NAME: NUR SYAZA ‘IZZATI BINTI ZAINI

STUDENT ID: 2022868716

QUESTION:

Explain the concept of body corporate under Companies Act 2016 and support your answer
with two (2) decided cases.

ANSWER:

The concept of body corporate under Companies Act 2016 is an artificial legal person that is
created and give recognition by the law. The two decided cases are:

1. Salomon v Salomon & Co.Ltd (1897) AC 22

Mr Salomon was a boot and shoe manufacturer. He ran the business as a sole trader. He then
converted the business into a limited liability company known as “Salomon & Co.Ltd”. He gave
one share each to his wife and his five children. He took the rest of the share for himself. His
business was transferred to the company. However, he continued to run the business as
before until the business was going downturn. Consequently, the company was wound up. He
managed to pay off some debts. However, some other creditors could not get created a
separate person even though the business of the company was the same as before. The debt
of the company is the debt of the company. The principle establishes by Salomon’s case is
that are as follows a company and its member are separated persons. This principal knowns
as veil of incorporation such as when a company has been formed and registered, the veil will
fall to separate the company from its members. There have two main effects of separate legal
entity, first only company is liable for its own debts and liabilities. Second, a company can
enter a valid contract with its own members or officers.
 2. Tan Lai v Mohamed bin Mahmud & ORS (1982) 1 MLJ 338

In this case, the first defendant and another were awarded a sawmill licence to run a sawmill.
The licence could not be transferred. A business was founded to operate the sawmill licence
with a capital of $200,000.00, 75% of which was held by the plaintiff and the remaining 25%
by the first defendant and the other licence. Following that, the plaintiff sold his shares in the
company to the first defendant. The plaintiff agreed to the delay in payment in exchange for a
guarantee from the other three defendants. The first defendant refused to pay the $43,000.00
outstanding balance. The plaintiff sought payment from the defendants. The defendants
argued that both the share transaction and the guarantee arrangement were improper. The
court ruled in favour of the plaintiff, stating that while the agreements were illegal as an attempt
to circumvent the licence's non-transferability requirement, the sale of the shares was not
harmed. Furthermore, while the company's operation of the sawmill was illegal because it
lacked a sawmill permit, the company's creation was legal.