Legal Personality Of A Company Case Study

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A company is a corporate body of a corporation. A corporation is an artificial legal person. The law sees it as separate and independent of the persons who are members of that corporate body. The legal recognition given to the company is provided in Section 26 Separate Legal Personality of the Companies’ Act 2001 which states that: “A company incorporated under this Act shall be a body corporate with the name by which it is registered and continues in existence until it is removed from the register of companies.” This means that the company can use its own name to enter into transactions and need not go through its members; the company can own its assets which do not belong to the members; the company can sue and be sued and be convicted of criminal offences like a natural person. The reason for creating the legal fiction of the separate legal personality has been said to be a matter of convenience. However, unlike a human being, a company has no natural lifespan. It can be dissolved by special procedures. The separate legal personality concept is useful in large companies where there are many shareholders and these shareholders are frequently changing (perpetual succession). But the mere fact of a change in shareholders has no effect on the company’s existence. THE RELATIONSHIP OF LEGAL PERSONALITY TO LIMITED LIABILITY It has been said that the most popular reason why a company is formed is to take advantages of the limited liability principle. However, we must also consider that although a company is a separate legal personality, it can have unlimited liability, that is, the shareholders may still be liable for the company’s debts. A corporate body with limited liability means the shareholders of a company limited by shares are ... ... middle of paper ... ... The Albezero [19771 AC 774 (HL), a shipment of oil belonging to one company was transferred to company during its voyage from South America to Europe. Both companies were entirely owned by the same ‘parent’ company. After the transfer of ownership, the ship sank and the cargo was lost. When the first company tried to claim for the loss, the ship owners argued that the second company was the true owner of the oil and it could not claim because the limitation period on such claims had expired. Therefore neither company could claim. Roskill LJ: ‘each company in a group of companies ... is a separate legal entity possessed of separate legal rights and liabilities that the rights of one company in a group cannot be exercised by another company in that group even though the ultimate benefit of the exercise of those rights would [be] to the same person or corporate body’.

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