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Corporate Separate Personality

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Introduction

Critically assess the effects of Corporate Separate Personality A company is one which can vary in size and in what kind of speciality and products they offer but they all have a few common factors amongst one another. All companies must comply with effects of registration by following the statutes in the companies Act 2006 s 16. A sector of this statute1 states that when a company consists of shares the members who have subscribed to the memorandum of association can then become the holders of the shares they had subscribed. The two similarities I am going to look at are; limited liability and separate legal personality. The latter refers to the liability of the members of a company is limited by the number of shares they hold. If the company faces a point during their incorporation where they have insufficient funds the company's creditors cannot seek the amount from members. Separate legal personality is when a company is a separate legal person, distinct from its members and directors.2 The foundations of company law was established in Saloman v Saloman & Co. ...read more.

Middle

4 There are many advantages and disadvantages associated with corporate separate personality. One advantage of separate personality is that it could encourage investors to invest in a situation where they may not have before. A disadvantage could be the loss the creditors make or the shareholders would not with good faith towards the creditors money and carry out unwise investments with the creditors money. In company law the term 'lifting the corporate veil' is when you are looking behind the company's separate personality to make the members of the company liable. This would be an exception to the genera rule that shields the members from liability. They are held liable regardless of the fact that directors are immune from liability that the company faces. This is seen as a major constraint for members as they are only liable to the company according to the guarantee of their shares. Although Salomans case creates the back bone for corporate separate liability exceptions are looked into to discover the 'reality' of the situations which are being disputed. ...read more.

Conclusion

This statute looks at why a reasonable director of a company would not be able to see whether the company is a going concern before winding up of the company takes place. An example to show where a company is guilty of these statutes is displayed in Gilford Motors Ltd v Horne8and in Jones v Lipman9. Lifting the veil of incorporation is an aspect of company law which has many different decisions a court can lead to. The court try to stay consistent with the Saloman case but may be obliged to lift the veil of incorporation if justice needs to be served. Corporate separate personality is something which provides an immense advantage to its members as the company has legal existence which means it is responsible for its own debts. The company and its members are seen as separate legal entities which restricts the liability they owe to the company to the shares they subscribed in the memorandum of association. I conclude that the overall effect of corporate separate liability is positive and has a great impact in Company Law. ...read more.

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Summary:
This is a generally accurate assessment of corporate personality. There could be more accurate expressions used at times and some of the points made could be developed further.
Rating: XXX

Marked by teacher Nick Price 04/10/2013

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