QUESTION
Briefly explain the concept of corporate legal personality. Discuss the situations in which the
general principle that upon registration a company becomes a juristic person separate from its
members does not apply or is ignored.
ANSWER
A corporate legal personality refers to the fact stated by law that a company is recognized
as a legal entity distinct from its members. A company having this personality is an independent
legal existence separate from its shareholders, directors, officers and creators. Under the
following situations a company becomes a juristic person separate from its members;
Existence of proprietary interest, which refers to the ability of the company to own
property for example land. Since the company gain full ownership of property has the right to
acquire and transfer property in its own name .hence corporate legal personality occurs. This is
as established in Teacher, law. (Nov 2013)
Debt, a company becomes a legal person when has an unlimited amount of debts as the
company is full responsible for the debts that will be incurred during the course of business.
However this does not apply to its members with limited liability. Therefore the creditors if the
company cannot take any action against the members if the company went into liquidation as
established in Salomon v. Salomon co Ltd (1897) (Lee,2005).
Perceptual succession, the principle implies that a company becomes a legal person
when it can make contracts, hold property, and can be sued regardless of ownership changes.
And by default a registered company will continue as a separate legal person when an owner
dies, leaves the company or goes bankrupt.
Limited liability, is a business entity that prevents an individual from being liable for the
company’s financial losses and debt liabilities. Hence a company becomes a separate legal
person under the limited liability principle.
Suing a company, a company becomes a separate legal person when it is sued, which
means when people make a legal claim against a company or employer for varied reasons. For
example violation of their rights.
Therefore; a company may be organized in various ways for tax and financial liability
purposes depending on the corporate law of its jurisdiction. Generally a company overview
includes the future goals, Basic company information as well as ownership and management
team.
