This form of protection is however questioned at times because even though shareholders may not be sued in person, wen the corporation uses its money to pay off debts, i becomes the investment of investors that is indirectly used for this purpose (Geraghty, 2002). Te concept of corporate civil liability can be said to have emanated from corporate personality because it determines the applicability of holding a corporation liable for acts of omissions and commission by natural person employed by the corporate (Niederhoffer, 2005). Snce section 588V of Act 2001 acknowledges the principle of corporate legal personality, i can be said that it supports the idea of corporate civil liability.
Mre specifically, te Act professes for corporate liability to be used in civil law rather than criminal law (Wells, 2001). Te reason for this is that unlike criminal liability, cvil liability is easy to proof. Manwhile, sction 588V of the Act requires much evidence in finding a corporation guilty of offence when it contravenes. O the surface, oe is likely to argue that since under corporate liability in charge of a corporation cannot be sued for acts and omission committed in the name of the corporation, ten it is shareholders rather than creditors who are protected.
Sction 588v of the Corporations Act 2001 however helps in clearing this misconception. Tis is because the section actually seeks to promote the regulation of corporations by supporting corporate civil liability. Te reason this is said is that even though the natural persons may not be directly held responsible, crporation are forced to emphasize on due diligence and the management, that indeed when there are any lawsuits, i will be the corporation as an entity, o which they head that will be brought to disrepute.
Bcause of the level of corporation regulation the Act ensures, ceditors, a much as shareholders are guaranteed of protection when they lend to corporations (Leigh, 1977). Tis is because even though shareholders may not be sued as individuals, te ultimate aim of the creditor will always be to get their monies paid whether the payment is done by shareholders as individuals or done by corporation as an independent entity.
Fr example the section states that a contravening corporation is one that “is the holding company of a company at the time when the. ..
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