Case study When a company attempts to pass up and evade legal obligations.

The court has the right to disregard any company when any of the corporate personality tries to avoid and evade procedural legal obligations, then the court has all the rights to identify its members or in other words, the court has all the rights to hold the multiple owners and shareholders with unlimited liability.

·         When a company put itself upfront for its character to be determined:

If a company has doubts that its being run by some enemy from any other sector or region or if the company thinks that it has lost control due to any certain reason, then the court can ignore the corporate narrative which is exactly opposite to its law and at its discretion, the court can examine the persons who states their real authorization over the company or who call themselves the real owners. This factor also leads to identifying enemy or alien enemies as such conditions leads to going against policies of public which is why it is always recommended that the courts should allow concealing of the identification of the people who are the real enemies trying to hide with corporate veil. This condition implies even if the company has its incorporations in a same country with the enemy country.

·         When a potential fraud is suspected:

There are chances that the corporate entity might get disregarded when a company tries to use veil for wrong purposes like routing creditor’s claims or using fraud means.

·         When the revenue interest needs to be protected:

The courts can pierce the veil if a company tries to use corporate veil for protecting its interest and for the purpose to avoid tax obligations. Tax evasion allows the court to break through the corporate veil and it is considered highly unethical if a company tries to use corporate veil for the sole purpose of getting rid of taxes and tries to safeguard the revenue and interests. Whereas, the shareholders can yet consider themselves related to the company depending upon their own accord.

·         When a company acts like an agent:

Doubt situation arises when a company may start acting like an agent or an outsourced trustee for another company, in those situations and circumstances, court demeans the individuality of the company and then can ignore the corporate veil to identify with the members of the company.

·         When a company tries to avoid welfare legislation:

This factor is considered to be as wrong as avoidance of tax obligations and it is as common as that and this allows the court and rather becomes its duty to lift the veil in such situations to reach to the true affairs of state and to reach out to the companies hiding themselves behind smoke screens.

These are some of the conditions when the court can lift the corporate veil to regulate the real and authorized companies and to keep the corporation sector smooth. (Anon., 2020)

Many companies tend to adopt liberal corporate laws just for the sake of facilitating development that too in the perspective of other jurisdictions. As Salvador had purchased the shop solely for himself and at that time, none of the other owners agreed to him with his decision of buying the shop so it’s evident that he is the sole owner of that particular shop and no one else has the ownership neither they can claim for it and this is the reason Salvador started contemplating over legal proceedings. From time to time, companies go through a number of corporate alternatives which includes factors like ownership rules, limited partnership, joint stock and capital and business trust and especially when there is no other means of raising funds or capital for the capital than bringing corporation laws. Corporate power cannot be given very often rather there are rare chances of that which leads to general laws like literary corporations or ecclesiastical with general incorporation. The four owners can use the new legislatures that lead to considerable extension of the corporate company or enterprise when it comes to business that too with restraints and conditions. They can also use the revolutionized corporate chartering that aims to bring equality and smacks one person’s claim of ownership for more capital investments.  Corporate chartering also leads to increased taxes whereas a company is merely considered an association for business practices no matter how many owners it has. Chintz Arts Supplies is a joint stock company formed as partnerships among five friends under the seal of an agreement that restitutes the sharing of capital and interest and the division of undertakings into profitable shares that are transferable too by the original owners as well as partners. This is not considered to be a typical form of partnership as it consists of many members which makes the articles of agreement to be generally different. These types of partnerships are definitely not suitable for large associations and as Chintzs Arts Supplies has grown into a successful company with three running stores and online network as well so the arousal of such conflicts was expected. An important provision for joint stock lies in section 25 of the Act that clearly exempts trade in partnership that might have been lawfully done. The only way for all of these four owners is to form association for partnership and trust for equitable interests and this will be called the deed of settlement which allows the stock to be divided into specifies number of shares and the proportion of deed can vary with specifies majority and as per the delegation of committee directors leading to the shop’s property to be vested in separate body of trustees and that would include all the owners of the business. The deed of settlement allows the owners to sue even their own partner for the claims against corporation and membership but in the case of Chintz Arts Supplies, it is an undeniable fact that Salvador is the sole owner of this particular located shop as he was the one who bought it with all of his own capital while other owners disagreed with him. According to law, either they all should pay their contribution or they all let him be the sole owner for that particular regional shop which turned out to be a huge success. (Cheng-Han, 2019)

Q3)

Jackson objects the share issues as all other owners have proposed to remove him from board as he denied investing in the capital for further growth because he does not have the capital as he bought a new house recently. Such kind of unjust provision can only happen to have come across shareholders and not any other third party dealing. This leads to limited liability dealing which can only be achieved if the victimized owner takes legal proceedings to elaborate his financial status to the court and actual reasons why he is unable to invest in the capital for the time being. The other four owners do not hold any right to take him away from board just because he does not have consent in investing further for growth. This implies on the common stock of the company and is not only about the individual assets of shareholders or the individual owner of Chintz Arts Supplies Ltd. Many insurance cases appear in such context with policy holders bounding to negotiate with the terms of deed settlement of the companies. The advantage of joint-stock company is that the promoters can secure their supreme capital more feasibly in order to make financial undertakings which can give Jackson the opportunity of making investment in future and making trade capital available that might not get employed anywhere otherwise. But negligence of other owners can always ruin one owner’s career and share in the company. Monopoly rights what Jackson needs in this situation by clearly demonstrating his financial instability to the court and ask for fair justice that how the other owners can simply remove him from board as one does not have control over the personal expenses while he had no idea that others were planning to make much more investments in the stock for the sake of growth. Limited liability was not a part of 1844 Act because of its reservations against extended forms of limited liability as many people oppose it for the joint stock companies having multiple owners just like Chintz Arts Supplies as according to the juristic point of view, the company is in itself a legal organization distinct of its multiple owners and what they behave like. There are always some of the narrow and some broader expectations that can ruin the companies the overall status in the industry. But Jackson here has all the right to stand against what other owners are planning to do to him as he has not committed any fraudulent case neither has he made any conflict for the company’s success.