Company Law (overview od development of company law in cwc Caribbean)
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THE SALOMON PRINCIPLE OF WHAT RELEVANCE
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- There are limits where the courts will allow the lifting the veil of incorp where the veil is sought to be lifted for the pursuit of vested rights
- Meridian Global Funds case
| Ord v bellhaven Ltd alleged D’s had misrepresetned the profitbalily of a pub which the P leased back, at the conclcusion of D restricting, they had no substantial assets, the plaintiff sought leave of the courts to subsitute the D’s with either the holding company
COA refuses to grant leave, court held there was no allegation of impropriety in the restricting of the group, but Smallbone had stolen pounds, there was cases of impropriety, no evidence of transfer of aswets thus no evidence of mala fides in the restricting exercise- no allegation of impropriety- thus court could not find the use of the corp was a use of corp mask There are limits where the courts will allow the lifting the veil of incorp where the veil is sought to be lifted for the pursuit of vested rights 3. Where the D by the device of the corp structure attempts to evade such rights (future) to relief as 3rd parties might require in the future Veil of incorp will NOT generally speaking be lifted In Adams, the court held in this category, there would be no special circum. To allow for the lifting of the veil be way of exception to the general principle Agency Where the co acts as an agent of its members, or a subsidiary acts as an agent for his parents According to Adams, On ordinary principles, liability will attach to all or any of its individual members, in the case of the former and not in the company, or the principle parent in the case of the latter In context of group of companies, similar principle will apply where 1 co acts as agent for others Smith stone & Knight Ltd. v. Birmingham; co. acquired partnership registered it as subsidiary co, but carried on its business as part of the parent co business as if the subiduar was part o the subsid The profit of the subsid treated as profit of parent company Parents act as if the partnership was its child The premises of the subid was compulsory acquired Can the parent claim compensation in respect of comp acquisition of subsidiary In attempts to do it, the courts says entitled to succeed bEcause the court held that the parent operated with the subsidiary as if the subsidiary was an agent acting on behalf of it under ordinary agency principles it was entitled to gain compensation Law on Group enterprises Dhn v towel hamlet Republic of congo cases; try Meridian case Separate legal personality & Crime and Tort Solomon v Solomon; decides that a company is a being separate/distinct from its members i.e. its shareholders Also decides, sub selectu ( not express finding-it is a logical inferenace from it being seperate) that the company is a fictitious being How are these companies as a separate being? How are these notion how the company a fictitious being ( not a real person) be translated into liability for crime which requires mens rea ( intent or recklessness) or wrong doing ( in civil liability) In other words, if a company is a ficticous being how is it be capable of being reckless? At fault? Strictly in a sense as we know it in the tort of negligence Company is fictitious person but acts by real persons who are capable of forming intent and being reckless or capable of wrong doing ( in civil sense) sufficient to attract liability However, the company is separate and distinct person from employees and directors Note: open with this quote for exams for this question Meridian Global Funds case (PC decision) Lord Hoffman describes problem in this case; “Company exist because there is a rule usually in a statute which says that a persona victa shall be deemed to exist and to have certain powers,rights and duties of a natural person but there would be little sense in deeming such a persona victa to exist unless there were also rules to tell us what acts were to count as acts of the company. It is therefor a necessary part of corporate personanality that there should be rules by which acts are attributed to the company” 1st category :rules of attribution: Primary rules and secondary rules Primary rules can eb found in the constitution of the company ( in Trinidad and Tobago that’s bylaws)- if you form a company must submit bylaws- set out powers of borad,chariman,executive chairman etc. Powers set out in constitution are said to be primary rules of attribution Example: purpose of appointing members of the board, a majority vote of the shareholders shall be the decision of the company, decision of the board in managaing the company shall be the decision of the company – these are “dealing provisions” Identification theory :The board/ shareholders is identified with the company 2nd category: “ these primary rules of attribution which is referring to the corporate constitution are obviously not enough to any company to go out into the world and do business not every act on behalf of a company could be expected to be the subject of a resolution of the board. The company therefore builds upon the primary rules of attribution by using general rules of attribution which are equally availabile to natural persons mainly the principle of agency. For this purpose it will appoint servants and agents who acts by a combination of the general principles of agents and the companies primary rules of attribution counts as the acts of the company and having done so it will also make themselves subject to the general rules by which liability for the acts of others can be attributed to natural persons” Page 102 last paragraph Stone and rolls v. moore Criminal libality Moore v wrestler 1944 2 AE 515 El ajou v dollar land holdings ltd Liability from individuals who perform the relative acts to the corporation should be born in mind Organic or altered ego doctrine Directive mind and will doctrine Lennards v Asiatic Petroleum Formation of company Twycross v grant-definition wrong; one undertakes to form a company with reference to a given project and to set in and to take the necessary steps to accomplish that goal Burgess’ this is inadequate since it doesn’t cover persons who have been far less actively involved in the company Eg. those involved in arraging for a person to be a director Erlanger c. New Phosphate company Lord Blackburn: “ a short and convenient way of designating those who set in motion the machinery by which the act enables them to create an incorporative company Enormous potential for commercial abuse from those who Settled as promoters are nor categorized as fiduciaries- no secret profit rules-no conflict rules 3rdparty Examinbale: gluckstein v Barnes’s case; property was purchased from 120000 pounds, purchase price was 140000 pounds; the company then purchased the company from Gluck, as the promoter for 180000; Pg 68 of burgess Unsuspected third parties; prospectus is issued offering the shares in the company Solomon; Lord Notoron; disclosure is not the most appropriate word to use when a personw ho plays many parts announces to himself fin one character what he has done and doing in another character The talk of disclosure to the thing called the company where there no shareholders is a fast” Gluckstein in odds with Solomon ¨court makes a finding that use of the corporate form was not intended for legitimate purposes set out in the company’s act where as in Solomon, Solomon cona fide exercise where as Gluk it was not Free Incorporation Contracts n.b. 2003 section 20, ss 12345 Must be in writing or does not apply If the company does not come into existence it does not apply Providing these two conditions are satisfied in 20 (1), the promoter Is bound by the preincorporation contract and is entitled on the reverse side to benefit from the contract Differs at common law because at CL, Kendler says once these two conditions are satisfied, the modern law will not find a pre incorp contract to be a nullity instead the promoter will be personally bound by the contract and entitled to the benefits of the contract This means; Company is not bound by it i.e company does not benefit from it The statute, valid subject to conditions, will treat the promoter , not the company, as being obligated under the contract and be the beneficiary In kendler, COMMON LAW, HOWEVER, kindler is a wine expert and owner of hotel and gets together with x and comes together to form a company and takeover something, a certificate of incrp is issued on 20th of feb 1856 and in January of 1856, kindler contract to sell the company, stock of goods that he owns sells to baxter and others on behalf of the proposed company which he then leaves; baxter agrees to accept terms proposed Something Before it comes into existence Personally liable on the contract It can have no capacity to either contract or to enter into any legal transactions because it has no personality; cannot be sued; cannot own property; has no capacity Kelner v baxter Newbourne v… Court grapples with questions which concern the acquisition of property of which extensively buys A promoter is an incorporator This is the person who takes on the task of forming a company Twycross v Grant case Lord Cockburne A person undertakes to form a company with reference to a give project and to set it going and take the necessary steps to accomplish that purpose Incorporator and promoter responsible for; Registering the company Entering into pre-incorporation contracts Responsible for issuing a prospectus in the case of a public company Promotor is responsible for appointing directors and finding shareholders who may wish to invest in the company to be formed If the promoter owes the company a fiduciary duty As a promoter you are required to act in the interest of the company He must not act contrary to the interest of the company These include A promoter must not make a secret profit in the process of forming the company ; meaning as a promoter, in dosing business for the company there must be full disclosure i.e. must be honest in their dealings ; cant deceive the company or the directors ; Gluckstein v Barnes; Promoters must make full disclosure of the circumstances surrounding the making of secret profits In this case promoters were required to pay the company the secret profits made due to non-disclosure Erlanger 1878; full disclosure ought to be made to an independent board of directors Lagunas Nitrate co 1899; the court held that full and honest disclosure should be made to the members/shareholders Duty to account all profits made in any transaction involving the company Statutory duty; promoter has a statutory duty of full disclosure If the promoter is seeking to form a public company then the promoter has a statutory duty of disclosure Has a duty to be truthful and honest Cant conceal information that members of the public ought to know Subduty of promoter; not to exercise un due influence or improper influence over the decisions of the company Breaches of the Promoter- Remedies Download 154.95 Kb. 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