Level 10 Number 11 York Street, Sydney
Mr. Ben and Ms. Lilian
Beneli Farming Pty Ltd
Number xx xxx Street, Sydney
Dear Mr. Ben and Ms. Lilian:
In the accordance with your previous statement of your wills, that you want to leave the company to your three adult children, there are some advices for you.
Firstly, two issues will be explained in this letter: the nature of a company; and the thing you actually own in the company as members.
Secondly, some relevant legal principles will be provided.
For the first issue, the nature of company will be defined.
Under the Corporation Act 2001 (Cth), a company is defined as an artificial, abstract legal entity with its own rights and liabilities. A company is an association of individuals, and is one type of corporation. There are three main characteristics of a company: 1. Separate legal entity 2. Limited liability 3. Legal Capacity
1. Separate legal entity The principle of separate legal entity of a company was established by the case of Salomon v Salomon & Co. Ltd. A company is regarded as an entity which is separate and distinct from its shareholders or members and directors or officers. A company may have the same rights and obligations in law as an individual. A company can have its own assets, liabilities and contracts. The corporate veil can be lifted between the company and members or directors. The change of company’s shareholders, members or directors may not affect the company’s state.
2. Limited liability A company’s liability of members is limited. Company’s shareholders or members are not personal liable for the company’s debts.
3. Legal Capacity As a company is a separate legal entity, company owns the legal capacity to do things which include suing or being sued; and entering into contracts in the name of the company.