The Nature of a Corporation and Its Formation, Essay Example

A corporation exists independently of any of its shareholders.  It even survives the death of all its shareholders.  Its existence is perpetual unless it is dissolved by order of a court or by a voluntary resolution of its shareholders, or it is struck off the register for failure to comply with statutory regulations.

In this case, the directors and sole shareholders of Driftwood Products Limited went on vacation together for three weeks.  While the shareholders were away, the office manager was left in charge of operating the business.  He took this opportunity to sue a client whose account was long overdue.  A few days after the company’s lawyer initiated the action, all three shareholders were killed in a fishing accident, their boat overturning in a storm.

The client that was sued by the office manager has suggested that the creditor corporation (Driftwood Products Limited) no longer exists since all three shareholders were killed.  Therefore, the suit should be dismissed.  However, this is not what the law requires.

When the three sole shareholders of Driftwood Products Limited were killed, the corporation was not dissolved.  The only way a corporation can cease to exist is if it is dissolved by order of a court or by a voluntary resolution of its shareholders, or it is struck off the register for failure to comply with statutory regulations.  Neither of these scenarios happened in this case, so the corporation is still in existence.  The debtor that was sued will have to defend the case as he would if the three shareholders were still alive.

Works Cited

Easson, J.E., A.J. Soberman, D.A. Smyth. The Law and Business Administration in Canada. Pearson Education Canada, 2007.

Re Noel Tedman Holdings Pty. Ltd., (1967) Qd. R. 561 (Queensland S.C.).