[azmacma]

The case :-
Sal started a business in manufacturing shoes in 2000. The business has prospered and Sal wanted to expand the business. He incorporated a company, Sal & Sons Sdn. Bhd. The
Company started with a paid up capital of RM100, 000. He held 99,998 shares of RM1 each,
Which he paid for by setting-off against the price of the business which he had transferred to the company. His wife and son both held 1 share each in the company.
The company soon hit financial problems due to economic downturn. The company needed further capital to remain solvent. He borrowed money from banks. However, the problem still continues. Sal lent money to the company, secured by debentures over the company’s loating assets. Even this was not enough to prevent the company from sliding into insolvency. A week before the company went into liquidation, Sal exercised his rights under the debenture to take possession over some of the company’s assets.
The company’s other creditors argued that Sal, as the “real” owner of the business, cannot also be a lender. They argued that the debenture is a fraud against the creditors. They also argued that Sal and the company are one and the same, as he owns the majority shares and his wife and son are essentially his nominees. Therefore the company is essentially a one-man company, which is against the Companies Act 1965.

Based on the above facts of the case, discuss the following:
a) i. Who is the real owner of the business;

ii. Whether Sal as a shareholder can also be a creditor to the company.

b) Circumstances in which the veil of incorporation may be lifted.

[excon]

Hello:

I answered this question once. Maybe you can look it up. Oh, yeah. It's a homework question...

excon