THE NATURE, FORMATION AND CONSTITUTION OF LIMITED COMPANIES Case Law Exam Revision Flashcards
Separate Corporate Personality Definition
A separate corporate personality also known as the “corporate veil” means an organisation can be its own legal person. A legal person possesses legal rights and is subject to legal obligations. There are two types of legal person natural and artificial. A natural person is an actual human being, for example, a sole whereas an artificial person is created and destroyed by the law for example corporations.
A business that has a separate corporate personality is an independent legal person who is separate from its members and owners meaning that is it responsible for its own legal obligations. It is recognised by the law meaning that it can raise legal actions on its own rights and is subject to legal actions against it. The company also has legal capacity and becomes a party to the contracts meaning that it can deal with 3rd parties. Lastly, the company obtains perpetual succession meaning that the business will continue to exist despite changes in membership (unlike partnerships where it must be dissolved).
Veil of incorporation
Separate corporate personality
Case law
Salomon v Salomon & Co Ltd (1897)
MacAura v Northern Assurance Co Ltd (1925)
Lee v Lee’s Air Farming Ltd (1961)
Pre-incorporation Contracts
Case Law
Phonogram Ltd v Lane (1982)
Kelner v Baxter (1866)
Tinnevelly Sugar Refining Co v Mirrless, Watson & Yaryan Co Ltd (1894)
Situations when Veil of incorporation has been lifted
(by statute to enforce the law; evasion of obligations; group situations)
Case Law
Daimler Co Ltd v Continental Tyre & Rubber Co (GB) (1916) [public interest]
Gilford Motor Co Ltd v Horne (1933) [evasion of obligations]
Categories of companies which may be formed under Company’s Act 2006
public companies & private companies
limited companies (by share or guarantee) & unlimited companies
small medium and large companies
