The following scenario is relevant to the question.

John and Lan decide to set up in the restaurant business in Auckland using a two company structure. They register two companies, one (called Blue-Ribbon Dining Holdings Limited (BDHL)) to own the major assets and the other one (called Blue-Ribbon Dining Limited (BDL)) to trade. BDL will incur liabilities owed to creditors but will not have many assets and BDHL will own assets such as goodwill and equipment but will not have many debts. John and Lan are shareholders and directors for both of these companies.

The business structure is set up as proposed and is successful initially. However, John has difficulty remembering how the business is set up when entering into transactions that create legal relations and often confuses the trading name, and the names of the two companies. For example a supplier to the business (Fresher Vegetables Limited (FVL)) asked for a signed order form before its first delivery to BDL. Under customer name on the order form John entered Blue Ribbon Dining. He signed the order form John (company representative).

Sometime later a number of new restaurants have now opened up in Auckland and BDL struggles to compete. This is not through any fault on behalf of John and Lan there are simply too many restaurants operating in the same area. BDL eventually goes into liquidation. The liquidator calculates that the creditors are likely to only receive 10% of what is owed to them. However, if the assets of BDHL were included in the liquidation then the payout to the creditors of BDL would increase to 90% of what is owed to them. The liquidator also wonders if John could be held liable personally to FVL.

The liquidator concludes that the law here can be difficult and she needs more information.

Question ( Please answer using New Zealand Law of Business Orgniaztion )

The principles of separate legal personality and limited liability are fundamental to company law but a number of necessary exceptions apply where the court is prepared to lift the veil. Two of these exceptions are found within the Companies Act 1993 itself s 25 (Use of company name) and ss 271 & 272 (Pooling of assets of related companies). Discuss these principles and the two exceptions contained within the Act including why either or both of these exceptions might be considered necessary. Also include reference to the scenario to illustrate your answer.