This article tends to provide the legal status of company itself when investors need a Hong Kong offshore company formation, irrespective of legal entities of members, directors, secretaries and other executive office holders. It also intends to throw some light on the member’s liabilities their Hong Kong offshore company formation.
General views on the Legality and discussion on Company’s Doctrine
Earlier, it was a common view that Company is nothing or said another way like open Hong Kong offshore company formation was unreal, but an identity given to every member of it and serves the common goal of all of its members but gradually with the passage of time, the unprecedented view conferring acceptance of company’s legal entity, started to evolve and now, one major fundamental concept of Company Law constitutes of Doctrine of Separate legal entity of a company. This doctrine regards company a single person and thus it has been established that company itself too, holds own rules and liabilities and there is consensus on the view that Company is a separate legal person independent of company’s member.
Referring to the decision of the House of Lords in Salomon v Salomon and Co. Ltd. There was uniformity in acceptance of the view that Company is a separate entity. In the case, Lord Macnaghten, in his note said:
Company is lawfully not an agent of any member of it or trustee but itself has the legal power and separate entity, nor subscribers are liable to sabotage its legal entity, except to the extent and manner, provisioned in the Act.
Law even protects the legal sanctity of company even if it is a one-member company that is Company is being operated by one person. House of Lords, in the case of Salomon v Salomon and Co. Ltd. Rejected the stance that companies legislation is not meant for small business and emphasised that subscriber is not required to inject any amount more than what he or she entitled to pay against his or her total shares, In this case they rejected the myth that company was the alias of Salomon and clarified that once the requirements for incorporation are met and company is legally incorporated, it has legal existence of its own with liabilities and rights of its own thus Salomon is not liable for company’s debt.
Rights, Power, Obligations and Liabilities of the Company
Pertaining to the legal rights affirmed to the company, company has all rights, power, capacity and privileges of a common person and as it being the separate legal entity, it holds the right to contract with any one. This implies that company can sign contract with anyone even the members of its own company, it can best be understood with reference to the Lee v Lee’s Air Farming Ltd. Where Mr. Lee was the governing director and controlling shareholder of the company, where he signed contract with the company, he controls, and worked as Chief Pilot and received wages for doing so. During his duty, airplane crashed, and he died. After his death, his wife sought financial compensation in compliance with company’s law, where in case of accidental death, company is liable to pay deceased employee financial compensation. Matter were brought before The Privy Council (New Zealand’s Court of Appeal) and council held that Mr. Lee’s contract with his company has the legal standing and company was liable to enter in any contract, even with its members, So, he signed contract in a different capacity that is, providing services as chief pilot and receiving wages against this position while being the governing director at the same time too.
As a legal entity, Company can own property or any land and what would be owned by the company, its members or employees would not have any share in it nor they claim this to be theirs and thus not liable to own that property, land or whatsoever. In Macaura v Northern Assurance Co. Ltd, where there was timber on land was owned by the company and was insured against the name of one of shareholder, it was established in this case that shareholder is not liable to claim the policy because item insured, is owned by company and not by shareholder. Lord Buckmaster stated:
“no shareholder has any right of claim over the property owned by company, in any capacity, for he has no legal interest in it”
In another matter brought up before the Hong Kong’s court in Good Profit Development Ltd v Leung Hoi it was seen that company’s substantial assets consisted of real property and two of company’s shareholders wanted to sell these property to the person, who then seek legal assistance from the court and became the plaintiff and sued these two directors and prayed before court that agreement be enforced between him and directors so sell all shares to him. Factually, shareholders set up company just to acquire property, this does not mean the company was an “alter ego” for the shareholders, principally it came out in that case that, just because members do not have legal right over the company’s property this does not mean that company can never be regarded as trustee for its members, exception may exist, where for the specific circumstances, trust be established where the company holds on trust for one or more particular members.
Company can also be subjected to the legal obligations or liable in tort, moreover it is liable on contracts for the company.
What are member’s liability in contrast with the Company’s liability
Depending on the category for which company is registered under Cap.622, thus liability of members for the company’s debts depends entirely on the category for which it is registered. Limited liability doctrine is distinct from the sanctity of company being a separate legal entity.
For the companies limited by share, members are liable to pay any balance on their payment subsequent to the sum of their shares price in case company’s assets are not enough to pay to its creditors, however in case of full payment and zero balance in shares payment then member may lose only the amount in case company becomes bankrupt and no payment be needed to pay from his or her side.
For the company’s limited by guarantee, member is liable, only to pay the maximum of amount, he or she stated in articles, in case of freezing of company’s assets.
Keywords:
open offshore company in Hong Kong
hong kong offshore company formation
https://www.onlinecompanyregister.com/hk-company-law/one-issue-for-open-offshore-company-in-hong-kong
