Question

In: Finance

4)La Rosh Ltd was incorporated in 2015 as a private limited company. During 2019, the company...

4)La Rosh Ltd was incorporated in 2015 as a private limited company.

During 2019, the company faced serious financial problems due to a decline in demand and creditors have put a claim against the company leading it into administration.

The bank has forfeit all of the company’s assets and the unsecured creditors are asking for legal advice in suing the shareholders for damages.

Required:

By reference to a relevant case, discuss whether the company’s creditors could claim payment from the company’s owners and explain the cases under which the creditors might ask for the lifting of the corporate veil.

Solutions

Expert Solution

Secured creditors like Financial institutions will always have their debt secured against the company through collateral on their Assets and when there would be a claim on the asset, the priority of the secured creditors will be higher than those of unsecured creditors, so, a bank will always be having a higher priority in claiming of the Assets of the company rather than unsecured creditor who does not have his debt secured by any collateral.

In this case unsecured creditor cannot claim the payment from the company owners, because the bank has acquired all the company's Assets and it has secured collateral against the loans and it has priority in claiming of those assets.

Cases under which corporate veil would be lifted by the creditors-

A.corporate veil could be lifted in case the company has engaged itself into negligent activities

B.where the conduct of the company is in conflict with the public interest or public policies, the corporate veil of the company can be lifted.

C. Any company was performed any act which ultra wires the company

D. Engagement of the company into fraud as well as improper conduct.

jeff jeffy answered 1 year ago
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