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Company Law
T1-Legal Entity of A
Company

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Introduction

The Companies Act 1965 is the principal

legislation governing the formation and operation
of companies in Malaysia
The Act enables an association of persons to form
various types of corporate organizations known as
registered companies
This Act also provides facilities for the
incorporation of companies, its constitution, its
relation with members and creditors, management
and winding-up
Registrar Of Companies enforces and administers
the CA 1965
Every company must register with ROC before
conducting any business activity
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Incorporation

A company is a legal entity that is separate and

distinct from its members and shareholders
When a company is formed, it is said to have
become incorporated
Has a separate legal personality, separate from
its members
(Salomon v Salomon and Co)- Salomon had been
in the shoe leather trade for some time. He then
formed a company and sold his business to it.
Payment was in the form of cash, debentures. The
company wound up and it was argued that
Salomon and the company were the same person.
The HOL held that it was properly constituted and
in law the company was a distinct legal person
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Effect of Incorporation

Fundamental consequences of separate legal

personality:
Limited liability companies are liable without limit for
their own debts
Business Property property of the company is
distinguished from that of its members
(Macaura v Northern Assurance)- the P owned a timber
estate. He formed a one-man company and
transferred the estate and continued to insure it in his
name. when the timber was lost in a fire, it was held
that he couldn't claim the insurance as the timber
belonged to the company
Perpetual succession continuity of the company is
not affected by the death or incapacity of its members
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Cont

Contractual capacity in its own right

and can sue or be sued in its own name
Transferable membership incorporation
greatly facilitates the transfer of
members interests and shares
Increased borrowing powers
unincorporated traders or partnerships
would find it easier to borrow money
because of their personal liability
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Veil of Incorporation

In some exceptional cases the company is

identified with its members or directors
The principle that a company is a person separate
from its members and directors can produce
unsatisfactory results in certain circumstances
That is why there are some situations where the
veil was lifted
There are 2 types of veil lifting:
Judicial lifting
Statutory lifting

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Judicial Lifting

Public interest: (Daimler Co Ltd v Continental Tyre

& Rubber)- the D company was incorporated in
England, but all its shareholders except one and
all its directors were German residents in
Germany. When war broke out between England
and Germany, it commenced an action for
payment of a trade debt. The solicitors of the D
company issued the writ upon the instructions of
the secretary of the company. The P contended
that the company was an alien enemy company
and payment of the debt would amount to trading
with the enemy. It was also contended that the
action had been commenced without the
authority of the company. The COA nonetheless
decided for the D company
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Evasion of Obligation

(Gilford Motor v Horne)- Mr. Horne was an exemployee of The Gilford Motor Co and his
employment contract provided that he could
not solicit the customers of the company. In
order to defeat this he incorporated a limited
company in his wife's name and solicited the
customers of the company. The company
brought an action against him. The COA
regarded it as a mere sham to cloak his
wrongdoings
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Fraud

(Jones v Lipman)- a man contracted

to sell his land and later changed his
mind. In order to avoid an order of
specific performance, he transferred
his property to a company. The
courts awarded specific performance
both against Mr.Lipman and the
company
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Agency

(Smith, Stone & Knight v Birmingham Co)SSK owned some land, and a subsidiary
company operated on this land. BC issued a
compulsory purchase order on this land. Any
company which owned the land would be
paid for it, and would compensate any owner
for the business they ran on the land. Since
the subsidiary company did not own the
land, BC claimed they were entitled to no
compensation. The courts held that the
subsidiary company was an agent and BC
must pay compensation
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Group Enterprise

(DHN Food Distributors v Tower

Hamlets)-A subsidiary company of
DHN owned land which the Ds
issued a compulsory purchase order
on. The courts held that DHN was
able to claim compensation because
it and its subsidiary were a single
economic unit
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Statutory Lifting

1.
2.

Membership numbers: s 36 CA 1965

Trading:
Fraudulent (s.304(1)
Wrongful (s.303(3)
Dividend payments: s.365(2)
Taxation: s.140(1)
Misdescription: s. 121(2)
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