Legal personality Flashcards
1
Q
What does limited liability mean?
A
- shareholders’ liability for debts and liabilities of the company is limited to the amount (if any) unpaid on their shares
- S74 Insolvency Act 1986
2
Q
What is meant by the company’s legal personality?
A
A company is a legal entity that is distinct from its owners - the shareholders - as well as from its directors, creditors and employees. It has a separate legal personality.(Salomon v Salomon)
3
Q
What are the consequences of the separate legal personality?
A
- the company owns its own property
- the company enters into its own contracts
- the company sues and is sued on its own liabilities
- company continues to exist even if the shareholders or the directors change
- directors are agents of the company (principle)
4
Q
When does a company official become a legal person?
A
from the date of incorporation (the date on which the Registrar issues the certificate of incorporation)
5
Q
What does ‘piercing’ the corporate veil mean?
A
- courts may go behind the corporate framework and the company’s separate legal personality to make the shareholders of a company liable.
- This is an exception to the rule that shareholders’ liability is limited to any unpaid amount owing on their shares.
6
Q
What are the circumstances that piercing the veil will be ordered?
A
- when there are no alternate remedies (if there is a remedy in tort then that should be used instead)
- rare
- facade/ sham, evading a legal obligation
7
Q
Are parent companies liable for their subsidiairies?
A
- parent companies are NOT liable for their subsidiaries other than in specific statutory circumstances
- group of companies are a single economic unit (DHN Food Distributors Ltd v Tower Hamlets)
8
Q
What is lifting the corporate veil?
A
- where the courts are prepared to look behind the corporate structure to hold a shareholder liable for the liabilities of a company. They would establish the real facts but not actually pierce the corporate veil.
