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Hi, need to submit a 1250 words essay on the topic Corps Mini Essays.Therefore when the Company was wound up during financial difficulties, the Court absolved Salomon of liability for debts - despite
Hi, need to submit a 1250 words essay on the topic Corps Mini Essays.
Therefore when the Company was wound up during financial difficulties, the Court absolved Salomon of liability for debts - despite management arrangements being the same before and after incorporation - on the basis of the separate legal entity doctrine3. While the case of Ebrahimi4 also involved an arrangement where a partnership was reconstituted into a corporation,
the issue of winding up was dealt with in a different manner than the Salomon case, and cannot be reconciled with the strictly corporation-centered approach that was used in Salomon. The Ebrahimi case made the partner Nazar liable for potential losses to Mr. Ebrahimi whose equal partnership position was displaced by an unequal bargaining share accorded to Mr. Nazar in the corporation through transfer of 200 shares to Mr. Nazar’s son. Therefore the decision in this case applied the principles of partnership law, invoking the good faith and trust that partners owe each other, by making the Directors liable and permitting winding up of the Company in the interest of a just and equitable solution - disregarding the separate legal identity of the corporation which should have absolved Mr. Nazar of liability. This was essential in the interests of justice and equity to Mr. Ebrahimi.
Corporations law and partnership law are currently separate. However, current amendments to the Partnership Act of 1892 (NSW) have made provision for LLP and ILPs, with the facility of limited liability being extended in these cases to promote innovation and risk taking. While this could address the limited use of partnerships due to their inability to restrict liability5, it also allows for benefits to be gleaned by foreign investors and large entrepreneurs, promoting a capitalistic structure that may not necessarily be beneficial to Australian interests. If the limited liability benefits of a corporation are to be extended to small
