Company law problem questions portfolio: Various questions and answers
- Corporate personality
- Capital maintenance
- Directors duties
- Directors duties as a result of the companies act 2006
- Articles of association and share capital
- Priority of charges on liquidation and floating charges
The factual scenario raises issues regarding enforceability of contract and in order to advise the parties, it will be necessary to evaluate the company law requirements regarding authority.
With regard to the property purchase, the issue arises as to whether this forms part of the Fresher Limited's assets. Whilst Barbara and Angela had entered into an agreement to incorporate a company, the company was not incorporated until December 2007 and the Vinacre plot was purchased in August 2007 in Angela's sole name. At this point, Angela and Barbara had a contractual agreement to set up a company and as the company had not been incorporated, the land will belong to Angela.
With regard to Peter's rights regarding the supply of the grape press, the central issue arises as to who is liable for the breach under the executory contract. Firstly, Angela explained to Peter that she was forming a company called Wino Limited and purported to be entering into the contract with Peter on behalf of the Wino Company.
[...] However, group company structures often create problems of effective regulation and accountability, yet existing principles of law have arguably been stretched to ignore separate legal personality within a group. For example, large corporate groups commonly operate as an MNE, which are effectively, a number of individually incorporated companies related to each other through common ownership and policy control in various jurisdictions. From a plaintiff's perspective, they will often be in a better position if legal action is instituted against a parent company as opposed to the subsidiary. [...]
[...] Cases and Materials in Company Law. 8th Edition Oxford University Press. Companies Act 1985 Insolvency Act 1986 Companies Act 1989 Companies Act 2006 www.companieshouse.gov.uk www.opsi.gov.uk G Morse (2007) Palmer's Company Law: Annotated Guide to the Companies Act 2006. Sweet & Maxwell at p.1 Section 40(2) of the CA 2006.  AC 22. Peter T Muchlinski., (2007). Multinational Enterprises and the Law. 2nd Edition Oxford University Press at p.3 Peter T Muchlinski (2007) ibid at 7. Peter Nygh (2002). The liability of Multinational Corporations for the Torts of their subsidiaries. [...]
[...] Alternatively, if the book debt is an equitable charge for future book debts then it will constitute an equitable charge, and as such the rule in Dearle v Hallwill apply, which provides that where amongst equitable charges the two equities are equal, the first in time will prevail. In this scenario, the legal charge of 15th February would prevail in liquidation. In summary, if the book debt is a legal charge, it will rank in priority in liquidation. Secondly, the charge of 15th February will have priority over the floating charge, which will rank last as an equitable charge. [...]