The fundamental question presented by the case is if Albion C. Cranson, Jr. is a partner with Real Estate Service Bureau and therefore liable for the debts incurred in purchasing typewriters form IBM. Albion C. Cranson, Jr. contended that the Real Estate Service “Bureau was a de facto corporation and that he was not personally liable for its debts “(Warner, et al., 2012, p 693). Furthermore, it is stated “The fundamental question presented by the appeal is whether an officer of a defectively incorporated association may be subjected to personal liability under the circumstances of this case” (p. 694). The decision was that Cranson was not liable for the debt because “I.B.M. is estopped to deny the corporate existence of the Bureau, we hold …show more content…
“Suppose that a company, thinking its incorporation has taken place when in fact it hasn’t met all requirements, starts up its business. What then?” (Warner, et al., 2012, p. 683). The “what then” is when a court decides that a corporation de facto has been formed if three requirements have been met. When this occurs, the state has the power to force the company to correct the step or fix the prerequisite that was not met previously. The Legal Information Institute de facto corporation as
Legal recognition of a corporation, even if the articles for incorporation are not properly filed. To be granted de facto corporation status, there must be: a relevant incorporation statute, a good faith attempt to comply with it, and evidence that the business is being run as corporation. (https://www.law.cornell.edu/wex/Limited_Liability)
In contrast corporation by estoppel holds that a corporation cannot be denied existence to disclaim or invalidate a contract that was entered in to willing. Dictionary.com defines estoppel as a bar or impediment preventing a party from asserting a fact or a claim inconsistent with a position that party previously took, either by conduct or words, especially where a representation has been relied or acted upon by others
“The idea that a corporation is a legal person with constitutional rights is, of course, a controversial one. Some commentators argue that it's bad policy. In my view, however, it is a well-settled principle of US constitutional law and justifiably so. The legislative history of the Fourteenth Amendment suggests that Congress substituted the word ''person'' for the word ''citizen'' precisely so that the provisions so affected would protect not just natural persons but also legal persons, such as corporations, from oppressive legislation.”
Rule: Generally, a corporation is not bound by contracts entered into on its behalf prior to existence. However, a corporation can attain rights and subject itself to duties with respect to preincorporation matters. A contract that
The articles of incorporation may also indicate the names and addresses of those who initially served as directors. It can also set forth the purpose
Corporations Law can be described as the interaction between directors, employees, financier, consumers and the community. Corporations law can be implied to this case as Water Corporations, a government owned company had a responsibility upon entering into a contract with Norvik Industries to provide an attention to skill when connecting the water line. To provide fully trained employees to undertake this job. This involved double checking there work.
This essay will explain the concepts of separate personality and limited liability and their significance in company law. The principle of separate personality is defined in the Companies Act 2006(CA) ; “subscribers to the memorandum, together with such other persons as may from time to time become members of the company are a body corporate by the name contained in memorandum.” This essentially means that a company is a separate legal personality to its members and therefore can itself be sued and enter into contracts. This theory was birthed into company law through the case of Salomon v Salomon and Co LTD 1872. This case involved a company entering liquidation and the unsecured creditors not being able to claim assets to compensate them. The issue in this case was whether Mr Salomon owed the money or the company did. In the end, the House of Lords held that the company was not an agent of Mr Salomon and so the debts were that of the company thus creating the “corporate Veil” .
Although courts are reluctant to hold an active shareholder liable for actions that are legally the responsibility of the corporation, even if the corporation has a single shareholder, they will often do so if the corporation was markedly noncompliant, or if holding only the corporation liable would be singularly unfair to the plaintiff. The ruling is based on common law precedents. In the US, different theories, most important "alter ego" or "instrumentality rule", attempted to create a piercing standard. Generally, the plaintiff has to prove that the incorporation was merely a formality and that the corporation neglected corporate formalities and protocols, such as voting to approve major corporate actions in the context of a duly authorized corporate meeting. This is quite often the case when a corporation facing legal liability transfers its assets and business to another corporation with the same management and shareholders. It also happens with single person corporations that are managed in a haphazard manner. As such, the veil can be pierced in both civil cases and where regulatory proceedings are taken against a shell corporation.
This paper was conducted as a Discussion Board Post assigned by Professor J. Reinke of: Liberty University, Graduate School of Business, Lynchburg, Virginia 24515.
The Uniform Computer Information Transaction Act (‘UCITA’) differs from the Uniform Commercial Code Article 2 (UCC) in that
Case 37.5: Duty of Loyalty. Edward Hellenbrand ran a comedy club known as the Comedy Cottage in Rosemont, Illinois. The business was incorporated, with Hellenbrand and his wife as the corporation’s sole shareholders. The corporation leased the premises in which the club was located. Hellenbrand hired Jay Berk as general manager of the club. Two years later, Berk was made vice present of the corporation and given 10 percent of its stock. Hellenbrand experienced health problems, and moved to Nevada, leaving Berk to manage the daily affaires of the business. Four years later, the ownership of the building where the Comedy Cottage was located changed hands. Shortly thereafter, the club’s lease on the premises expired. Hellenbrand instructed Berk to negotiate a new lease. Berk arranged a month-to-month lease, but had the lease agreement drawn up in his name instead of the corporation. When Hellenbrand learned of Berk’s move, he fired him. Berk continued to lease the building in his own name, and opened his own club, the Comedy Company, Inc., there. Hellenbrand sued Berk for an injunction to prevent Berk from leasing the building. Comedy Cottage, Inc. v. Berk, 145 III.App.3d 355, 495 N.E.2d 1006, Web 1986 III.App.Lexis 2486 (Appellate Court of Illinois).
Mr. Alleman argued that Mr. Kitson failed to retain business records for Kitson Enterprises, a corporation of which Mr. Kitson was the sole shareholder and §727(a)(3) of the Bankruptcy Code prohibits discharge when the debtor has “concealed, destroyed, mutilated, falsified, or failed to keep or preserve” records"from which the debtor's financial condition or business transactions might be ascertained…”.The bankruptcy court found that these records were not material to Mr. Kitson's financial condition because the corporation’s tax returns showed that the business made no profit, the bankruptcy court had determined that Kitson Enterprises had no assets, and Mr. Kitson had earned no money from the corporation. The Court of Appeals, therefore, agreed that the bankruptcy court was correct to conclude that the records were immaterial and discharge was not barred under §727(a)(3).
Salomon v Salomon and Co. Ltd (1897) AC 22 - when Aron Salomon sold his business to Salomon and Co. Ltd. Company, where he was still the major shareholder and some of his family was also a member. He also received a debenture as part of the payment for a secured term. But when the company has gone into liquidation during the 1890’s some argued that his
This case was prepared by Professor Stephen E. Barndt of Pacific Lutheran University. This case was edited for 5MBP 9th Edition. Copyright C 1998 and 2000 by Stephen E. Barndt. This case was published in the Business Case [ourn Summer 1998. Vol. 1. No. t. pp. 53-{}9. Reprinted hy permission,
Q1. What is the primary objective of IBM’s advertising? How have the objectives of its advertising changed over the years?
When a company is incorporated it is treated as a separate legal entity distinct from its promoters, directors, members, and employees, which confers the benefit of not being responsible for the companies debt on the members on the company. However even though a company is a separate legal entity and it attains the advantage of not laying the responsibility of company’s debt on the
The incorporated enterprises are recognized as legal persons who mean that these enterprises have a persona that is separate from that of its owners. Essentially, the personality of an incorporated company ensures that its liabilities do not extend to its owners unless in instances recognized by law. The rule on the legal personality of a company was laid in Salmon v. Salmon Co. Ltd , an English case in which the court held that the assets of a company are separate from those of the owner. To date, the rule has applied across the world and has been utterly beneficial in modeling the current business environment. However, some contentions have emerged with regards to companies that operate at an international level. Known as multinational