Company law assignment 1

Name: Junior Martin Baedonga

ID number: 700039453
Lecture : Mr Humphey Marau
 1. Discuss 3 advantage of incorporating a limited liability company and provide
relevant examples.

In incorporating a limited liability company, it has a lot of advantage towards the company itself
and the shareholders and as well as the employees in that certain entity. Specifically, three
advantage which associates with incorporating a limited liability company may include limited
personal liability, unlimited life and increase credibility.

Limited personal Liability

A limited liability company is an entity separates from its owner. When incorporating a limited
liability company, it becomes a legal company, which means the entity is now a legal person of
its own. Being a legally distinct company the personal assets or properties of each owner are not
reachable by creditors. This means that creditors will not touch any of the assets or property of
the shareholders in the case of the business going bankrupt or could not repay its credit. The
liability of a limited liability company members is limited only to the amount of money invested
in the limited liability company. For instance, if an entity takes out money from a bank in the
form of credit and could not repay it due to the company going bankrupt then the bank will not
reach to the personal assets of owners such as its home, car or its personal bank account. Thus
we could say incorporating a LLC is an advantage as it protects its members from the company’s
liability.

Unlimited life

An incorporated company has an unlimited life span. This means that the company will continue
to exist even if the shareholders die or leave the business, or if the ownership of the business
changes. For example if the owner of the hot bread Kitchen in Honiara dies the corporation will
still continue to exist.

Increase Credibility

Potential investors or financial lending institutions such as banks seems to look at incorporated
companies as being stable and trust worthy to invest or lend funds to. By incorporating a limited
liability company it means that the company is now a legal entity. Due to liability issues some
companies will tend to perceive incorporated companies as trust worthy to repay their liabilities.
For example before the banks could lend funds to any company who applies for funds or loans
the banks will then require the certificate of incorporation in order to recognize that the company
is a legal entity and it can be sued if not complying with their agreements.

1. The companies’ act 2009 allows an aggrieved party to appeal the decision/actions of
the registrar. In your opinion, what is rational for this procedure?

In my opinion the law allows the space to appeal the decisions or actions of the registrar thus to
avoid biasness and also to balance the actions of the judges and the parties subjected to the law.
In some situation the company might not agree or looks at the decision made as being unfair or
bias. Thus they will have to appeal the case so that the decision can be reviewed by any
independent judge or judges to give a faire decision of the case. Also in appealing the case it
allows for the correction of errors by the trial judge and to ensure that courts arrive at correct
decision.

2. The companies’ act 2009 prohibits any person who has property of the company for
his or her own use or benefit, or for a use or purpose other than the use or purpose
of the company. Discuss the main reason for this rule.

It is important that we have rules that prohibit the owner to use the company’s property in order
to preserve the confidence of the business to its potential investors or even customers. In any
company the confidence level is determined not only through the performance and the quality of
the products or services provided but also through observations of how owners show their care
towards the company’s asset. Owners’ use of company assets or properties would ruin the
company’s reputation. Potential investors will refuse to invest in that certain company as they
will see that the company is not managed well or they will look at it as expenses will be greater
than profit as the company’s property will serve its rightful purpose and also that of its owners.
On the other hand customers will also sometimes hesitate to pay products or access service from
the business if they see that company properties were being used by employees or owner for their
own uses. For instance company XY ltd used to do deliveries of cabbages upon order, however a
customer sees that the same truck used to deliver cabbages were used by the owner of the
company to collect rubbishes from his home to dumpsite, this will reduce the chance of the
customer to order cabbage from that company as the delivery vehicle were miss used in an
unhygienic way. Thus it is important that rules prohibiting the personal uses of company’s
properties for another personal use were put in place in order to preserve the confidence that
investors and customers have with the company.