This means that a company is a juridical person having the legal rights, duties,obligations and liabilities resulting from legal relationships.
And these legalrights, duties, obligation and liabilities cannot be shared by any other personexcept where the company is acting as an agent of the other person.
Salomon v Salomon,
the court further held that where the company’s objectivesof entering into a legal relationship is to benefit it shareholders, is not sufficientto construe that the company is an agent of the shareholders. Therefore, as aseparate legal person from its members, a corporation can enter into a contract,be a party to a proceeding and own properties.
This concept of separate legal personality of a company had been stronglyembraced by the US
when the court in
Southern Railway v. Greene
corporations are persons under the law with the same rights as a natural personwith few exceptions.
One of these exceptions is aggravated damages which isawarded as a compensation for injury to feelings and a company has no feelingsto be injured.
Separate legal entity is a principle of commercial convenience
which allowscorporations to organize large and complex businesses as oppose to other formof business such as partnership or Joint Stock Company. These benefits arederived from the distinct effects of separate legal entity which may include1.Limited liabilityArguably, the rationale behind separate legal entity is the limitation of personalliabilities of members towards creditors.
This is an essential feature of corporate form which limits the liability of shareholders to their interest in the
In the UK, s16(3) CA 2006, provide that a registered company is capable of exercisingall the function of an incorporated company.
See J.H Rayner (mincing lane) ltd v. Department of trade and industry (1990) 2 AC 418
Derek F., et al.
(26 edn, Oxford University Press Inc., New York 2009-2910) p122
Philip I. Blumberg, ‘’The Corporate Personality Of American Law’’ (1990) 38 A. J. C. S 49p53
216 U.S 400 (1910)
Philip I. Blumberg, ‘’The Corporate Personality Of American Law’’ (1990) 38 A. J. C. S 49p58
Collins Stewart ltd v financial times lid (2005) EWHC 262
Daniel T. C. Song, ‘’the Salomon orthodoxy: unralling the metaphorical myth’’ (2001-2002) 21 S. L. R. 199 p207
Marc Moore, ‘’a temple built on faulty foundation: piercing the corporate veil and thelegacy of Salomon v Salomon’’ (2006) J. B. L. p1