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1 Forms of business organization 2 Sole trader 3 Partnership 4 Non profit-making organization 5 Classification of company 6 Significance of separate corporate existence 7 Limitations on separate corporate existence 8 Corporate capacity. 1 Forms of business organization
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2 Sole trader
4 Non profit-making organization
5 Classification of company
6 Significance of separate corporate existence
7 Limitations on separate corporate existence
8 Corporate capacity
(1) Sole traders, sole proprietorship
(2) Partnerships: general, limited partnership
(3) Company: unlimited, limited, stock
(4) Non profit-making organization
(1) Unlimited liability: owner
(2) No separate existence, not legal person
(3) No formality is required for its formation
The relationship subsisting between persons carrying on business in common with a view to profit
(1) Relationship subsisting between persons: no new legal person
(2) Business: every trade, occupation or profession
(3) In common: jointly carry on business,for the benefit of all partners
(4) View to profit
(1) Agency: Each partner is the agent of the firm and fellow partners
(2) Unlimited liability: partners
(3) Joint and several liability: serious consequence
(4) Maximum partners: 20
(1) Disagreement leads to stalemates
(2) Dishonesty or incompetence of one partner leads to heavy losses suffered by fellow partners
(3) Time consuming in the aspects of major decisions
3.4 Does partnership have separate personality?
(1) Firm’s creditors call against firm assets first
(2) Deceased partner’s personal creditors have first call against personal assets of his estate
(3) Partnership may hold real property
(3) Own name: may sue and be sued by such name
(4) Accounting perspective: separate entity with its own assets, liabilities and financial statements
(1) Limited partners: passive role in firm management
(2) Unlimited partners: active role in management
(3) Legal person status: UK
(1) Unincorporated associations: tennis club, no separate personality; trade unions: legal person
(2) Government department: DTI, FCO, legal person
(3) Local authorities like local council: legal person
(5) Charities: if registered as company, usually limited by guarantee; else, trustees assume unlimited liability
(1) Limited company: 95%
Minimum: 1 member
End with PLC
End with Ltd, excluding UC
￡50000alloted, 1/4 paid up
No share capital limit
Quoted on Stock Exchange
Cannot be quoted
Shares must be paid in cash
Shares can be given away
6.1 Case study
(1) Salomon V Salomon & Co Ltd(1897)
No more obligation to pay.
No. He wasn’t owner of timber.
Mrs Steigmann ran pork shop, leased her next door shop to Mrs Tunstall. She wanted to occupy the shop herself. She could do so if she intended to occupy it herself. Before lawsuit, she incorporated a company, and owned all but 2 shares.
Can she end the lease?
Court of appeal decision:
No. It is the company instead of her wanting to occupy the premises.
(1) Limited liability: shareholders
(2) Continuous existence
(3) Ownership of property
(4) Contractual capacity
(5) Professional management, since 1840’s
(6) Less loyalty: shareholders
(7) Separation of ownership and management
(8) Criminal liability: danwei fanzui in China
7.1 Lifting corporate veil: prevent the abuse of limited liability
7.2 Situations of lifting corporate veil
(1) Formed for fraudulent purpose
Mr. Horne was laible. Injunction: he and the company.
Daimler Ltd v Continental Tyre & Rubber Co Ltd (1916)
Continental Tyre Co could not sue on the debt.
DHN Ltd v London Borough of TH (1976)
Bronze and DHN could be treated as one economic enterprise.
Goodwin v Birmingham City FC(1980)
Mr. Goodwin, manager of Birmingham City Football Club, five-year contract. He used his company to supply the services to the Club. The Club sacked him in year 3. He found a better job soon. His company sued the Club for full damages.
8.1 Same capacity as human being
Municipal corporations, and corporation formed by memorandum of association are usually strictly restricted in their capacity.
8.2 Ultra vires doctrine: abolished for third party protection