DEPARTMENT OF LAW

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NAME : ETHAN MUKAMBA MULONGA

STUDENT ID : 22210514
PROGRAM : BACHELORS OF LAW (LLB)
COURSE : BUSINESS ASSOCIATIONS
COURSE CODE : LL (331)
LECTURER : Ms. Subizyo Gondwe
YEAR/ SEMESTER : THIRD (3) YEAR
ASSINGMENT NUMBER : two (2)
CONTACTS : 0973986384
EMAIL : ethemmulonga@gmail.com

QUESTION 1
(a).Facts of the Case:

In the case of Salomon v Salomon (1897) AC 22, Mr. Salomon had operated a
successful leather business as a sole trader for many years. He then incorporated
his business into a company called Salomon & Co. Ltd., with himself, his wife, and
five of his children as shareholders. Mr. Salomon held the majority of shares in the
company and was also its main creditor by virtue of a debenture secured on the
company's assets.

When the company later faced financial difficulties and went into liquidation, its
creditors sought to hold Mr. Salomon personally liable for the debts of the company.
The key issue in the case was whether the corporate veil could be lifted to disregard
the separate legal personality of the company and impose liability on Mr. Salomon as
an individual.

Main Principles Established:

1.Separate Legal Personality: The most significant principle established in

Salomon v Salomon is the concept of separate legal personality. The House of Lords
affirmed that a company is a distinct legal entity from its shareholders, directors, and
officers. This means that a company has its own rights, obligations, and liabilities
independent of those of its members. In this case, Mr. Salomon was not personally
responsible for the debts of the company, as it was a separate legal entity.

2.Limited Liability: Another important principle derived from the case is limited
liability. Shareholders in a limited liability company are generally not personally liable
for the company's debts beyond their investment in the company. By incorporating
his business, Mr. Salomon limited his liability to the amount invested in the
company's shares and was shielded from personal responsibility for the company's
debts.

3.Corporate Veil: The case also established the principle that the court will not
ordinarily pierce the corporate veil to look behind the separate legal personality of a
company and hold its members liable for the company's obligations. The courts will
only do so in exceptional circumstances where there is evidence of fraud, improper
conduct, or to prevent the abuse of the corporate form.

4. Salomon as a Precedent: Salomon v Salomon remains a landmark case in

company law and forms the basis of the modern corporation as a separate legal
entity. It underpins the corporate structure and governs the relationships between
companies and their shareholders, providing certainty and protection for investors
while promoting commercial activity.
(b). Essential Elements Required to Create a Business Trust:
1.Trustee: A business trust must have a trustee who holds legal title to the trust
property and manages the affairs of the trust on behalf of the beneficiaries. The
trustee has a fiduciary duty to act in the best interests of the beneficiaries and ensure
the proper administration of the trust.

2. Beneficiaries: The trust must identify one or more beneficiaries who are entitled to
benefit from the trust property or income. The beneficiaries can be individuals,
organizations, or even other trusts. The rights and interests of the beneficiaries in the
trust must be clearly defined in the trust deed.

3. Trust Property: The trust must possess identifiable trust property that is held by
the trustee for the benefit of the beneficiaries. This can include assets such as real
estate, securities, cash, intellectual property, or any other form of property. The trust
property must be clearly specified and transferred into the trust for the trustee to
manage.

4. Trust Purpose: A business trust must have a specific purpose or objective stated
in the trust deed. The purpose can be broad, such as generating income for the
beneficiaries, or specific, such as investing in a particular industry or project. The
trust purpose guides the actions of the trustee in managing the trust property.

5.Trust Deed: The creation of a business trust requires a legally binding document
known as the trust deed. The trust deed outlines the terms and conditions of the
trust, including the identities of the trustee and beneficiaries, details of the trust
property, the trust purpose, distribution provisions, and any other relevant
instructions governing the trust.

6.Compliance with Legal Requirements: To create a valid business trust, it is

essential to comply with all legal requirements and regulations governing trusts in the
jurisdiction where the trust is established. This includes adherence to trust laws,
registration (if required), tax obligations, reporting obligations, and any other legal
formalities.

7. Perpetuity Period: In some jurisdictions, there may be restrictions on the

perpetuity period of a trust, which limits how long a trust can exist. It is important to
consider and comply with any applicable rules regarding the duration of the trust to
ensure its validity and effectiveness.

By establishing a business trust with these essential elements in place, parties can
structure their business affairs, protect assets, achieve specific objectives, and
provide for the benefit of chosen beneficiaries in a legally recognized and secure
manner. Careful consideration should be given to each element when creating a
business trust to ensure its efficacy and compliance with relevant legal standards.
QUESTION 2
Liability of a Company vs. Partner and Partnership:

1.Company Liability:
Limited Liability: In a company structure, shareholders have limited liability. This
means that their personal assets are usually protected from the company's debts
and obligations. Shareholders are generally only liable for the amount they have
invested in the company.
Separate Legal Entity: A company is considered a separate legal entity distinct from
its shareholders. This means that the company itself is responsible for its debts and
obligations, and shareholders are not personally liable for the company's actions.

2.Partner Liability in a Partnership:

Unlimited Liability: In a general partnership, partners have unlimited personal liability
for the debts and obligations of the partnership. This means that partners can be
held personally responsible for the partnership's debts, even if it means using their
personal assets to settle obligations.
Joint and Several Liability: Partners in a partnership are often jointly and severally
liable. This means that each partner can be individually held liable for the full amount
of the partnership's debts, not just a proportionate share based on their ownership
percentage.

Comparison:
Both partners in a partnership and shareholders in a company contribute capital to
the business. However, their liability differs significantly.
In terms of risk exposure, partners in a general partnership face higher personal
liability compared to shareholders in a company with limited liability.
Both companies and partnerships are separate legal entities recognized by law, but
their liability structures determine the extent to which personal assets are at risk.

Contrast:
Companies provide limited liability protection to shareholders, while partnerships
typically do not offer this protection to partners.
Partnerships often involve shared personal liability among partners, while companies
shield shareholders from personal liability beyond their investment.
The distinct legal frameworks of companies and partnerships impact how debts,
losses, and obligations are allocated and managed in each business structure.

In summary, the key difference lies in the extent of liability exposure: companies
typically offer limited liability to shareholders, whereas partnerships often entail
unlimited personal liability for partners. This distinction influences risk management,
investment decisions, and the overall legal framework within which businesses
operate.
QUESTION 4
Relevance of Statutory Corporations in a Globalised Business Environment
Statutory corporations, also known as public corporations, are entities created by
statute and tasked with providing specific public services or functions on behalf of
the government. Their existence is perceived to be necessary in economies to
ensure the provision of essential services to citizens while striking a balance
between social welfare and economic interests. In today's globalized business
environment, the question arises: Are statutory corporations still relevant, or can their
role be seamlessly taken over by other forms of companies, such as public
companies? Let's examine this issue in detail:

1.Unique Mandate:
Statutory Corporations: These entities are typically established to serve specific
public purposes, such as transportation, utilities, healthcare, education, and
infrastructure development. Their focus is on providing essential services that may
not be adequately addressed by purely profit-driven private entities.
Public Companies: Public companies, on the other hand, operate for profit and are
driven by shareholder interests. While they may provide certain services, their prima

2 .Social Responsibility:
objective is to generate returns for shareholders rather than solely focusing on
public service delivery.

Statutory Corporations: These entities are often mandated to prioritize social

welfare over profits. They are accountable to the government and society at large,
ensuring that essential services are accessible and affordable to all citizens, even in
marginalised or underdeveloped areas.
Public Companies: Public companies have a responsibility to their shareholders to
maximise profits and shareholder value. While some public companies engage in
corporate social responsibility initiatives, their primary focus is on financial
performance rather than public service provision.

3.Risk Management:
Statutory Corporations: As entities established by law, statutory corporations may
have certain legal protections and immunities that shield them from certain risks and
liabilities. This can be particularly important when providing critical services with
inherent risks, such as healthcare, transportation, or energy supply.
Public Companies: Public companies are subject to market forces and shareholder
demands, which can sometimes prioritise short-term gains over long-term stability.
Their risk management strategies may differ based on market conditions and
shareholder expectations.

4. Long-Term Planning:
Statutory Corporations: Given their focus on public service delivery, statutory
corporations are often involved in long-term planning and infrastructure development
projects that span multiple decades. They can take a more strategic approach to
meeting societal needs and addressing emerging challenges.
Public Companies: Public companies may prioritise quarterly profits and short-term
performance metrics to appease shareholders and maintain market competitiveness.
Long-term planning may take a back seat to immediate financial goals.

Conclusion:

While public companies play a crucial role in the global economy and offer various
goods and services to consumers, the unique mandate and focus of statutory
corporations remain relevant in addressing specific public service needs. The
existence of statutory corporations ensures that essential services are provided to
citizens in a socially responsible manner, often with a long-term view and a focus on
equitable access.

In today's globalised business environment, a balance between profit-driven entities

like public companies and socially oriented institutions like statutory corporations is
essential to meet the diverse needs of societies. The coexistence of these different
business models allows for a complementary approach to service provision, with
each entity serving its distinct purpose in supporting economic growth, social
welfare, and sustainable development.
QUESTION 6
Rights, Duties, and Obligations of a Partner in a Partnership

Rights:
1. Right to Participate in Management: Partners have the right to take part in the
management and decision-making processes of the partnership. They can contribute
ideas, vote on important matters, and have a say in the direction of the business.

2. Right to Share Profits: Partners are entitled to a share of the profits earned by
the partnership according to the terms of the partnership agreement. This right is
based on each partner's capital contribution or profit-sharing ratio.

3. Right to Information: Partners have the right to access and inspect the
partnership's books, records, financial statements, and other relevant information.
Transparency is essential for partners to monitor the business operations and
financial performance.

4.Right to Property: Each partner has the right to use partnership property for
business purposes and in accordance with the terms of the partnership agreement.
This includes assets, equipment, and intellectual property owned by the partnership.

Duties:
1. Fiduciary Duty: Partners owe a fiduciary duty to act in good faith and in the best
interests of the partnership. They must avoid conflicts of interest, disclose relevant
information, and refrain from self-dealing or acting against the partnership's welfare.

2.Duty of Loyalty: Partners must be loyal to the partnership and prioritize its
interests over personal interests or outside opportunities. They should not compete
with the partnership, misappropriate partnership assets, or engage in activities that
harm the business.

3.Duty of Care: Partners are required to exercise reasonable care, skill, and
diligence in carrying out their responsibilities within the partnership. This duty entails
making informed decisions, seeking advice when necessary, and acting prudently in
business matters.

4.Duty to Contribute Capital:

Partners have an obligation to contribute capital as agreed upon in the partnership
agreement. Failure to fulfill this duty may result in financial repercussions or legal
consequences, depending on the terms of the partnership agreement.

Obligations:
1.Joint and Several Liability: Partners in a general partnership have joint and
several liability for the debts and obligations of the partnership. This means that each
partner is personally liable for the partnership's debts, and creditors can seek
repayment from any partner individually or collectively.

2. Obligation to Indemnify: Partners may be required to indemnify the partnership

for losses incurred due to their actions or decisions. This obligation ensures that
partners are accountable for any harm caused to the business by their conduct.

3.Compliance with Partnership Agreement: Partners are obligated to comply with

the terms and conditions outlined in the partnership agreement. This includes
adhering to profit-sharing arrangements, decision-making procedures, dispute
resolution mechanisms, and other provisions that govern the partnership's
operations.

4. Continued Engagement: Partners are expected to actively participate in the

affairs of the partnership, contribute to its success, and fulfill their specified roles and
responsibilities. A partner's continued engagement is crucial for the partnership's
growth, stability, and long-term viability.

Conclusion:

In a partnership, partners enjoy certain rights, such as participation in management

and profit-sharing, while also bearing duties like fiduciary responsibility and loyalty to
the partnership. Additionally, partners are bound by obligations related to financial
contributions, compliance with the partnership agreement, and joint liability for the
partnership's obligations. Understanding and fulfilling these rights, duties, and
obligations are essential for maintaining a productive and harmonious partnership
while upholding the principles of accountability, transparency, and mutual trust.