CONCEPTS OF COMPANY LAW

The main purposes of company law are:

i)            To protect the creditors, and

ii)           To protect the investors of the company.

+ there are several fundamental legal concepts, pertaining to company law. They are:

a)  Legal Personality

As we have mentioned in the previous post, a limited company is an artificial person and is regarded by law as having a separate legal entity distinct from its members (Salomon v Salomon & Co Ltd (1987)). A limited company has a legal capacity to make contracts, take legal action, own property, sue or be sued as a natural person.

b)  Perpetual Succession

A company does not automatically dissolve with the death or bankruptcy of the owner or any of the partners. It will continue in existence until it is dissolved by a court order or by liquidation, e.g. Jardine Matheson Group over 100 years.

c)   Limited Liability

It refers to the concept that members of a limited company have a limited liability to the extent of any amount unpaid on their shares.

d)  Restriction of Business Activities

The business or activities of a company is restricted or regulated or regulated by its memorandum and articles of association, the Companies Ordinance, etc.