Incorporation (wk 1)

Question 1

Principal and Agent in a company?

Answer 1

Principal would be the shareholders and Agent is the management of company.

Question 2

off-the-shelf companies?

Answer 2

when the corporation process has been completed, just need to resign directors and transfer the shares. (buy a company that already exists)

Question 3

what is Agency?

Answer 3

when one person acts on behalf of another, allowing them to enter contracts with 3rd parties. (fiduciary relationship)

Question 4

Duteis and Rights of an Agent?

Answer 4

Duties:
- act in person
- to act in good faith
- obey instructions
Rights:
- right to lien (hold onto property)
- remuneration (get paid)
- right of relief (expenses paid for)

Question 5

Incorporation process?

Answer 5

when a business creates a DISTINCT legal entity, seperate from its owners. Giving the company the protectoin from liability, and can enter contracts.
Have to select an appropriate business structure, submit legal docs, appoint directors and comply with tax regulations.

Question 6

Salomon v Salomon A. & Co. Ltd
(1897)

Answer 6

Mr Salomon turned his sole trader business into a ltd, by selling shares to company. Making him and his family subscribers of the company.

Later on, the business became INSOLVENT and liquidators argued that the company is an Agent of Mr Salomon and should personally be liable for its debts.

House of Lords stated, once a company is LEGALLY INCORPORATED, it becomes a seperate legal entity from its shareholders. Therefore, Mr Salomon was not liable for the company’s debts.