Law3033 Company Law

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LAW3033 - Company Law




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QUESTION
Murugesan owned a rubber estate. He formed a limited company and sold the rubber estate to the company. Before he sold the rubber estate to the company, he insured the estate in his own name. After the sale to the company, he did not transfer the insurance policy to the company’s name. Two months later, the estate was destroyed by fire. Decide whether Murugesan is able to claim under the insurance company.
(20 marks) ANSWER
Issue
Whether Murugesan is able to claim under the insurance company. (based on the
effect of incorporation, i.e. to acquire, own, hold, develop or dispose of any property)
(2 marks)
Law
Section 20 Companies Act 2016: A body corporate and shall have a legal personality separate from that of its members and continue in existence until it is removed from the register. Section 21 Companies Act 2016: A Company shall be capable of exercising all the functions of an incorporated company and have the full capacity to carry on or undertake any business or activity including One of the effects of incorporation is to acquire, own, hold, develop or dispose of any property.
Macaura v. Northern Assurance Co. Ltd. Facts Macaura own land on which stood timber. He sold the land and timber to a company he formed and received as consideration all the fully paid shares. Afire destroyed all timber which had been felled. Macaura had earlier insured the timber against loss of by fire in his own name. He had not transferred the insurance policy to the company. When Macaura attempted to claim on the policy, the company refused to pay. The issue was whether Macaura had an insurable interest at the time of the loss. Held Macaura cannot claims insurance on the timbers as the timbers belong to the company. Therefore, even if a person owns all the shares in the company, he does not own the company’s property nor does he have any legal or equitable interest therein. To do any act which it may door, to enter into transactions.
(6 points x 2 marks = 12 marks)

2
Application
Applying the relevant laws above, based on the effect of corporation, a company can own property in its name.
Murugesan could not claim under the policy because the estate which was damaged belonged to the company. Therefore, Murugesan, as a shareholder, had no insurable interest in the assets of the company.
(Any 2 points x 2 marks = 4 marks)

Conclusion
It can be concluded that Murugesan will not be able to claim the insurance.
(2 marks)
(Total = 20 marks)