Company Law Issues

In: Business and Management

Submitted By song0126
Words 1530
Pages 7

Facts: Due to the global financial crisis, the business of Bling Bling Pty Ltd has declined and the company is in the process of insolvent and under the care of a liquidator. The liquidator has rejected Sue’s claim to the securities, which includes a substantial block of shares that were fully paid, and debentures for further substantial sum secured by charge over all company’s assets.

Issue: Whether Sue can enforce her charge [security interest] against Bling Bling Pty Ltd ?

Relevant case: 
Under corporate law, there is a rule of separate legal entity explained in the case of Salomon v Salomon & Co Ltd. Once a company is incorporated, there will be a distinction between private and company’s debts and assets, a company can contract with its members and a company can be liable in tort to a member. As seen in the final decision in the famous case of Salomon v Salomon & Co Ltd, “…once the company is legally incorporated it must be treated like any other independent person with rights and liabilities appropriate to itself…”

Application: In this case, because of there is no fraud so the company is a separate legal entity. The debenture given by the company is valid, thus, Ms. Sue should succeed in her claim against the company in her capacity as a secured creditor with priority payment for company’s debt owed to her.

Fact: Ms. Sue sold her company and took out an insurance policy in her name to cover the goods against fire and theft. After burglars broke into the premises of ‘Bling Bling Pty Ltd’ and stole stock valued at $500,000, Good Luck Ltd refused Amy’s claims for the stolen stock at ‘Bling Bling Pty Ltd’.

Issue: Whether Sue can enforce the claim against Good Luck Ltd?
Relevant case: In the case of Macaura v Nothern Assurance Co Ltd (1925), Mr. Macaura sold his company and took out an insurance policy in his name to…...

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