The poster above discussed critical issues on the nature of companies under

Companies Act 2006

Nature of companies

A company registered under the Companies Act is a legal entity with a separate
identity from its members, so by the law, it is seen as an artificial person (NATURE
OF A COMPANY, n.d.). All companies share some characteristics in common, not
considering their size.

1. Separate legal entity

The company has a legal identity separate from its members as a result of
incorporation. Anyone who got injured by the company has the right to sue the
company but not sue the company’s shareholders (Macintyre, 2019, p.452). One
significant case study for this is Salomon v Salomon and Co Ltd [1897] which
changed the company law.

· Salomon v Salomon and Co Ltd [1897] AC 22 (House of Lords)

In this case, Mr. Salomon was a sole trader of a shoe-making company, then he
formed a limited company and sold his business for £39,0000. Mr. Salomon and his
family are shareholders of the company, he has 20000 shares while other people
have 1 share each. The company owed Mr. Salomon £10,000 so they gave him
debentures equal to this amount but then the company make Mr. Salomon to pay for
the company’s dept during the time company went into liquidation (Explore-law,
2019).

Held. Mr. Salomon and the company was two separate legal persons; therefore Mr.
Salomon have no obligation to pay the dept for the company.

2. Limited liability

Limited liability is the dept of the company must pay by themselves, even selling
assets lead to liquidation (Macintyre, 2019, p.454). As the assets of shareholders
and owner are not at risk when the company fails

3. Perpetual succession

As the membership of a company can change over time, it must unaffected the
community (NATURE OF A COMPANY, n.d.). So, the members can come and go in
a company, but that company still survives and exist. If a shareholder leaves the
company of die, the share will be inherited by other shareholders and the company
can continue to exist.
4. Shares

The right to transfer shares

5. Capacity to sue and be sued

A company has power to make contracts and have the rights to sue or being sued on
these contracts in the name of the company. The company can sue someone when
some loss is caused to the company such as damage to property or personality of
the company in their name. Similarly, all the legal proceeding against the company is
in its name (NATURE OF A COMPANY, n.d.).

6. Common seal

Conclusion:

How it affects to companies

Word count:

References:

Explore-law. (2019). Salomon v Salomon & Co Ltd (1897) AC 22|Case Summary.

[online] Available at: https://www.explore-law.com/salomon-v-salomon/ [Accessed 23
Jun. 2022]

Legislation.gov.uk. (2022). Companies Act 2006. [online] Available at:

https://www.legislation.gov.uk/ukpga/2006/46/part/2/crossheading/general [Accessed
22 Jun. 2022]

Macintyre, E. (2019). Business law. 9th ed. Harlow, Essex, United Kingdom ; New
York: Pearson, p.452- 454

NATURE OF A COMPANY. (n.d.). [online] Available at:

https://law.uok.edu.in/Files/5ce6c765-c013-446c-b6ac-b9de496f8751/Custom/compa
ny_intro.pdf [Accessed 22 Jun. 2022]
Practical Law. (n.d.). Memorandum of association. [online] Available at:
https://uk.practicallaw.thomsonreuters.com/6-107-6835?transitionType=Default&cont
extData=(sc.Default)&firstPage=true [Accessed 23 Jun. 2022]