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Company Law

Essay by   •  March 18, 2017  •  Case Study  •  551 Words (3 Pages)  •  533 Views

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This case involves Simon as a plaintiff and Rubber (Sounth Africa) as a defendant , and it may involve Rubber Ltd(parent)

It Involves to the legal area of Separate Legal Entity. There are 5 legal question. 1) is Rubber Ltd (South Africa) the separate legal entity? 2)is it legal to lifting the corporate veil of Rubber (South Africa) and make Rubber liable. 3)Alternative of lifting corporate veil. 4) What is the legal liability of Rubber (parent)

Company is a legal entity that is defined as artificial person which own right and liabilities for example like making contracts, taking legal action and sue or be sued. A company is a separate legal entity distinct from its member. (Salomon v Salomon and Co Ltd (1987) UK )

Lifting the cooperate veil is only applicable only when the company is used as a façade for illegal activities  (HKSAR v Leung Yat Ming (1999))or used to defraud creditors or evade legal liabilities (Gilford Motor Co. v Horne (1933)). This is an exception to treat company and shareholder as a separate but rather a single entity. Shareholders assume own unlimited responsibilities. There is a rare exceptional case if there is a parent and subsidiary relation hold between them. Group of companies treat as single economic entity. (DHN v Tower Hamlets (1976))

Regard to the legal question one, since Rubber South Africa is an incorporation. Therefore, Rubber (SA) is a separate legal entity distinct from its parent. Regarding to question two, as Rubber SA is not set up for committing any illegal activities and/or legal liabilities. Therefore, it is unlikely that the court will lift the cooperate veil and deem Rubber parent and Rubber SA as a single entity. It means that Simon will sue Rubber SA for his health problem. In addition, Rubber parent will not be liable party in this case.

However, in exceptional case, if the court find that the parent and subsidiary relationship exist, like Rubber parent and Rubber SA, the court will lift the cooperate veil and treat Rubber parent and Rubber SA as single entity, according to the case DHN v Tower Hamlets. In this case Rubber parent and Rubber SA will be liable to the Simon’s claim.

Regarding to legal question three, there is an alternative to the cooperate veil. Since Rubber parent control the health policy and also the directors are the same in both Rubber parent and Rubber SA. In this case, Rubber SA own the duty of care to Simon. It seems that Rubber parent do not control the safety policy of Rubber SA tightly. It breaches the duty of care of Rubber parent. The company negligent in safety policy has committed the tort of negligence. According to the case Chandler v Cape plc, the fact is similar in Simon’s case. If the tort of negligence is established, both Rubber SA and Rubber parent is liable for Simon’s claim.

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