CORPORATE LAW (LAW485) ASSIGNMENT 1

The definition of partnership lies under Section 3(1) of Partnership Act 1961. A
partnership is a relationship between people carrying on business in common with a view of
profit. In the case of Ratna Amal and Anor v Tan Chow Soo Parties, they formed a syndicate
to sell condensed milk. The relationship between the parties was a partnership within the
meaning of Section 3.

In the context of limit on size, minimum numbers for partnership are two people and
generally limited to 20 partners. Some professional partnerships are allowed a greater number as
stated in Section 14(3) (a) and (d) of Partnership Act 1961.

All management takes part in management of partnership business which subject to the
partnership agreement. Partners may appoint one of them as managing partner to manage the
business. Partnership property is owned by all partners collectively. Each partner has an interest
in the assets of partnership.

Partnership has unlimited liabilities where each partner is personally liable for debts of
the partnership and liable to use their private resources to settle the firms debt. The act of
partner binds the other partners, thereby making them all personally liable. Also, partners cannot
limit their liability to creditors of the partnership.

While, in context of legal rights and legal actions, partnership can sue and be sued in its
firm name. A partner is able to bring an action enforcing rights of the partnership in the name of
all partners. Creditors can sue the firm itself or sue any one of the partners for the firms debt.

According to Section 26, all partners shall contribute equally in the capital. However,
partners can agree on unequal contribution of capital. Capital contributed by partners can be in
form of cash or non cash of capital such as land or building. Land and building will be valued
and credited as capital. A partnership may raise capital by the partners contributing further
capital or making loans.

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For duration and dissolution context, a partnership may exist for a fixed period and it
comes to an end at the expiry of the period. Partners may agree to renew the partnership for
another fixed period. A partnership for an indefinite duration will continue until dissolves.

The law applicable for companies is Companies Act 1965. According to Section 4(1), a
company means a company incorporated pursuant to the Act or pursuant to any corresponding
previous enactment. Once it is formally registered, a company becomes an artificial legal entity
recognized by the law. For instance, the company comes into existence as a body corporate. A
company is separate legal entity and distinct from its member. It may refer to the case of
Solomon v Solomon & C. Ltd. Its purpose or objective is specified in the Memorandum of
Association or MOA.

The minimum number of members must be two people, while the maximum number of
members are vary between public listed company and private limited company. There is no limit
for public listed company however the maximum number of private limited company is 50
members. A company must appoint directors, whose task is to manage the company, and a
company must have two directors at all times. The powers of directors are set out in the Articles
of Association or AOA.

The companys property is owned by the company and not by its members. Members
only own shares in the company. Company is capable of owning properties. Change in
membership of company will have no effect on the ownership of assets.

Generally, the companys members are not responsible for the debts of the company. The
liability of members of a company depends on the type of company such as unlimited
companies, companies limited by guarantee, public companies limited by share, and private
companies limited by share. Common type of company is company limited by shares where the
ability of members is limited to the amount, if any, unpaid on the shares. For unlimited
companies, members are fully liable.

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The right of a company can only be enforced by the company itself. The rule of Foss v
Harbottle requires the company itself to be the person enforcing its rights. A company may sue
and be sued by its own member. Also, a company may sue anyone of its shareholders who owes
the money to the company.

In the capital and rising of capital point of view, a company is able to raise funds and
borrow money by issue of shares and debentures. The Act regulates the rising of funds from the
public. Section 38 prohibits a company from offering to the public for subscription of shares or
debentures and the deposit of money, unless they are accompanied by a registered prospectus. A
company is able to raise funds by the issue of debentures secured by a floating charge over assets
such as inventory.

For duration and dissolution, a company has continued existence and is not affected by
the death or incapacity of one or more of its members. Members may come and go but the
existence of the company is unaffected unless its name is struck off the register of companies.

Differences

There are some differences between partnership and company that can be distinguished in
many ways or elements.

In term of numbers of members, the minimum number of members for both partnership
and company is two partners. However, there are differences in maximum number of members.
Generally, the maximum number of members for partnership is limited to 20 partners and also
allowed professional partnership to have a greater number as stated in Section 14(3)(a) and (d) of
Partnership Act 1961. While, the maximum number of companys member are no limit for
public listed company, and maximum of 50 members for private limited company.

Next differences are in term of management. In partnership, all management has a power
in managing the business which subject to the partnership agreement. Partners may appoint one
of them as managing partner to manage business. This is because, partners are agents of the firm
for carrying on its business in the ordinary course of business and are entitled to manage the

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firm. As for company, they must have at least two directors at all time and the powers of
directors are set out in the Articles of Association.

Other than that, partnership property is owned by all partners collectively. Each partner
has an interest in the assets of partnership. Besides, for security over assets the partners cannot
create floating charges but they can mortgage the firms assets. On the contrary, the companys
property is owned by the company and not by its members. Members only own shares in the
company. Company is capable of owning property and change in membership will have no effect
on the ownership of assets. In addition, the company also can use current assets as security by
creating floating charges to the assets.

In term of liabilities, partnership has unlimited liabilities where each partner is personally
liable for debts of the partnership and liable to use their private resources to settle the firms debt.
Partners cannot limit their liability to creditors of the partnership. Compare to company, the
companys members are not responsible for the debts of the company where they have limited
liabilities. However, it depends on the type of company. For the company that limited by shares,
the ability of members is limited to the amount. While, for unlimited companies members are
fully liable. For instance, if a company bankrupt it will not affect the members of the company.
Only the company will be liable for any losses occur. Meanwhile, if the partnerships business is
bankrupt, all of the partners assets or properties will be taken in order to cover the losses (if)
since all partners are liable for all debts of the firm or associations.

In the context of legal rights and legal actions, partnership can sue and be sued in its
firms name. A partner is able to bring an action enforcing rights of the partnership in the name
of all partners. Creditor can sue the firm itself or sue any one of the partners for the firms debt.
While the right for a company can only be enforced by the company itself. According to the rule
of Foss v Harbottle, it requires the company itself to be the person enforcing its rights. A
company may sue and be sued by its own member. A company may sue anyone of its
shareholders who owes the money to the company.

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Based on Section 26 of Partnership Act 1961, all partners shall contribute equally in the
capital, however, partners can agree on unequal contribution of capital. Capital contributed can
be in form of cash or non-cash capital. Apart from that, any profit making will also be divided
equally between the partners or divided based on the contribution ratio among the partners.
Inversely, the companies able to raised funds and borrow money by issuing shares and
debentures between the members only. According to Section 38 of Companies Act 1965, a
company is prohibited from offering the shares or debentures to the public unless they are
accompanied by registered prospectus. Issuing debentures secured by a floating charge over
assets such as inventory may rise up the companys funds. By issuing shares can increase capital
of the company and will help in maintaining or increasing companys profit.

Last but not least, a partnership may exist for a fixed period and it comes to an end at the
expiry of the period. Partners may agree to renew the partnership for another fixed period. A
partnership for an indefinite duration will continue until dissolves. Oppositely, a company has
continued existence and is not affected by the death or incapacity of one or more of its members.
Members may come and go but the existence of the company is unaffected unless its name is
struck off the register of companies.

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Conclusion

As a conclusion, Kassim Selamat should choose form of business that he want to venture.
A company form of business, overall, it has more advantages than partnership in the context of
liability, number of members, management, property rights and also contribution. Since a
company is a person artificial, invisible, intangible and existing only in the contemplation of law
which means that a company and its member are two different things or have separate legal
entity. Kassim Selamat can reduce risk in his business and do not responsible for any liability or
a loss of the company since the company has a limited liability.

When Kassim Selamat set up the company he must choose the type of company whether
it is a public listed company or private company. If Kassim Selamat chooses to run public listed
company, he has no limit in number of members, thus he able to raise the companys fund. But,
if he decides to set up private company, the number of member is limited to 50 members only.
However, company is more advantageous than partnership because partnership form only limited
to 20 members, if it is non-professional business. In public listed company, Kassim Selamat able
to limit the liability on company losses if he set up the company with limited number of shares.
This is because the amount of liability is limited with the number of shares they invest.

Other than that, the company has a continued existence where the company still continues
its operation eventhough one or more members are incapacity or dead. The dissolution of
company does not affected unless the company name is struck off the register of companies.
Therefore, Kasim Selamat should venture in company form of business because it has more
advantages than disadvantages.

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