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Corporate law serves to protect the business community against unscrupulous practices. It has the mandate of guarding companies and guaranteeing that breach of contracts does not occur. This thus ensures that a healthy business environment and proper regulations exist. It governs within its power, how the various stakeholders of a company including the employers, managers, customers and the shareholders interact with one another. It also offers the guidelines in which companies should relate with one another (Beatty 29). The paper aim at analyzing the situation described in the case study and making appropriate conclusions.
In the case whereby an agreement has been made between companies, contract law has to be applied. The law provides that the terms and conditions of a mutual contract are satisfied before the actual agreement is drafted. In this case, both parties have to ascertain to fulfil their obligations according to the provisions of the contact. Each side of the agreement has a legal duty to perform regarding the actualization of the terms agreed upon.
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In the presented question about the liability of the Techno-Corp to repay Milhouse a loan of $1 million, one would need to query if the terms of the contract were binding to all the members of the corporation. We can thus use this ground to either include the rest of the shareholders as liable to the debt or exempt them from the debt. Putting into consideration that Techno-Corp is a limited liability company, the law cannot entirely hold individual members as singly liable. The loan payment mandate hence lies on the financial capacity of the company as a whole.
Mallory used the name of the firm and his aptitude as the president of the company to acquire the loan to salvage the monetary standing of Techno-Corp. Since the firm and not individuals was indicated as the contract participant, the rest of the stakeholders, who collectively form Techno-Corp should be included in bearing the cost of repaying Milhouse. Mallory, being the biggest shareholder in terms of investment capital, should cover the most of each individual burden of the costs (Beatty 24). However, the rest of the investors in this company can alternatively choose to sue Mallory for misappropriation of the funds by his lavish living at the expense of the company’s profits.
As much as accountability is concerned about a limited liability company, it should be noted that there are conditions in which the company can be relieved from paying the debt. In case of bankruptcy, and Techno-Corp is declared being unable to satisfy its financial obligations, the firm can be excused from repaying Milhouse and this would relieve all the stakeholders partly or completely. In this case, the company in debt would sell its property so as to compensate the creditor or each member would be allowed to make payments in installments to partly cover the debt. This thus would make each member lose the value accrued by his/her shares in the company.
In conclusion, a lot can be argued regarding the constraints of use of law against morality. For example, it is considered ethically immoral to force someone pay for a debt that he/she did not borrow but the business law provides the contrary for the shareholders of Techno-Corp. This therefore brings out the fascinating nature of law in its endeavor to exercise power over those whom it declares sovereignty.
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