Corporate personality

Question 1

For incorporation what must be sent to the Companies House along with a fee?

Answer 1

• Memorandum of Association
• Articles of association signed by the subscribers
• Company name and address
• Officer details
• Share capital and shareholder details

Question 2

what does the certificate of incorporation prove?

Answer 2

it is proof of evidence
once incorporated the legal existence cannot be challenged by the crown unless the objects of the company are illegal

Question 3

What key legal principles did Salmon & Salmon Co Ltd give?

Answer 3

separate legal personality and limited liability
if you are a shareholder these principles protect you

Question 4

what is separate legal personality?

Answer 4

a company is, at law, a distinct and separate person from the people who set the company up

Question 5

what is limited liability?

Answer 5

any full paid-up shareholders could not be required to pay any more

Question 6

what are the legal consequences of incorporation?

Answer 6

• own the property with in a company
• sue directors or outsiders
• employ members and outside individuals
• continue with its original shareholders

Question 7

advantages of incorporation?

Answer 7

• separate corporate personality
• limited liability of members
• members obtain shares and receive dividends
• perpetual succession - a company continues to exist without original shareholders
• increased methods of raising finance

Question 8

disadvantages of incorporation?

Answer 8

• subject to more tightly controlled rules and regulation than partnerships
• public inspection of accounts and loss of privacy
• various administrative costs
• less flexibility and more formality after incorporation

Question 9

What are the Salmon principles known as?

Answer 9

the corporate veil
the individual shareholders are protected from outsiders who may be trying to sue if they have paid up

Question 10

what is piercing the corporate veil?

Answer 10

disregarding corporate personality and the salmon principles do not apply anymore
shareholders will not enjoy limited liability anymore and they will be liable for the companies debts
courts are reluctant to do this

Question 11

how can the corporate veil be pierced under statute?

Answer 11

parliament has the power to determine when the veil may be pierced
e.g. Fraudulent trading s213 IA 1986

Question 12

how can the corporate veil be pierced under common law?

Answer 12

Prest v Petrodel Resources Ltd (2013)
Evasion principle = allows the court to disregard the corporate veil when a company is interposed so that its separate corporate personality will defeat a right or prevent enforcement
Concealment principle = does not involve piercing the corporate veil, involves the courts looking behind to discover the facts which the corporate structure is concealing

corporate veil will not be pierced if an alternative remedy is available