Concept of Separate Legal Entity and Consequences of Corporate Personality on a Company Essay

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SCHOOL OF MANAGEMENT
ACW 204
COMPANY LAW AND SECRETARIAL PRACTICES
YEAR 2010/2011
SEMESTER 1

Lecturer : Dr. Hazril Izwar Ibrahim
Name : Kok Cheng Hon
Matric No. : 105000

COMPANY LAW AND SECRETARIAL PRACTICES- ACW 203/204
INDIVIDUAL ASSIGNMENT
Discuss the concept of separate legal entity and consequences of corporate personality on a company; as part of the discussion present your opinion whether the judiciary can ignore the rule of separate corporate personality and how the said rule will affect group of companies. Under the concept of separate legal entity, a company will becomes a body corporate that exists separately with its owner and distinct from its individual members and directors. In others word, the corporation is …show more content…
As a result, the court would look beyond the legal fiction to the reality of situation. There are some circumstances where the corporate veil can be lifted by the Act. One of the circumstances is reduction of members below the statutory minimum, which is less than two. Section 14(1) states that incorporation of company requires two or more persons to register their name to the memorandum. The corporate veil might be lifted even if the number of members fall below two, the company still have an independent legal existence. However, the members remained in the company will still liable for the debts of company under section 36. It is only that the members remain after 6 months after the business started can be sued and liable to the payment of debts. The second circumstance is offence relating to financial assistance to purchase shares. Financial assistance is assistance given by the company on the purchase of its own share or the shares of its holding companies. Once the company or the other people constituted an offence under section 67, the privilege of limited liability of members may be lost. The court may order the convicted person to pay compensation to the company once the company suffered a loss or damage as a result of constitution of offence. Basicly, section 67 involves some prohibitions related to any way of lending, purchasing and dealing
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