Salomin Vs. Salomon V The People's Insurance Company Ltd

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1a) Separate legal entity refers to the type of legal entity that is detached from its accountability. A company is considered an artificial person, when it’s incorporated by complying with the prescribed procedure, that’s when it comes into being a separate legal entity from its members and officers. The importance of separate legal entity was first established in the landmark case of Salomon v Salomon & Co Ltd (1897), and it was well accepted as part of Malaysian law. In section 169 of the Companies Act 1965 provides that the directors a holding company are to ensure that the company’s accounts and those of its subsidiaries are consolidated. Therefore, even though a person holds almost all shares and debentures and controlled the company’s…show more content…
This principle also applies to companies of wholly-owned subsidiary according to the case of The People’s Insurance Co (M) v The People’s Insurance Co Ltd (1986) 1 MLJ 68. In the case of Hotel Jaya Puri Bhd v Hotel, Bar & Restaurant Workers (1980) 1 MLJ 109, the hotel company had a wholly owned subsidiary to carry out business, however, the company had ridiculous losses and this lead to the restaurant being closed and employees being forced to leave the job. It stated that it was not in party to the contact employment and they was no need to pay employees did not receive their benefits. The court held that it was liable to the employees of the restaurant as the hotel company and the restaurant company were one group. ii). Avoidance of contractual obligations A company may also be formed into a legal corporation so that a person can avoid being agreed into contract. In Jones v Lipman (1962) 1 All ER 442, L entered into a contract to sell his house to J; L then changed his mind and incorporated A Ltd, to avoid specific performance by transferring the house to A Ltd. J enforced that L and A Ltd where A Ltd defended that it was not a party between the contract of L and J. The court held that A Ltd was created by L to “avoid recognition by the eye of equity”, and demanded L and A Ltd to carry on with the contract with J. iii). Fraud or improper…show more content…
The consequences of the doctrine of ultra vires have been classified into categories such as independent objects, dependent objects and powers, to make them less severe. Independent objects are the company’s main objects which it expressly undertakes; additional activities which are interpreted widely are dependent objects where the likelihood of a void transaction will be less severe; powers are authorities given to a company to generate its ideas. Deterrence to both company and third party is formed in this doctrine from entering a transaction not given the authority in the memorandum of the company. In Re Introduction Ltd (1970) CH 199, the company engaged into pig rearing business without altering the objects clause of mainly promoting exhibitions. Because business experienced challenges so the bank suggested that loans should be made, the court held that the company had no power to borrow for intention outside of the object clause and the company will be considered bad debt because of failure to recover the

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