Question

Explain the types of companies and the exceptions of corporate veil. Discuss the duties of the directors of a company. Give your view on the exceptions of corporate veil and duties of the directors

ASSIGNMENT QUESTION PURPOSE The purpose of this assignment is to enhance learners' ability to explain the types of companies and exceptions of corporate veil. Learners are also expected to be able to discuss the duties of directors of a company. REQUIREMENT Explain the types of companies and the exceptions of corporate veil. Discuss the duties of the directors of a company. Give your view on the exceptions of corporate veil and duties of the directors. [Total: 60 marks]

Answer 1

Types of companies are-

1. Business Corporation-In this types of companies in the US, the shareholders are the owners of the company. They have right to elect The directors who govern the Corporation and responsible for policy making of the business of the company.

2.Limited Liability Company (LLC)-In case of a limited liability company, (LLC), the members are insulated and expected to follow a proper procedure when separating matters of personal and business. Members are insulated even if that not managing the company. Financially these companies are considered to be transparent which can be a problem for nonresident owned organizations.

3. Federally incorporated companies in the US-The bank is termed as “national.” The OCC or Office of the Comptroller of the Currency charters a bank with the mandating of having National in its name while the ones which are state-chartered Banks cannot have national in its name.

4.State, territory or Commonwealth Incorporated-Under such type of company, Only one person is responsible for owning and controlling the entire business. The person is also responsible for the entire business along with all the profits and loss as applicable.

5. 'C' and 'S' corporations-A corporation is taxed as a C corporation or it is treated as a subchapter S Corporation. The disregarded entity, on the other hand, has one owner which is recognized for the purpose of tax and it is recognized as a separate entity from its owner. Single member agencies are included in types of the disregarded entity along with qualified subchapter S subsidiaries and real estate investment trust subsidiaries which are qualified.

The exceptions of corporate veil- As we know that due to a limitation of liability and separation principle, shareholders are held liable only toward the legal entity and not toward third parties, virtually creating a "veil" between the shareholders and third parties.

However, in certain circumstances, such veil may be lifted by a court order where a fraudulent and misleading use is made of the legal entity certain circumstances.This situation is considered exceptions of corporate veil. Normally it is done when courts feel doubts and want to clarify the accountability of relevant person/s. Like- Evasion of Obligations, Or fraud.

Duties of Directors-Important duties of directors are-

1.Determination of objectives and priorities.

2.Communicating with the stakeholders to inform them of the company’s growth and ensuring their input plays a part in the company’s future.

3.Monitoring the performance of employees and encouraging them to achieve their targets is one of the primary duties of directors.

4.Establishing rules and regulations and forming policies that everyone in the company would follow.

5.Making sure the organisation has a good system of governance and that there is no gap in communication.

According to my opinion, corporate veil is an important feature for a company, due to have a separate legal entity. However directors can be held accountable for all those activities which they do on behalf of the company because a company is an artificial person and its hands are its directors. So when if anything goes against stakeholders, court can ignore the concept of separation and make a director/s responsible. So it is duty of each director that they perform all their activities with honesty and faith.

Thanks & all the best............