A was employed as an office manager in a company. He had arrears of his 3 month’s salary
and he filed a suit against the Managing Director of the company for the recovery of arrears of
his salary. Will he succeed in getting his arrears? Give reasons. Under what circumstances the
court may disregard the separate legal entity of a company.
Answers
Answer:
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Yes, due to different legal position he will be able to file suit against getting his dues
Explanation:
Separate legal entity
The most important consequence of incorporation is that a company is treated as an individual. It has its own rights and rights are different from the rights of its owners.
Limited liability
When shareholders buy shares from a certain company and pay a fixed percentage amount of the shares instead of paying the full amount, and when the company is dissolved, the shareholders are liable to pay the remaining amount. If a shareholder has paid the full amount, he is not liable to pay any amount on the dissolution of the company. Therefore, shareholders have limited liability.
Perpetual succession
It refers to the existence of any organization notwithstanding the death, bankruptcy, insanity, change in membership of any member from the business. In such cases, the shares are transferred to the next generation.
Property ownership
Some assets may be owned by a company. These assets remain owned by the companies regardless of their shareholders and members.