FE-1 Company Law and Equity

Question 1

What is the principle of separate legal personality established in Salomon v Salomon & Co [1897] and applied under the Companies Act 2014 in Ireland?

Accepted Answer

A company is a legal person distinct from its shareholders and directors — it can own property, enter contracts, and sue and be sued in its own name. Shareholders' liability is limited to their capital contribution

Answer

A company's debts are automatically the personal debts of its directors

Answer

Separate legal personality only applies to publicly listed companies

Answer

The principle was modified by the Companies Act 2014 to allow piercing in all cases of insolvency

Question 2

Under the Companies Act 2014, what are the main duties of directors in Ireland?

Accepted Answer

Duty to act in good faith in the interests of the company, to act within their powers, to avoid conflicts of interest, to exercise reasonable care, skill and diligence, and not to benefit from their position

Answer

Directors owe duties only to shareholders, not to the company

Answer

The duties under the 2014 Act are entirely separate from the old common law and equity duties

Answer

Directors have no fiduciary duties — only contractual obligations under their service contracts

Question 3

What is the rule in Foss v Harbottle [1843] and when can shareholders bring a derivative action in Irish company law?

Accepted Answer

The proper plaintiff for a wrong done to the company is the company itself — shareholders generally cannot sue. Exceptions include: fraud on the minority by those in control, ultra vires acts, and breaches of special resolution requirements

Answer

Any shareholder can bring an action on behalf of the company at any time

Answer

The rule was abolished by the Companies Act 2014

Answer

Shareholders can only bring derivative actions with the court's pre-approval

Question 4

What is a constructive trust in Irish equity law?

Accepted Answer

A trust imposed by equity independently of the parties' intention to prevent unjust enrichment — it arises by operation of law where a person holds property in circumstances that make it unconscionable to deny the beneficial interest of another

Answer

A trust created by the express words of the settlor

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A trust created to hold property for charitable purposes

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A trust imposed by statute under the Succession Act 1965

Question 5

What is the maxim 'equity follows the law' and how does it operate in Irish law?

Accepted Answer

Equity supplements but does not override the common law — where legal and equitable rights exist, equity will follow the allocation of rights established at common law unless there is a specific equitable reason to do otherwise

Answer

Equity always overrides the common law in all cases

Answer

The maxim means equity applies the same rules as common law

Answer

Equity follows the law only in land transactions

Question 6

Under Irish company law, what is the difference between a private company limited by shares (LTD) and a designated activity company (DAC)?

Accepted Answer

An LTD has no objects clause and can carry on any lawful activity — a DAC has a constitution with specific objects clauses and is used for companies whose activity needs to be restricted or defined

Answer

Both have identical constitutions under the Companies Act 2014

Answer

A DAC has unlimited liability while an LTD has limited liability

Answer

LTD companies can have unlimited members while DACs are capped at 50