Law Cases Study

Q16
Disadvantages of limited liability
  Transfers risk of company’s insolvency to creditors.
  Impact varies depending on type of creditor
Compare secured and unsecured creditors
Company employees as creditors
Victims of a company’s negligence(tort creditors)
  ASIC advice on steps creditors should take to reduce their risk.

Advantages of limited liability
  Encourages investment in risky businesses
  Reduces need for investors to monitor managers- not in proprietary company
  Facilitates diversified share portfolios- not in proprietary company (no market
  for shares)
  Essential for efficient operation of stock markets
Limited liability is separated entity from its shareholders, owners, and creditors. So when the company becomes insolvent, the owners, shareholders are not liable from the debt company owed.
However, small, proprietary company is not to obtain the benefits of limited liability, but to minimize income tax.

Q17.   - not complete
As held in Salomon case, a company is separated legal entity from its owner. Therefore, although the company becomes insolvent, the owner of company is not liable for the debt of company

Q18. Salomon case, life veil of incorporate (Frud, avoidance of obligation) - not complete       same with past exam

As the principle of Salomon case, a company is separated entity. However, there are various statutory provisions which lift veil of the company. By the common law, the corporate veil would be lifted, if there is fraud and avoidance of legal obligations. (如果涉及到directors的疏忽，如past exam 里的例子，还要提involvement in directors’ breach of dutys180(1) Green v Bestobell industries   Ltd.
The company cannot rely on the principle of Salomon,

as held Creasey v Breachwood Motors Ltd, Plasto Australia Ltd   was liable for former company’s, Plasto Ltd, debt to creditors.
as in Re Darby, if it was set up as a dummy company虚假的，傀儡的 for the purpose of perpetrating a fraud. Plasto Ltd   is liable

Q19. Salomon...