In such situations, the law is not completely clear as to the issues concerning the

Company's legal status and your personal liability. I have reviewed the Articles of

Incorporation of the Company and, in my opinion, pursuant to the laws of this jurisdiction,

The Company might be considered as no company at all. This is because its purported

Formation was deficient as the Articles did not comply with the relevant statutes and no

Certificate of incorporation had been issued at the time of contract. (44) ..

The issue of your personal liability primarily hinges on whether the court accepts this

View. In the case that the Company is deemed a company in fact, you will, of course, be

Insulated from liability. (45) ..

However, it might be efficacious to argue another modern development in the law. The

traditional view in this jurisdiction is that all of the "shareholders" in a would-be

Company may be held personally liable for debts incurred in the name of the company.

(46) In this context, the idea is that passive "shareholders" should not incur liability

due to the failure of the managing "shareholders" to act competently. On the other hand,

the traditional view seems to prevail perhaps due to the ease of its application. (47) ................

Judges tend to support the traditional approach as, in practice, they are likely to spend

Less time in court. I would therefore anticipate an argument endorsing the modern

Approach will not be warmly received by the court.

There is one final argument you could raise. It is based on the concept that a party cannot

Argue that a would-be company was improperly formed when at all times it dealt with the

Undertaking as if it were validly formed. (48) In my opinion this argument represents

The best possibility for you to avoid personal liability. However, its success depends on the

Evidence presented, which means that a more detailed investigation of the facts is required.

Example:

~ ABC D E F G HI

0 ========

A Specifically, it obviates the need for an in-depth factual analysis of the

shareholder's participation.

B As a result of this action, the interpretation of the clause of the original

Agreement relating to rental payments became a matter of dispute.

C However, there is an argument, increasingly supported by judges and prominent

Legal scholars, that provided the inadequacy is later cured, as it was in this

Case, the would-be company should be given the status of a company in fact at

The time of contract.

D In a case of this nature, it would operate as an injustice to permit such a

Contention to be advanced.

E If not, your chances of avoiding liability are greatly diminished.

F The Company has failed to make contractual payments despite receiving and

Using the equipment.

G However, there is a significant development in the law towards allowing claims

Only against those who actively participated in the management of such a

Company.

H That is to say, facts and circumstances may come to light which would require

Us to significantly modify our advice.

ILECpractice test

E

Part 6

Questions 49-54

Read the following extract from a reference book on contracts and the questions

Date: 2015-12-11; view: 892