Sam's Liability for SamCom Ltd's Obligations Essay

Sams Liability for SamCom Ltds Obligations - Essay ExamplePromoters also have a fiducial duty to the shareholders, as he stands in the alike position as a company director. As such, Sam cannot make a secret profit and he must have full manifestation with any transaction that he takes while he is the promoter of the company. He also cannot serve himself at the expense of the shareholders (Erlanger v New Sombrero Phosphate Co (1878) 3 App Cas 1218). The facts state that the business that became SamCom Ltd was valued at ?50,000, yet the business was sold to SamCom Ltd for ?90,000. This might be a breach of Sams fiduciary duty to his shareholders (Cahn & McDonald, 2010), if he did not disclose that his company was worth substantially less than what SamCom Ltd. paid for it. The solicitor who Sam hired to take the necessary go for incorporation, however, is not considered a promoter, as Re Great Wheal Polgooth Co. Ltd. (1883) 53 LJ Ch 42 established that persons who are acting as a prof essional competency at the behest of the promoter, such as solicitors, do not become promoters. As for the contract to buy the silicon chips for ?5,000, this is a pre-incorporation contract, and the company would not be flinch on this contract. This was established in the fount of Kelner v Baxter (1866) LR 2 CP 174, which established that pre-incorporation contracts do not bind the company. ... was incorporated, so the company would not be echo by this contract. Separate Personality of the Company and Lifting the Veil On the facts, it may be assumed that this is a closely held corporation. This does not, however, negate the separate legal disposition of SamCom Ltd. According to established English law, a corporation is a separate legal personality who has the ability to sue and be sued and hold debts in its cognomen (Wild & Weinstein, 2011). Moreover, the fact that only one person is a corporation does not defeat the separate legal personality of the corporation. This was esta blished in the seminal case of Salomon v. Salomon & Co. 1897 AC 22. In this case, Salomon made leather boots, and he was basically the sole bona fide shareholder of his company. The company went into liquidation, and the creditors attempted to make Salomon personally presumable for the companys debts. The Salomon court held that, as long as a company is a legal entity, then the business, and the debts, belongs to the company, not to the shareholder(s). In this case, the lower courts had attempted to say that Salomon himself was liable, because he was the only arouse shareholder the other shareholders were his family members, and they were disinterested. The House of Lords held, however, that this does not defeat the claim of corporate personality. Therefore, this case may be applied to the facts, in that SamCom Ltd. is a closely held corporation, but, as per Salomon, the corporation would still have a separate legal personality and Salomon further demonstrated that corporations, because they are separate legal entities, will be liable for the debts incurred by