Question

The Flying Saucer Restaurant owned a large commercial building. The Restaurant often leased some of their premises to Lick's Leasing Ltd., who, had for many years had a practice of subletting the space to a tenant. Ted Wear Ltd had subleased the premises for only a few months, before leaving without paying. Flying Saucer Restaurant then initiated legal proceedings against Lick's Leasing Ltd in order to get compensation as per the lease. Shortly it was discovered that Lick's Leasing Ltd had no assets and could not pay. In response, the Flying Saucer Restaurant then tried obtain the rent that was owed by looking to Mrs. Meehan who was the only shareholder of Lick's Leasing Ltd. Mrs. Meehan refused to personally pay the unpaid rent so the Flying Saucer Restaurant then started legal proceedings against Mrs. Meehan.

1. What is the likely outcome of this legal action?
2. Will the Flying Saucer Restaurant be successful?
3. . Are they able to look to her for payment?
4. D. Why or why not? Explain with reasons

Answer 1

Answer A- The likely result of this legal action of that the landlord may be denied of receiving any rent from Mrs. Meehan due to the concept of the corporate veil

Answer B= No, the restaurant is not going t be successful as the doctrine of the corporate veil will safeguard Mrs. Meehan from being personally liable for any types of liabilities resulted in the organization

Answer C= As the company does not have enough assets to pay the rent and Mrs. Meehan is not personally liable for the liabilities so Mrs. Meehan will not be directed for the rent payment

Answer D= The doctrine of corporate veil will prevail in this situation that safeguards the promoters from any type of liability of the business