EXI

M BANKAGRICULTURALUNI
VERSI
TY
BANGLADESH

AnAssignment
On

“
Ani
ncor
por
atedcompanyhasanar
ti
fi
cialent
it
ydi
sti
nctf
rom
it
smember’’

Cour
seCode:
Law-
261

Cour
seTi
tl
e:CompanyLaw

Submi
ssi
onDat
e:08/
09/
2020

Submitt
edt o: Submi t
tedBy:
Sabr
inaMost afaSani
a Si
dratulMoontahaShor
mi
Lect
urer,Depart
mentofLaw RegNo:LLBW2018000688
EBAUB Batch:13th
EBAUB, Depar
tmentofLaw

1
Acompanyi salegalent
it
yf ormedbyagroupofindi
vi
dualst
oengageinandoperatea
business—commer ci
alorindustr
ial
—ent
erpr
ise.Acompanymaybeorganizedi
nvari
ous
way sf ortaxandf i
nanci
all i
abi
lit
ypur
posesdependingont hecor
poratelaw ofit
s
j
urisdicti
on.

The l
ine ofbusiness the companyisi n wil
lgeneral
lydeter
mine whi
ch busi
ness
st
ruct
urei tchooses such as a part
nershi
p,propri
etor
shi
p,orcorporat
ion.These
st
ruct
uresalsodenotetheownershipst
ructur
eofthecompany.

Theycanalso bedi
sti
nguishedbetweenpriv
ateandpubli
ccompanies.Bot
hhav
e
di
ffer
entowner
shi
pst
ruct
ures,regul
ati
ons,
andfi
nanci
alr
epor
ti
ngr
equi
rements.

Companyanassoci ati
onofper sonsf ormedf ort hepur poseofsomebusi nessor
undert
aki ng,whi ch hasa l egalper sonalitysepar atef rom t hatofi tsmember s.A
companymaybef ormedbychar ter,byspeci alActofPar li
amentorbyr egistr
ati
on
undertheCompani esAct s.Thel i
abilit
yofmember si susually(butnotal way s)limited
bythechar ter,ActofPar liamentormemor andum ofassoci ati
on.Acompanymaybea
publi
climi tedcompany( PLCorpl c),inwhi chev entitsshar esmaybet ransf erredf r
eely
among, andownedby ,member soft hepubl ic.Al ll
imitedl i
abil
itycompani esthatar enot
publi
cl i
mi ted compani es ar e pr i
vat e compani es,denot ed byt he term Lt d.Whi l
e
compani esar eownedbyt heirmember s( i
.e.shar ehol ders)
,t heyar emanagedbya
boardofdi rectors.Hist
orically
,t hedut iesowedbyt heboar dar ef i
duciaryinnat ureand
owed t ot he company r athert han t he shar eholders.Compani es ar et he maj or
i
nstrumentf oreconomi candf i
nanci algrowt handdev el
opmenti ntheWest er nwor l
d.A
l
imitedcompanyencour agest r adet ot heext entt hati nt heev entofi nsol vencyt he
ownersar el iableonlytot heext entoft heirunpai dshar ecapi t
al.Thel i
mi t
edcompanyi s
alegalper soni nitsownr ightandi ssuedi npl aceoft heowner sordi rectors.

Acompanymaybel i
mi t
edbysharesor
,int hecaseofapr iv
atecompany , byguar antee.
SincetheCompani esAct1980,iti
snol ongerpossibletocreateacompanyl i
mi tedby
guaranteeandhav i
ngashar ecapit
ali
nt heUK.Acompanyl i
mi tedbyguar anteei sa
company t hathas t he l
i
abi
li
ty ofit
s member sli
mi t
ed by t he memor andum of
associati
ontosuchanamountast hemember smayunder taket ocont r
ibutet othe
assetsoft hecompanyuponi tsbeingwoundup.A companyl i
mitedbyshar esisa
companyhav i
ngtheli
abil
it
yofi
tsmember slimit
edbyt hememor andum ofassoci ati
on
totheamount ,i
fany,unpai
donthesharesr especti
vel
yheldbyt hem.

ht
tps:
//l
egal
-di
cti
onar
y.t
hef
reedi
cti
onar
y.com/
Company
+(l
aw)

For
mat
ionofaCompa
ny:
4St
age
s

Theformat
ionofacompanyi sal engt
hyprocess.Forconv
eniencethewhol
epr ocess
ofcompanyf or
mati
onmaybedi vi
dedintothef ol
lowi
ngfourstages:1.Promotion
Stage 2.Incor
por
ati
on or Registrat
ion St
age 3.Capi t
alSubscr i
pti
on Stage 4.
CommencementofBusinessStage.

2
1.
Promot
ionS
tag
e:

Thisisthefir
ststageofFor mati
onofaCompanyandt hewordpromot
ionref
erstot
he
al
locati
onofv ari
ousact i
vit
iesdesignedforaparti
cul
arcompanyorenter
pri
se.Att
he
ti
meoft hisstage,thecompanyneedsal otoft
hingsfort
heest
abli
shmentli
kecapi
tal
,
propert
y,busi
nessobj ect
s,eff
ici
ency,andsoon.

Theper sons,whoinit
iat
etheparti
cul
arbusi
nessorcompanyar eknownaspr omoter
s
andanypr omoterneedwill
-power
,capaci
ty,di
l
igence,cour
age,f
oresi
ght
edness,sel
f-
respecttostar
tabusinessandbecomesuccessful.

Promotionofacompanyisthecombinat
ionorsum t
otalofal
ltheacti
vi
ti
esrel
atedto
theincorpor
ati
onofacompany.Thepromoti
onstageincl
udesvari
ousstagest
of ul
fi
ll
thedesiredr
esult
soft
hef
irstst
age:
-

(
i)Di
scov
eryofani
dea-

Discoveryofanideameansf i
ndingorthi
nki
ngaboutapart
icul
arl
ynewideafor
establi
shingthenewbusiness.Thi
sstepisaver
yimport
antsteptoini
ti
ateorexpand
thenewbusi nessbecauseithel
pstoprovi
dethefr
ameworkatti
tudeofthenew
business.

(
ii
)Takeact
ion-

(
a)Det
ail
edI
nvest
igat
ion-

Aftert
hetimeofinit
iat
ion,
thepromoter
sreachedt
hei
nvest
igat
ionst
agef
orcol
l
ect
ing
thepart
icul
arsourceofdatafr
om themarket
.

(
b)Assembl
yofnecessar
ymat
eri
als-

Aft
ert
hetimeoftheinvest
igat
ion,nowist
heti
metoassemblet
heresour
cesoft
he
companyandkeepiti
nasaf eplaceandpr
epar
eitf
oryourcompany
’sfor
mati
on.

2.Regi
str
ati
onorI
ncor
por
ati
onSt
age-

Thisisthesecondstageoff or
mat i
onofacompanyandatt hi
sst
age,itiscompulsor
y
todecidethename,l ocat
ion,andlegaldocumentati
onofthecompany .Thi
sstageis
veryimport
antbecause,inthisstage,thecompaniestr
ansf
erourlegaldocumentsto
theregi
str
aroffi
ceattheregist
rarofthecompany.

Pr
ocedur
esf
orRegi
str
ati
onofaCompany
-

Att
he t
ime ofr
egi
str
ati
on,t
her
e ar
evar
ious l
egaldocument
srequi
red f
ort
he

3
i
ncor
por
ati
onoft
hecompany
.Thedocument
sar
e-

(
i)Memor
andum ofAssoci
ati
on-

Memorandum ofAssoci
ation(MoA)i sadocumentt hatisseenasav eryimportant
documentf
oranycompany .Thi
sdocumenti srequir
edatthetimeoftheincorpor
ation
ofanycompany.I
nthi
sdocument ,theproperdescri
pti
onofasealofthecompanyand
i
tsmember’snames,
address,pr
ofessions,
signat
uresarethemostnecessary
.

I
fanycompanydoesnothav eit
smemor andum t
heni
twillnotbeal
lowedtodot he
r
egistr
ati
on.Asweknow,t hememorandum oft
hecompanyisanimport
antdocument
whichweal soknow asthechart
erofthecompanyanditalsohel
pstoidenti
fythe
r
ightsandprocedur
esoft
hecompany .

(
ii
)Ar
ti
clesofAssoci
ati
on-

Art
icl
esofAssoci at
ion(AoA)isanot
herimportantdocumentthatisnecessaryforany
companyt oattheti
meofest abl
i
shment.Ital
soincludest
heinternalandsub-i
nternal
rul
esofthecompany ,whicharemadeforthefulf
il
lmentofthewor ksexpl
ainedinthe
memor andum documentofthecompany.

Whenacompanyi sregistered,
theniti
sveryi
mportantt
ohavetheArti
clesof
Associat
ion,andi
tisalsov eryi
mpor t
antt
ohav et
heMemor andum ofAssoci
ati
on
becausethesetworeflectthenatureandscopeofanycompany

(
ii
i)Ot
herAgr
eement
s-

Af
terbot
hdocuments,
thepromotersofthecompanysubmitt
heotherdocument
s
al
ongwit
hMoAt otheregi
str
arof
fice.So,t
heotheragr
eement
sare:-

 Pr
omot
ersgi
vet
henot
iceoft
hel
ocat
ionoft
heaut
hor
izedof
fi
ceroft
he
company
.
 I
ndi
cat
eproperknowledgeandinf
ormati
onaboutthedir
ect
ors,
 Pr
ovi
denecessar
ysignedart
icl
estotheregi
str
aroff
icef
rom eachdi
rect
oroft
he
companywi
tht
hei
rful
laddr
ess,
name,
andsi
gnat
uresal
so.

3.Capi
tal
Subscr
ipt
ionSt
age-

Thisi
sthethi
rdstageofFormati
onofaCompanyandi nthi
sstage,
thepr
omotersof
thecompanywil
ldecidethecapi
tal
struct
ureofthei
rcompanybecausemanagi
ngany
companyfort
heircapit
alisani
mportanttask.

Thepriv
atecompanycandeposi
tit
scapi
tal
from l
i
mi t
edmembersbythecompanybut
thepubl
iccompanyhastoobser
vewit
hthevari
edlegalr
ulesf
ort
hecoll
ect
ionof

4
capi
tal
.

Aft
erthi
s,
 t
he questi
on ar
ises,
 
from where to 
col
lect
 t
he 
capit
al?Theanswerist
hat
Thecompanyrunsmanyadv er
ti
sementsar oundt
hepubli
c,i
ssuingaprospect
usfort
he
publ
ic,
andinf
ormi nthesharemarketforthecoll
ecti
onofcapi
tal.

4.CommencementofBusi
nessSt
age-

Thisisthef
ourthst ageofFor mati
onofaCompanyandi tmeans,atthisst
age,the
companyget salegal approvalcer
ti
ficat
efrom t
heregi
str
aroffi
ceforthepurposeof
runni
ngaspecificcompanyorbusi ness.Whenacompany ’
slegaldocumentsare
veri
fi
edbyanyr egistrarundersect
ion149(1)andsecti
on149(2),t
henthecompany
getsalegalcer
tif
icatet orunthebusiness.

Thi
slegal
cer
ti
fi
cat
eisal
soknownas“
Cer
ti
fi
cat
eofcommencementofBusi
ness“
.

htt
ps:
//subj
ect
quer
y.com/
int
roduct
ion-
stages-
and-
concl
usi
on-
of-
the-
for
mat
ion-
of-
a-
company/

Whati
saLegalEnt
it
y?
Thehal
l
mar
ksofasepar
atel
egal
ent
it
yar
ethati
tcan:

 buy,
sel
landownpr oper
tyofanykindi
nit
sownname
 agr
eetolegal
lybi
ndingcont
ract
s,and
 sueandbesuedinitsownname.

Asaconsequenceoft
hesef
eat
ures,
separ
atel
egal
ent
it
iescan:

 i
ncurdebt( whichiscreatedbyacont r
act
ualr
elat
ionship)
 becomecr edi
tors,bylendingtoot hers
 ownassets-i eproperty:
o tangibl
e: desks,chair
s,pensandpaper
o i
ntangible:suchasi ntel
lectualpr
oper
tyrights:copy
right
,desi
gns,t
rade
mar
ksandconf
ident
ial
inf
ormat
ion
 ownrealpr
oper
ty,i
eland,
and
 bel
iabl
etopaytaxes(ast
atut
oryobl
i
gat
ion)

Al
lthet
hingst
hathumanbei
ngscando(
andar
elegal
ent
it
ies)
,fr
om al
egal
per
spect
ive.

Thisterms“separatelegalenti
ty”meanst hesamet hi
ngas“ separatelegalpersonali
ty”
,
“separat
elegalexistence”
,and“ separat
el egalper
son”.I
t’
sanent it
ywi t
ht hefeatures
descri
bedinboldabov eandr ecognisedbylawashav i
ngthosef eatures.

5
I
t’
st hi
s separ
atelegalper
sonal
i
tyt
hatmakes compani
es at
tract
ivev
ehi
cles f
or
busi
nessvent
ures.
 

Sometimes,t
oident
if
ywhatalegalent
it
yis,i
t'
smor
eimpor
tantt
oknow wheni
t'
s
def
ini
tel
ynotasepar
atel
egal
per
son.

Whyi
sthi
slegalconcepti
mpor
tant
?

Twomai
nreasons.Ther
ear
emanyot
her
s.

Li
abi
li
tyrest
swi
tht
hecompany
,rat
hert
hant
heshar
ehol
der
s,di
rect
orsorcompany
of
fi
cers.

Al
so,
otherl
egal
concept
sinl
awar
ebasedont
hissepar
ateent
it
yconcept
.

Thati
ncl
udest
hesel
egal
concept
s:

 l
i
mi t
edli
abil
i
ty
 pi
erci
ngthecor
por
atev
eil
,ofasi
ngl
ecompany
,oracompanyoper
ati
ngwi
thi
na
gr
oupofcompani
es
 makinglegal bi
ndingcont r
acts,andtodetermine:
o t owhi chent i
tylegalobli
gati
onsareowed
o t hel egalenti
tyinbreachofcontract,
and
o wh ichlegalenti
tyisliabl
etopaydamages
 commondesi gns,whichgiver i
setojoi
ntandsev er
all
iabi
l
ity
 t
hesepar ateparti
cipatingparti
esinaconspiracy
 t
helegalent i
tywhichcar ri
esstri
ctli
abi
li
tyforat ort
,suchasint
ell
ect
ual
proper
ty
i
nfri
ngement  
 
 thepersonwhi chhasv icar
iousliabil
it
yforanother
 shareholders,andhowt hei
rr ol
esandr esponsibi
li
ti
esaredi
vor
cedandsepar
ate
totherolesanddut iesofdirect
or s–ev eni
ftheyarethesameindi
vi
dual 
 thediff
erentr oles,powersofdirectorsandfiduci
arydut
iesf
ordir
ector
s
 whichpar t
yi sanagentandwhi chi sthepri
ncipal
 whenpar tnershi psari
sebyoper ationoflaw

Theyal
lpr
ett
ymuchst
artwi
tht
heconceptofsepar
atel
egal
ent
it
ies.

Topoft helistf
ormostbusinessesistotakeadvantageoflimi
tedl
iabi
li
ty.Busi
ness
acti
vi
tiescanbest ruct
uredusingdif
fer
entlegal
enti
ties,
assubsidi
ari
esorconnected
compani es.Eachoftheshareholder
sineachofthoseentit
ieshasl
imit
edl i
abil
i
tywhen
they
'reincorporat
ed.

Thebasi
cconcepti
sst
rai
ght
for
war
d.

Butinmot
ion,
thi
ngscangetconf
usi
ngi
fyoudon'
tknowwhaty
oushoul
dbel
ooki
ng
for
. 

6
Acompanyi saseparatelegalentit
yasdist
inctf
rom it
smember s,t
her
efor
eitis
separateatl
awfrom i
tsshareholders,
dir
ectors,
promoter
set candassuchis
conferr
edwithr
ight
sandi ssubjecttocer
tai
ndutiesandobl
igati
ons.

Thesecent
ralpr
incipl
esofcompanyl
awwer
efi
rstl
aiddowni
nverycl
eart
ermsbyt
he
HouseofLordsi
nt hecaseSal
omonvSal
omon&CompanyLtd[1897]AC2.

Therul
i
ngout l
inedi npartinthequotedtextoftheassignmentfrom LordMacnaght
en’s
rul
i
nghassev eralimportantconsequences,notleastt
hatwheret hel
iabi
li
tyoft
he
membersisli
mi ted,theycannot,onl
yinexceptionalci
rcumstancesbeheldli
abl
eforthe
companiesdebts.

UndertheconceptofLi
mitedli
abil
itytheowner softhecompanyundernormal
cir
cumstances,ar
enotanswerableorr esponsibl
efortheobli
gat
ionsoft
hecompany
ther
eforemakingtheowners/shareholdersli
ableonlyfort
heamountofthei
runpai
d
sharesandnottheobli
gat
ionsofthecompany .

Theprinci
plef
rom t
heSalamonscasefi
rmlyest
abl
ishedt
hatacompanyhasasepar
ate
l
egalident
ityt
othatofi
tsshar
ehol
dersandhasbeenappl
iedoverawi
derangeof
cases.

RoundaboutLt
dv.By
rne[
1959]I
R423

Theowner sofapubl i
chousewheni ndi
sputewi
thi
tsemployees,
whohadpl aceda
picketonthepremisestr
ansferr
edt hepubtoacompany.Thecourthel
dthatthepicket
mustbel i
ftedastherewasnodi sputebetweent
heemployeesandthenewowner,
despitet
hef actt
hattheownershipofthecompanywasv est
edintheori
ginalownersof
thepub.

Bat
tl
evI
ri
shAr
tPr
omot
ionCent
reLi
mit
ed[
1968]I
R252

Thecour
thel
dthatwhi
leahumanpersoncanrepr
esenthi
mselfi
nCour t,
alegal
per
son
suchasacompanycanonl
yberepr
esentedbyaSoli
cit
ororBarr
ist
er.

Thepr i
ncipl
esetdowni nSalomonvSal omon&Coi sknownast heVei lofIncorpor
ati
on.
Howev eritisnowbeeni ncreasinglyr
estr
ict
edi
nit
sapplicat
iontoani ncreasedextent
bylegli
slati
oni nordert
oprev enttheabuseofl
i
mitedl
iabil
it
yprotect
ionandt oensure
thatl
iabi
lit
yf ortaxisnotbeingav oi
ded.

Thev
eil
ofi
ncor
por
ati
onmayonl
ybedi
sregar
dedbyt
hecour
tincer
tai
nci
rcumst
ances.

ReaCompany
(1985)
[1985]BCLC333

Thecourthel
dthatitwoulduseit
spower
stopi
ercet
hecor
por
atev
eil
ifi
tfel
titwas
necessar
ytopreventaninj
usti
ce.

7
The3mai
nreasonswhyt
hev
eil
maybel
i
ftedar
e

Toenf
orcet
hepr
ovi
sionsoft
hecompani
esact

Toav
oidf
raud,
and

Todeal
wit
hagr
oupofcompani
es

Thecor
por
atev
eil
canbel
i
ftedi
ntwoway
s

Byaspeci
fi
cpr
ovi
sioni
nlegl
i
slat
ion

Btt
hedi
scr
eti
onoft
heCour
ts

1)Li
ft
ingt
heVei
lbyLegl
isl
ati
on

Ther
eareanumberofSt atut
orypr
ovi
sionsthathavetheef
fectofi
gnor
ingtheseparate
l
egalexi
stenceofthecompanybyatt
achingresponsi
bil
i
tyf
orthecompaniesoblgat
ions
toi
tsmember s,ori
nextr
emecases,theDir
ectors,

Per
sonal
li
abi
l
ityf
ort
henumberofmember
s–

UnderSect
ion36Compani esAct1963areductioninthenumberofmember sofa
companybelowthelegalmini
mum –t wointhecaseofapr i
v atecompanyandsev eni
n
thecaseofapubli
ccompanyf oraperi
odofmor ethan6mont hs,theneveryper
son
whoisamemberdur ingthatt
imewhowasawar eofthedef
init
ewi l
lbeheldli
abl
efor
thedebtsi
ncur
redbyt hecompanyint
hatperiod.

Per
sonal
Liabi
l
ityf
orTaxat
ionOf
fences–

Section94oftheFinanceActpr
ovi
desthatwhenat axof
fenceiscommitt
edbya
companywi t
ht heconsentofaper
sonwithi
nthatcompany,thatper
sonmaybesubj
ect
tolegalpr
oceedings

Per
sonal
Liabi
l
ityf
orFr
audul
entTr
adi
ng

Secti
on297CompaniesAct1963st at
esthati
finthecourseofl
i
qui
dati
onaper son
knowingl
ywasapartytocarr
yingonanybusinessofthecompanywit
htheint
entionto
defr
audcredi
tor
soranyotherfraudul
entpur
posethattheymaybehel
dpersonall
yliabl
e
wit
houtli
mitf
orthedebtsofthecompany.

ReHunti
ngLodgesLimited[1985]ILRM 75-TheHighCour theldthedirector
sandthe
pur
chaseroft
hemai nassetli
ableforthecompany ’
sdebtaf t
erittr
anspired,the
pur
chaserpai
dfortheassetbywayof3bankdr aftspayabletofict
it
iouspersonswhi
ch
weret
hendeposit
edbyonedi rectori
nabui l
dingsociet
y.

8
Per
sonal
Liabi
l
ityf
orReckl
essTr
adi
ng

Secti
on297Compani esAct1963st at
est
hatanypersonwhowasknowinglyapart
yto
carry
ingonanybusi
nessoft hecompanyinareckl
essmanner(i
tisadefencetohave
actedhonest
lyandreasonably
)theymaybeheldpersonal
l
yli
abl
ewit
houtlimi
tforthe
debtsofthecompany

Tor
ecogni
set
heexi
stenceofgr
oupsofcompani
es

Undersection150Compani esAct1963ifacompanyhassubsi
diaryunder
taki
ngsthen
consoli
datedgroupaccountsmustbepr eparedshowi
ngt
heprofi
tsandlossesand
assets/
li
abili
ti
esofthegroup.Thecorporat
ev ei
lmaybel
i
ftedt
oidenti
fya
holdi
ng/subsidi
arycompanyrelat
onship.

2)Li
ft
ingt
heVei
lbyt
heCour
ts

TheCourtshaveawi degambiti
ndecidi
ngwhet hertolif
tthecorporat
evei
landitisnot
easytoextr
actageneralpri
nci
ple,
howeveri tisestabli
shedthattheCour
tswill
not
permi
ttheVeilofI
ncorporat
iontobeusedf orf r
audulentpurposes.I
npastdeci
sions
theVeil
hasbeenli
ftedinthefol
lowi
ngsitustions

I
mpl
i
edAgency
-wher
eanagencyr
elat
ionshi
pexi
sts

Gil
fordMotorCompanyvHor ne[1933]Ch935–t hedefendantenter
edint
oanon–
competeagreementwiththecompanyi nt
heeventofhisleavi
ng.Hesoughttoevade
thi
sagreementonleavingbyformi
ngacompanywi thfami l
ymember sasdir
ect
orsand
him asanemployee.Thecourtsl
if
tedthevei
l
.

JonesvLipman[1962]1AllER442, ahousewassol dtoanewl yfor medcompanyto

avoi
danor derf
orspeci
fi
cper f
ormancegivenagainsthim byselli
ngt hehouset
oa
companyformedbybyhi m .RusselJdescr
ibedthecompanyas“adev i
ceandasham,
amaskwhi chheholdsbeforehisfacei
nattempttoav oi
dr ecognit
ionbytheeyeof
equi
ty.
”Thecourtl
if
tedthev ei
l
.

Si
ngl
eEconomi
cEnt
it
y-

Wheretheparentsubsi
diaryr
elati
onshipbetweencompaniesinthesamegroupi
sso
i
nter
li
nkedthattheyshouldbetreatedasasingleeconomicenti
ty.Thecour
tswi
l
lli
ft
t
heveiltor
electtheeconomicandcommer cial
real
it
iesofthesi
tuati
on.

Power
sSuper
mar
ket
svCr
uml
i
nInv
est
ment
sLt
d(Unr
epor
ted22ndofJuneI
981)
-

Acompanyheldal
easewi
tharest
rict
ivecov
enantf
rom ashoppi
ngcent
recompany
whi
chprecl
udedi
tfr
om gr
ant
ingaleasetoacompeti
tor
.Theshoppi
ngcentr
ewas

9
subsequentl
ysoldtoasubsi di
aryofar iv
al businesswhot hensoldpar
tofthefreehol
d
(nolongerleasehol
d)oftheshoppi ngcent r
et oanothersubsidi
aryt
oallowittotr
ade
onthesite.Thecourthel
dt hatalthought henewl yformedsubsidiar
ywasnotpar tyt
o
thecontr
actwi t
htherest
ricti
vecov enantitwasboundbyt hecovenantbecausethe
courtmay“t r
eattwoormor erel
at edcompani esasasingleenti
ty……ifthi
sconformso
economicandcommer ci
al r
ealit
iesoft hesi t
uation”
.

Wheret
hecompanywasf
ormedf
orf
raudul
entori
l
legal
pur
poses,
orf
ort
heav
oidance
ofl
egal
dut
ies

Wher
ethecompanyisbei
ngusedt
oper
pet
rat
eaf
raudorani
njust
iceagai
nstt
he
mi
nori
tyshar
ehol
der
s.

ReBugl
ePr
essLi
mit
ed[
1961]1CH270

Toest
abl
i
sht
het
ruer
esi
dencyoft
hecompany

Dai
mlerv
.Cont
inent
alTy
reCompany[
1916]2ac307

UnderBri
ti
shwar t
imelawstradingwiththeenemywasf or
bidden.Thedefendantowned
moniestotheplai
nti
ffaBri
ti
shr egi
steredcompany,whosedirector
sandsharehol
ders
wereGerman.Thecourtli
ft
edt heVeilandconcl
udedthatthePl ai
nti
ffwasnotobl
iged
topaythedebtasthi
swoul dconsti
tutetradi
ngwit
htheenemy .

Rel
atedcaser
efer
ences

Fol
l
owi
ngcasescanbement
ionedasr
efer
encecasesr
egar
dingt
hei
ssuedi
scussed:

v  Macaurawasal andownerwhosol dti

mberfrom hi
sestatetoacompanyofwhi
chhe
wast hesoleowner .Hei nsur
edt heti
mberthatlayonhislandinhisownnameast he
personinsuredundert hepoli
ciesissuedbytheinsur
ancecompany .Afewweekslat
er
thetimberwasdest royedbyf i
re.Macauraclai
medont hei nsur
ancepol
icy
.Nort
hern
Assuranceclaimedt hatthetimberbelongedtothecompanyandasaconsequencei t
wasnotpr operl
yinsured.

Hel
d:thet
imberbel
ongedt
othecompanyandnottoMacaura.Asar
esul
thi
scl
aim
f
ail
edashedi
dnothaveani
nsur
abl
eint
eresti
nthepr
oper
ty.

v 
 InAber deenRyv sBl aiki
e1854,l ordCranwor t
hst atedi nhisjudgementt hat–“ A
corporatebodycanonl yactbyagent s,anditis,ofcour se,thedutyofthoseagent sso
toactasbestt opromot et heinterestsoft hecor porati
onwhoseaf fair
st heyar e
conduct i
ng.Suchagent shav edut i
est odischar geofaf i
duciarynatur
et owardstheir
pri
ncipal.Andi tisar uleofuni v
er salappli
cationt hatnoone,hav i
ngsuchdut i
est o
di
schar ge,shallbeallowedt oenterintoengagement si nwhi chhehas,orcanhav e,a
personalinterestconfli
ctingorwhi chpossiblymayconf li
ct,withtheint
erestsofthose
whom hei sboundt opr otect…Sost ri
ctlyi
sthispr i
ncipleadher edtothatnoquest i
oni s

10
al
l
owedt
ober
aisedast
othef
air
nessorunf
air
nessoft
hecont
ractent
eredi
nto…”

v 
 ThecaseofFossv sHarbott
le(1843)2Hare461;67ER189r equi
rest
hecompany
i
tsel
ftobethepersonenf
orcingtheright
s.Membersgener
all
ycannotdothi
sonthei
r
company’
sbehal
falt
houghacompanymaysueandbesuedbyi tsownmembers.

v AbdulAzi
zBinAtan&87ORSv sLadangRengoMal ayEst
ateSDNBHD(1985)2MLJ
165isanothercasewhereallthesharehol
dersofthecompanysoldandtransf
err
ed
thei
renti
reshareholdi
ngstoacer t
ainbuyer.Ther
ef or
e,t
hecourthadt
odet er
mine
whetherachangeofemploy
ertookplace.

Held:An incorpor
ated companyi sal egalperson separate and di
stinctfrom it
s
sharehol
ders.Thecompany ,fr
om thedat eofincorporat
ion,hasperpetualsuccessi
on
anddidnotchangeitsident
ityorpersonali
tyev
ent houghtheentireshar
ehol di
ngofthe
companychangedhands.

v  Int hecaseofLeev sLee’ sAi rFarmingLt d( 1961)AC12,Leewasapi l

ot,who
conduct edanaer i
altop- dressingbusiness,for
medacompanyt oconductt hebusiness.
Leehol ds2999shar esoft he3000shar esi nthecompany .Ther emainingoneshar e
wast akenbyhi ssolicit
orasnomi neeforLee.Undert hearti
clesofassociation,Leewas
gov erningdirectorwithv er
ywi depower s.Wor kers’compensationinsur
ancewast aken
out ,nami ngLeeasanempl oyee.Leewaski ll
edwhenhi saer oplanecr ashedwhi l
e
engagedi naerialtop-dressing.Hiswi dowmadeacl aimforpaymentundert heWor kers’
Compensat i
onAct1922.Hercl ai
m wasi ni
tial
lyrejectedonthegr oundthatasLeehad
fullcont rolofhiscompanyhecoul dnotbea“ wor ker”wi
thinthemeani ngoft heAct .
“Wor ker’ wasdef i
nedundert heActasaper son“ whohasent eredontoorwor ksundera
cont r
actofser vice…wi t hanempl oyer.
”

Concl
usi
on

Inconclusion,theeffectsofcor por at
esepar at
eper sonali
tyarefar-
reaching.Acompany
i
sr egardedasal egalentityi ni tsownr i
ghtand,assuch,i tsmember shav eli
mited
l
iabil
it
yf oritsdebt sandobl igations.Thecompanyi sabletoownpr opertyinitsown
nameandi ssueshar estor aisecapi t
al.Iti
sablet osuedebt orsandsi mi l
arlybesuedby
i
tscreditors.Besides,sharehol der sanddi r
ectorscannotbeconsi deredast heagentsor
tr
usteesofacompany .Fi nall
y ,af undament alchar act
eri
sticofcor porateseparate
personali
tyi st hatofper pet ualsuccessi on,whi chr esult
si nacont i
nuationoft he
company ’sexistenceregardl essofi t
smember s.

Sour ce htt
ps:
/ /
www.lawyer
snjur
ists.
com/ ar
ti
cle/%E2%80%9Ca- company -i
s-i
n-l
aw-
dist
inct-
fr
om-it
s-members-t
he-
shareholders-
or-
the-
directors-
are-
nei
ther-
the-agent-
nor-
the-
trust
ees-
of-t
he-company%E2%80%9D- analy
ze-t
he-statement-wi
th-
reference-
to-l
ead/

11