Based on the principle of 'separate legal entity', a company is separated from its members. Hence, the personal money belonging to the members remained as their private assets. In order for a company to run business, the company requires capital of its own. Thus, the law allows a company to raise capital to run its business either through share capital or loan capital. There are many considerations a company shall take into account when choosing whether to raise the capital needed through share or loan.

1. Examine the legal relationship (including rights and obligations) between a company and its ordinary shareholders. (20 marks)