A Company Is A Separate Legal Entity

“Corporations are said to be “creatures of statute;” they exist because state laws allow human beings to organize themselves into entities that separate ownership and management functions as the outline above delineates. The business rule is there a presumption that making a business decision, the offices act in good faith with the belief that their actions is what is best for the company (Halbert/Ingulli, 2012 pg. 31).”

In the corporate form of ownership, the shareholders are the owners of the firm. The shareholders elect the directors of the corporation, who in turn appoint the firm’s management. This separation of ownership from control in the corporate form of organization is what causes agency problems to exist. Management may act in its own or someone else’s best interests, rather than those of the shareholders. If such events

This is the most common type of company and is what most people have in mind when considering whether or not to set up a company. Each shareholder’s liability is limited to the amount unpaid on the shareholding owned by them. However, the shareholder must also be aware that they run the risk of losing monies paid to the company whether in full or part payment of the shares owned by them.

In order to establish the liability of each party involved, it must first be determined whether the liable party will be KAL itself as a corporate personality or its directors. The case of Salomon v Salomon & Co Ltd has established the legal principle of a company as a separate legal entity with its own rights and responsibilities. This legal doctrine was reaffirmed in Andar Transport Pty Ltd v Brambles Ltd when Justice Kirby held that “the mere fact that the company may be owned or controlled

Creditors have tried to pierce through this concept of a company being a separate legal entity. However Courts are very reluctant to let them do so unless there is evidence of fraud or a sham.

Historically, commercial companies developed as a means of allowing a number of people to pool their resources (in the form of capital or management skills) to undertake an enterprise too large for a single individual. Creating a separate legal person to hold and incur the rights and obligations of the enterprise simplified dealings between the enterprise and those with whom it conducted business.

1. A company has a separate legal personality from the members in the company so in law it has separate rights and liabilities. The company can enter contracts and own property which wouldn 't make the members of the company liable only the company itself.

Rule of Law: As provided in the corporate law, corporations are legal entities that are liable for their own liabilities, and hence shareholders cannot be personally held liable for any liability in the corporation. Whether a corporation de jure or corporation de facto, individual shareholders may not take the identity of an organization per se; and hence this limits the liabilities of individual shareholders against creditors of the

Corporate groups can be defined as a company structure where several companies are interconnected through contract shareholding or as Dine says, “By interlocking dictatorships.” In these structure holding companies usually have control and influence over subsidiaries. Limited liability on the other hand, is the logical consequence of the existence of a separate legal entity or generally, the concept simply means that since the company is different from the shareholders, the members are only liable for the amount unpaid or their shares and not for the debts of the company

From the beginning of the judicial history, the lawyers and judges have emphasized about how a corporation is an intangible legal entity alone without body or soul (Arthur and Machen, 1911). The doctrine of separate legal personality basically is about how a corporation and the owners were two different entity (Kelly, Hammer and Hendy, 2014). The Limited Liability Act which replaced by the Joint Stock Companies Act 1856, is where the members are only liable up to the amount that

One of the prevalent belief is that corporations were set up solely to maximize profit to shareholders. Unlike other business models, corporations have the sole status of being viewed as a ‘legal person’, with the rights similar to natural citizens including “engage in business and contracts, initiate lawsuits, and itself be sued” (Business Dictionary). This unique classification provides corporations with the rare opportunity to take advantage of the power corporations have to benefit society and the economy. One such example is the potential for companies to incorporate under a B-Corp (Benefit Corp) structure rather than as a C-Corp. The way that a companies structures itself can have significant implications on its corporate governance.

Owners are not personally responsible for debts the business may accumulate. The ownership of a limited company is divided up into equal parts called shares (Bbc.co.uk, 2014).

According to the principle of the corporate veil, in order to make the shareholders liable for their company’s debt, it considers towards the company structure with the separate legal personality doctrine. Generally, being a shareholder means that they can obtain unlimited company’s profit whereas they are not responsible for more than the amount they invested. Thus, Limited Liability Company is the most favoured business form for investors. As a result, the creditors of the company cannot claim compensation from the shareholders even if the company has insufficient funds to pay its own debts in full.

The concept of limited liability was conceptualized to promote enterprise through limitation of risk. In many ways, the argument remains applicable today. As a detailed exposition is beyond the scope of this essay, this essay will examine the two major lines of debate. Firstly, the argument that limited liability encourages enterprise is normally linked with “passive investors” who have no other interest in the company other than that their money is invested within. However, on the opposite spectrum, the power to purchase shares was also given to companies having a separate legal personality. In corporate group scenarios, this essay will support the arguments of Blumberg and Wright that the parent company is not a “passive investor”, but rather an active force behind the subsidiary. Thus, there is a clear danger, as evidenced in cases such as Adams, that limited liability can encourage risk that is excessive, as ‘owners engage in excessively risky activities [being] protected from liability.’

The Principle of Separate Corporate Personality The principle of separate corporate personality has been firmly established in the common law since the decision in the case of Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate legal personality, rights and obligations totally distinct from those of its shareholders. Legislation and courts nevertheless sometimes "pierce the corporate veil" so as to hold the shareholders personally liable for the liabilities of the corporation. Courts may also "lift the corporate veil", in the conflict of laws in order to determine who actually controls the corporation, and thus to ascertain the corporation's true contacts, and closest and most real