality where it even went on to categorically state that there was no person who would directly compete with it after leaving the company within the first six months of termination of the contract. Situational analysis John is works for Diamond Car Sales and his contract states that upon termination of his employment, he cannot start a business that directly competes with Diamond Car Sales for a period of six months after the termination of his contract. Apparently, John’s contract is terminated and he decides to go into business straight away despite the provisions of his contract. Fearful of the provisions of the principle of "Separate Corporate Personality" John wants to know if he can operate a business. John decides to set up a company with his son and it competes with Diamond Car Sales. However, John is neither a director nor shareholder of the new company, but he runs the business and everyone refers to him as "the boss." Against this background, this paper seeks to critically analyse the authenticity of Diamond Car Sales’ warning to John to cease trading or they will opt for legal action in order to stop him from trading in direct competition with the company. Case analysis In this ...Download file to see next pagesRead More
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