Company Law Essay Example | Topics and Well Written Essays - 2750 words - 1

Company Law - Essay Example The House of Lords also held that once a company is incorporated, it acquires a legal status or personality that gives it the capacity to sue or be sued under its own name5. This implies that a company can file civil or legal proceedings against any person including the members who form it in its own name as noted by Talbot6. At the same time, the shareholders of the company can sue the company in its own name in case of breach. The House of Lords further noted that a legal entity in the form of a company exists perpetually; it is only when a company is liquidated or wound up that it stops to exist legally. This implies that the death of members of a company does not affect the existence of the company. Since the company is a separate entity, it will continue to operate even if all the members who formed it are dead7. This is attributable to the fact that the company will acquire other members such as through the issuance of shares or debentures to ensure its continuity8. The company can also employ workers in its own name to ensure its effective and efficient operation. Based on the precedence set by the House of Lords in Salomon v Salomon (1897) it is enshrined in English law that when an entity is incorporated, it is considered to be a separate legal personality. In this respect, the entity becomes separate from the individuals or organizations who take part in it. In other words, the owners and directors of the company or members of the company considered to be separate from the company. For a company that is limited by shares, the law assumes that it exists perpetually irrespective of the changes that may occur with respect to its constitution and membership. Furthermore, an incorporated entity can own any kind of property and hence has... This paper approves that the court further considered whether the subsidiaries were agents of the parent or not and analysed the situation from the corporate veil point. The Court of Appeal rejected the notion of treating the corporations as a single economic entity and held that the interest of justice did not feature as criteria for lifting the veil. The Court further held that that agency did not apply in the case much as sham and fraud did not apply in the same case. In making a ruling, the court noted that only three circumstances warranted the unveiling of a company; where a company is merely a facade, where a court is making interpretation of a statute, and when the subsidiary is an agent of the parent. This report makes a conclusion that a company is accorded equal treatment to that that may be given to any other independent individual. If for example, a sole trader incorporates his or her business and engages in contracts through the company as opposed to using his or her own name, then the company by law is not considered a trustee or agent of the sole proprietor. The existence of the new â€Å"person† that is the company survives its members, directors, shareholders, and employees for as long as it has not been liquidated or wound up. In as much as the Salomon case upholds the notion of separate legal personality, courts sometimes go to the extent of lifting the veil of corporation to establish the human faces behind the companies.