Professional Documents
Culture Documents
Prepared By: Group 3 1. Nirmal Aryal 2. Richa Joshi 3. Alok Kumar Patel 4. Deena Pradhan 5. Prashanta Lal Shrestha
EMBA Group 3
9/10/2013
What is Company ?
EMBA Group 3
9/10/2013
Introduction
Company derived from Latin word
Com : with or together Panis: bread Coming together for bread or meals
Ordinary sense
An association or group of persons of common minded people Grouped together for common goal, for promoting business, research, trade, or charity
EMBA Group 3
9/10/2013
Introduction (Contd)
Nepalese Companies Act, 2063
Sec. 2(a) defines Company as, Company incorporated under this Act
Private, Public, Holding, Subsidiary, Foreign, Listed, and Company not distributing profits.
EMBA Group 3
9/10/2013
Characteristics of Company
EMBA Group 3
9/10/2013
Perpetual Succession
Company never dies
EMBA Group 3
9/10/2013
EMBA Group 3
9/10/2013
Corporate Veil
Definition and Corporate Veil Understanding of
A corporate veil or the corporate shield is a term used to describe the separation of a corporation from its owners. As a separate entity, the corporation or the limited liability company is set up or formed to shield the owner of the corporation from personal liability or protect your personal assets from the business creditors claims
EMBA Group 3
9/10/2013
EMBA Group 3
9/10/2013
10
EMBA Group 3
9/10/2013
11
At the time of liquidation of the company, the creditors whose claims could not be paid in full , tried to press their claim against Mr. Salomon, on the basis that he and the company was actually the same one entity.
The lord justices held that the company was a different legal person from Mr. Salomon, and the creditor could not sue Mr. Salmon The case Salmon Vs Salmon establish the principle that the company is a separate legal person from its member/shareholders. This principle was also know as the veil of incorporation. Once the company has been duly incorporated, the court usually do not look behind the veil to find out why the company was formed or who really controls it.
EMBA Group 3
9/10/2013
12
Corporate Veil
Alter Ego Doctrine : A doctrine by which a court of law holds individual shareholders liable for a corporation's debts if the corporation is deemed to be nothing more than an "alter ego" of the corporation's owners.
The alter ego doctrine is also known as the instrumentality rule because the corporation becomes an instrument for the personal advantage of its parent corporation, stockholders, directors, or officers. When a court applies it, the court is said to pierce the corporate veil.
EMBA Group 3
9/10/2013
13
EMBA Group 3
9/10/2013
14
Doctrine laid down in Salomon V. Salomon & Co. Ltd has to be watched carefully Concept of Piercing the veil is much developed in US than in UK
EMBA Group 3
9/10/2013
15
EMBA Group 3
9/10/2013
16
EMBA Group 3
9/10/2013
17
Categories/ Types:
1. 2. 3. 4. Peeping behind the veil Penetrating the veil Extending the veil Ignoring the veil
EMBA Group 3
9/10/2013
18
Only after this, the courts decide what to do with it, i.e., whether to be satisfied with it or to more serious repercussions Can result to advantage to the company
Case scenario: Shareholders of a company was the trustees of a charitable trust. It was held that the company could claim to be exempt from paying a development charge because of this charitable status.
EMBA Group 3
9/10/2013
19
EMBA Group 3
9/10/2013
20
EMBA Group 3
9/10/2013
21
EMBA Group 3
9/10/2013
22
EMBA Group 3
9/10/2013
23
EMBA Group 3
9/10/2013
24
EMBA Group 3
9/10/2013
25
EMBA Group 3
9/10/2013
26
EMBA Group 3
9/10/2013
27
EMBA Group 3
9/10/2013
28
Nepalese Perspective
Sec. 24 (3)
False information published on Prospectus
maliciously or deliberately any person sustains any loss or damage by reason of his/her subscription of securities on the faith of that prospectus, the directors who have signed that prospectus shall be personally liable to pay compensation for the actual loss or damage so sustained.
EMBA Group 3
9/10/2013
29
EMBA Group 3
9/10/2013
30
EMBA Group 3
9/10/2013
31
Sec. 95(4)
Director acting beyond his jurisdiction
Loss or damage caused to the company Company may recover it.
EMBA Group 3
9/10/2013
32
Any amount or benefit derived from such transaction Returned to the company If any loss or damage, pay compensation.
EMBA Group 3
9/10/2013
33
Sec. 102
False statement on general meeting or encourage to distribute dividend higher than that of distributable profit
Officer personally liable for such act.
EMBA Group 3
9/10/2013
34
EMBA Group 3
9/10/2013
35
EMBA Group 3
9/10/2013
36
Conclusion
Court will not allow corporate form to be used:
For the purpose of fraud or dishonesty For the express purpose of depriving claimants ability to exercise his/her lawful rights As a mere device of sham or deceit to evade contractual or other legal obligations As a mere faade to conceal true facts Where it is established that there has been abuse or dishonesty of the corporate form.
EMBA Group 3
9/10/2013
37
Conclusion (Contd.)
Act of lifting corporate veil, one of the most controversial subjects in corporate law. Courts generally unwilling Rationale
Constant recognition of a corporate personality promotes stability as otherwise investors and business people would be unable to predict when the corporate form would be respected.
38
EMBA Group 3 9/10/2013
Thank You