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Assess Effects of Corporate Personality

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Introduction

Critically Assess the Effects of Corporate Separate Personality Incorporation is the process by which the company is recognised as a separate legal entity. The company will receive a certificate of incorporation, which certifies that the company has been registered under companies Act; it can be seen as a birth certificate of a company. Companies had been given a legal personality from the Salomon & Salomon and Co Ltd case, that had been regarded as the big change in company law as it forms the fundamental concept. This means that once a company is incorporated, the companies assets, belongs to the company and not to the members or shareholders. In the past centuries most companies were small in size and were either sole partnership or sole proprietorship, this meant that owners were liable for the company debts. But as for the corporate companies the shareholders or the owners benefited from limited liability, therefore if the company was liable, the owners were protected and there was no penalty for the company as the company was not recognised as a legal person. ...read more.

Middle

In other words the company has legal personality, but unlike real or natural legal person it has limitations, such as the company can't get married and usually cannot vote or hold public offence and if the legal entity dies (goes into liquidation) then they do not pass their property by a will. There are many advantages of incorporation and it is generally thought that the advantages outweigh the disadvantages, I will mention the main points below: Separate person The House of Lords recognises that a company's business is conducted by the company as a separate person that owns its property and enters into contracts. The member cannot claim to be the owner of the company's property, or claim compensation for damage done to the company's property, as illustrated in Maccaura V Northern Assurance Co Ltd. As the company is recognised as a separate person it can sue or be sued, the company can even sue its members as the company is separate from its members. However the company cannot be awarded aggravated damages as this requires injury to feeling and the company has no feelings. ...read more.

Conclusion

There are also other affects of this other than expense such as loss of privacy and record keeping requirements or regularities. Veil of incorporation Separate personality of a company is also called veil of incorporation. Members could take advantage of this separate personality and use the company to obtain funds dishonestly, perpetrate fraud or as a mere fa�ade concealing the true facts and not be liable for repayments, amongst the most famous case is the Adam V Cape industries Ltd. In exception to the Salomon principle, the courts have intervened where there is possible risk of unjust consequences and have implemented case by case basis or by statue. Conclusion Corporate personality has had a significant affect in forming company law over the last centuries, and the Salomon case has been a crucial benchmark to company law and is still being used in courts today. However, there is a need for more clear definition in key concept and a solid framework, where as when to lift the veil or who should be liable and what is mere fa�ade etc. ...read more.

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