A critical analysis of the Kitwe Supermarket LTD v Southern Africa Trade LTD 2007/HK/243

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Date
2013-12-17
Authors
Mumba, Richard
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Abstract
In Zambia and even United States the concept of incorporation was adopted from English Company Law. The doctrine of the veil of incorporation was demonstrated in 1897 in the case of Salomon v Salomon & Co. Limited. The purpose of incorporation is to separate an individual from legal liability of the company. Once a company is incorporated it becomes a distinct and separate person from those that subscribed for its formation. The directors and shareholders of the company are therefore treated separately from the incorporated company, thus protecting the personal assets of owners and investors form lawsuits. The principle behind the veil of incorporation is what is referred to as limited liability that is that a company's creditors can sue the company in its name and directors and shareholders are only liable to the extent of the amounts unpaid on their shares.This thesis discusses the case of Kitwe Supermarket Limited v Southern Africa Trade Limited1, to determine whether non-disclosure by the Directors of the Plaintiff company's current registered office amounted to fraudulent trading necessitating the piercing the corporate veil and making the two Directors liable for the debt of the corporation. Courts of law have erroneously deemed failure to disclose by the directors of the plaintiff company's current registered office a fraudulent trading. Hence there is an element of improper application of the principles related to the legal aspect of fraudulent trading This research has made recommendations for the furtherance and strengthening of Zambia's jurisprudence. The recommendations cover all possible circumstances under which the corporate veil is threatened. In order to prevent lifting the corporate veil therefore the Companies Act or a legislation should be enacted to provide for inclusion of formalities relating to holding initial meetings of directors and shareholders, prompt Corporate Tax payment, ensuring that there is prevention of mingling personal assets and those of the business, ensuring adequate business capitalization and display of the business name, just to mention a few.
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Company law- Zambia , Incorporation- Zambia
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