Commercial Applications
Answer
Separate legal existence means that a company has a distinct legal entity independent of its members. A company is created by law and is treated as an artificial person in the eyes of law. It can own property, make contracts and file suits in its own name. Shareholders are not the joint owners of the company's property and they cannot be held liable for the acts of the company. There can be contracts between a company and its members, but a creditor of the company is not a creditor of its members.
The principle of separate legal entity was firmly established in the famous case of Salomon vs. Salomon and Co. Ltd., where the court decided that after incorporation, Salomon and Co. had an identity separate from Salomon even though he owned virtually all the shares in the company.
Related Questions
A public company cannot begin its operations until it has obtained a certificate of incorporation and a certificate to commence business.
- True
- False
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- Efficient Management
- Legal Formalities
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Give two points of distinction between a company and a partnership.