Separate Legal Personality Essay

800 Words 4 Pages
There are two cardinal principles in today’s western corporate law: the first is, the ‘separate juridical personality’ of each company with rights and duties separate from its shareholders and the second is, politically based ‘limited liability’, shielding shareholders (originally ultimate investors), from personal liability for company’s obligations, by limiting their potential liability to the amount of their capital investment. The above principles, among others, facilitated the separation of ownership and control.

1.1 Separate Legal Personality Legal personality refers to the general and abstract capacity of a certain entity to operate as a legal subject. It suggests that a company is to be treated as a separate legal entity with an independent existence
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It is, therefore, possible to have one company owning one or more company wholly or partially. The legal personality of a company is often the reason why a company has become an attractive vehicle for commercial purposes, as the liability rests with the company, rather than the shareholders, directors, members or company officers, and endowed the company with all the requisite attributes with which to become the powerhouse of capitalism. The separate legal personality has the consequence that a firm has perpetual succession - its legal existence survives its members and directors - its existence is ended when it is wound up.
As this concept is described as a corporate veil and thus it protects those who exist behind it, it is also known to become a device by unscrupulous shareholders in exploiting the separate legal personality of the company to commit a fraud or injustice. Therefore, there are occasions where the courts were forced to disregard the concept and to lift the veil, which will be further elaborated in Chapter 3

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