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

Salomon established the cornerstone of company law. In Ireland, the Companies Act 2014 preserves this principle. A company is a separate entity from those who own or run it. The corporate veil can be pierced in limited circumstances including fraud and agency.

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

The Companies Act 2014 codified and extended directors' duties including: acting in good faith (the subjective element), acting honestly, using powers for proper purposes, avoiding conflicts, not gaining unauthorised benefits, and exercising the objective standard of care of a reasonable person with their knowledge and experience.

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

Foss v Harbottle prevents shareholders from litigating over corporate wrongs — the company is the proper plaintiff. Exceptions allow minority shareholder actions for fraud on the minority where the wrongdoers control the company and block the company from suing.

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 constructive trust arises by operation of law without the need for any agreement or intention. It is equity's response to unconscionable conduct — examples include: strangers who knowingly receive trust property, and cases of common intention regarding family homes (as in Gillespie v Gillespie in Irish family law).

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 historically grew up alongside common law to provide remedies where common law was deficient or harsh. It supplements rather than supplants the common law. Where no equitable rule intervenes, equity applies the common law position.

FE-1 Practice Test

FE-1 Practice Test

FE-1 Company Law and Equity