Keeping an eye on income growth

PUBLISHED : Sunday, 13 March, 1994, 12:00am
UPDATED : Sunday, 13 March, 1994, 12:00am

I DON'T have the time to monitor the Hang Seng Index every day. What are the available options which would allow me to aggregate income over an extended period of time? THERE are many options and all carry different elements of risk and reward. As a general rule, the greater the potential returns the closer one needs to monitor an investment. One option would be to invest in unit trust funds. These funds are run by fund managers who monitor the performance on a daily basis and who have access to investment information often unavailable to the general public.

Source: Indosuez Asset Management.

MY business partner has suggested that our small company should be incorporated with limited liability. He said only in this way are we equally protected from joint action taken against the company. I see such an action as indicating a lack of trust.

THIS does not indicate a lack of trust as the suggestion is intended to protect both parties from legal action taken by an outside party.

One of the advantages in incorporating a small business into a limited company is the limited liability of the shareholders. The incorporation of a company results in the creation of a corporation which is an artificial person and distinct from its shareholders. Therefore the shareholders are able to undertake business with limited financial liability in the event of the business failing.

For example, in the event that a company is wound up and not able to pay its creditors, the contribution required by a shareholder is limited to any amount which is unpaid on his shares. Therefore any shareholder who acquires fully paid-up shares has no further liability.

This does not mean that shareholders of a company can carry on business with no regard to the law. If a court finds that a company has been carrying on its business with an intent to defraud its creditors, the court may declare that any person who is knowingly a party be liable to make such contributions to the company's assets as the court thinks fit.

Incidentally, any person who is acting as a director of a limited liability company should always remember that a director may be liable to the company if he or she breaches any of his or her duties to the company.

Source: Robinson Double Send your questions to: Readers' Questions, Sunday Money, 5/F, 1 Tong Chong Street, Quarry Bay. Or fax to: 565 1423