Tim and Neil are cousins who shared a love for roast meats. Upon hearing that their favourite roast meat restaurant was planning to stop operating, they decided to pool their savings together and paid $300,000 to buy over the recipes for the roast meats as well as the rights to run the business. They incorporated a company called Shao Pte Ltd (Shao) to carry on the business of a fusion Chinese restaurant focusing on roast meats.

Tim and Neil approached SmartBank (SB) to borrow $500,000 to fund Shaos business. SB agreed to grant a one-year term loan to Shao provided Tim and Neil personally guarantee the repayment of the loan. At SBs request, Tim and Neil each signed a Letter of Guarantee.

Shao also entered a two-year tenancy with Gee Ann City Limited (GAC) to rent a unit within GACs mall for their restaurant. The rental for the unit was $20,000 per month. 1 year later, Shaos business suffered greatly due to the COVID-19 restrictions and it was unable to repay its loan when the one-year duration under its loan agreement with SB was up. Further, Shao was in 6-months arrears for their rental payment to GAC.

Advise Tim and Neil on the following:

(a) Using relevant statutory provision(s) and case law to support your answer, explain the doctrine of separate legal personality and the various effects of incorporation of a company. (25 marks)

Please support your answers with cases and legislation where relevant.