Legal Personality

Question 1

Explain the concept of legal personality. In what other ways can this question be phrased?

Answer 1

Explain the concept of the incorporation of a company
Explain the consequences arising from the Incorporation or registration of a company
State the rule of law established in the case of Salomon v Salamon and Co Ltd and bring out its merits

Question 2

How would you answer the question: Explain the concept of legal personality?

Answer 2

Introduction:
Once a company is registered or incorporated it becomes a separate entity from its shareholders with its set rights and obligations. This concept was tackled in the case of Salomon v. Salomon and Co. Ltd where the House of Lords in England ruled that Once a company is incorporated it becomes a separate entity from its members and can enter into valid contracts with its shareholders. This concept, its exceptions, and its consequences shall be better explained below

Body:
-> paragraph explaining the concept of legal personality
-> The advantages of legal personality
-> When legal personality can be violated

conclusion:
Beyond all the advantages that come with legal personality, one of its key appeals is the fact that since the company is a separate entity from its shareholders it is liable for all its debts, causing the liability of shareholders to be limited to the investment in the company.

Question 3

Talk about legal personality.

Answer 3

Once a company is incorporated it becomes an entity separate from its shareholders, meaning a registered company is no longer just a set of shareholders, but a separate legal entity, this concept is significant as it carries a set of consequences, for after incorporation a company obtains the features and characteristics of a natural person causing it to have rights and obligations equal to that of a natural person

Question 4

What are the advantages of a company obtaining incorporation?

Answer 4

-> The liability of shareholders becomes limited to their shares in the company
-> The company obtains the nationality of the country where in which it was incorporated
-> The company can now buy and own property
-> The company can now sue and be sued
-> The company’s shares become easily transferable

Question 5

When can a company’s legal personality be violated i.e. what is the concept of Lifting the veil Of incorporation?

Answer 5

Lifting the veil of incorporation means an incorporated company’s legal personality is taken away from it, and the court shall now hold the company’s shareholders and managers personally liable for any actions done in the name of the company. This can happen in two circumstances:
-> Under express statutory provision: The OHADA Uniform Act on Comercial Companies and Economic Intrest groups states that any employee who uses the company’s assets for his personal interest shall receive punishment

-> Under Case law: The court can take away a company’s legal personality in cases of sham practices, fraud, or illegal activity

Question 6

List the two circumstances where a company can have its legal personality violated.

Answer 6

-> Express Statutory Condition
-> Under Case Law