QUESTION 6
At law there is a maxim which states "where there is a conflict between common law and equity, equity must prevail".
Explain how this principle came about.
QUESTION 7
Discuss the differences between a limited company and other forms of business organizations.
Answer (2)
The maxim relating to common law and equity arose due to historical conflicts where equity aimed to provide fair outcomes when common law was too rigid. A limited company is distinct from other business forms due to limited liability for shareholders, its ownership structure, tax treatment, regulatory requirements, and continuity of existence.
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Question 6: The principle that 'where there is a conflict between common law and equity, equity must prevail' has its roots in the historical development of the legal system in England.
Originally, there were two distinct types of courts in England: the common law courts and the courts of equity (or the Chancery courts). Common law courts were based on statutes and legal precedents, dealing with cases mainly using strict legal rules. However, as society evolved, rigid applications of common law often led to unfair outcomes.
In response, the courts of equity were established to address these shortcomings. They were administered by the Chancellor and aimed to provide justice in cases where the strict rules of common law were inadequate.
Over time, conflicts between the decisions of common law courts and equity courts arose. To resolve these conflicts, the principle was adopted that equity should prevail over common law. This became formally recognized with the Judicature Acts of 1873-1875, which merged the administration of common law and equity, ensuring that equitable principles would override common law when necessary to achieve fairness.
Question 7: A limited company is distinct from other forms of business organizations in several key ways:
Legal Entity : A limited company is a separate legal entity from its owners. This means it can own assets, incur liabilities, sue, and be sued in its own name. This separates the personal finances of the owners from the company’s finances.
Limited Liability : Shareholders of a limited company are only responsible for debts up to the amount they have invested. This contrasts with sole proprietorships and partnerships, where owners are personally liable for business debts.
Ownership and Control : Limited companies can be owned by numerous shareholders who have transferred ownership through the purchase of shares. Management is typically undertaken by a board of directors, separating ownership from day-to-day management. In contrast, sole proprietors have full control of their business operations.
Regulatory Requirements : Limited companies have more stringent regulatory requirements, including filing annual reports and maintaining statutory records. This transparency can build credibility but contrasts with less formal structures like sole proprietorships which have fewer external reporting obligations.
Perpetual Succession : A limited company has perpetual succession, meaning its existence does not depend on the lives of its shareholders. Ownership can easily change hands without affecting the business.
Other forms of business, like sole proprietorships or partnerships, may have different advantages, such as more straightforward structures or fewer regulatory burdens, but they often expose owners to greater personal financial risks.
