Company Law

In: Business and Management

Submitted By gvmblr
Words 2658
Pages 11
1. Easy Groceries Pty Ltd: the Company

The issue here is Easy Groceries Pty Ltd is liable for the debts incurred as a separate legal entity to its directors and shareholders? Or will its directors be personally liable for its debts?
Upon incorporation, a company becomes a separate legal entity from its directors and members (s119). It can sue and be sued, acquire assets and debts, and enter into contracts in its own name. Its existence can lasts a lifetime as well. The Doctrine of Separate Legal Entity also known as “corporate veil” entails that the Directors of a Company have no personal liability while its Shareholders are only liable up to the amount they paid for their shares. In Salomon v Salomon & Co Ltd Case, Mr. Salomon was the majority shareholder and a secured creditor of the company. Upon winding up, the liquidators argued that Mr. Salomon must not be considered as a secured creditor since he was in control of the company itself. But the Court’s decision recognized Mr. Salomon as a secured creditor since the company has a separate legal personality from the directors and shareholder upon its registration and it has nothing to do with Mr. Salomon being a secured creditor.


Applying s119 corporations act, Easy Groceries Pty Ltd is a separate legal entity from its directors and shareholders, meaning that Easy Groceries Pty Ltd as a company itself is liable for the debts that occurred.


As an own legal entity, Easy Groceries Pty Ltd is liable for all the debts occurred.

2. Directors

A. Tom and Jones : Executive directors


Are Tom and Jones directors under s9 Corporations’ Act? Did they breach their duties under general law and the Corporations Act as directors? Can they be held personally liable? Are they able to any defences as directors of the company? Law


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