Legal Principles on Company

As stated in the previous post, Company is a separate legal entity and it's dinstinct from its members and shareholders.

Some legal principles hold for companies and among them are what I shall discuss below:

Doctrine of Corporate Legal Entity

A company is seen as just like a human individual entity and in no way will the position of a company interferes with the personality of the owners, members or shareholders of the company. The legal entity signifies that a company answers a name of its own, can sue and be sued, can buy, sell, lease and mortgage its property in its own name. So when there is any crises or legal issue, the owner of a company is treated differently and also the company as an individual legal entity.

• Legal decided case: Salomon vs Salomon Co. Ltd [1897] - A landmark UK company case of a shoemaker owned and operated by a single person. The case was upheld from a debt history that Mr Salomon found himself and the company in. The principle held was that the company will have to bear the liabilities alone and not with the owner of the company. (Please Kindly read the details of the case as provided in law references.

Lifting the Veil of Incorporation

This means that in certain circumstances, the directors and members of the company might be personally liable for theirbsiness transactions. Those circumstances include:

1. Business carried on when there are fewer than two members.
2. Defrauding the creditors.
3. Signing documents without the name of the company.

• Case: Lee William Leitch Bros Ltd. The company carried on business even after insolvency and the creditors discovered that they would not be able to pay. It was held that they carried out business with an intent to defaraud creditors. Hence, the directors of the company would be personally liable for the debts.