Company Law Issues Essays

1518 Words 7 Pages

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,
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Macaura because he did not own the timber. The House of Lords held that even if Mr. Macaura held all the share in the company, he ‘… is not the corporation and neither he nor and creditor of the company has any property legal or equitable in the assets of the corporation’. The decision means that the House of Lord drew a clear distinction between the assets (timber) owned by the company and the assets (shares) owned by private.

Application: In this case, ‘Bling Bling Pty Ltd’ and ‘Bling Bling’ are two separate entities. Because the fact was not stated that if Ms. Sue has transferred the insurance to ‘Bling Bling Pty Ltd’, thus, she cannot enforce the claim to recover the value of loss goods from Good Luck Ltd. This is an example of the distinction between private and company assets. A company holds its assets separate from the assets of its members. Therefore, in Sue’s case, it is clear that both are separate entities and ‘Bling Bling Pty Ltd’ had no insurance with Good Luck Ltd. Thus, Ms. Sue cannot receive the claim from Good Luck Ltd to cover the losses.

In conclusion, Ms. Sue is able to enforce her charge against Bling Bling Pty Ltd and receive priority payment as a secured creditor. However, Sue cannot receive claim from Good Luck Ltd to recover the loss of the stolen goods because both are separate entities and the insurance does not cover Bling Bling Pty Ltd.

Question 2

Facts: Ms. Amy (sole trader) is carrying on a restaurant

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