Separate legal personality


HideShow resource information
  • Created by: Lucy
  • Created on: 18-07-15 16:41
What is a company
An association of members (shareholders) formed to conduct business or other activities in the name of the association
1 of 27
Who do corporations have separate legal personality distinct from
their memebers
2 of 27
What does separate legal personality distinct from their members mean
they can be sued and can sue
3 of 27
Most companies are incorporated under what Act by complying with the registration procedure
Companies Act 2006
4 of 27
private ltd companies or public limited companies (plc) can strictly knows as
registered corporations aggregate
5 of 27
Other types of corporation are
Statutory Corporations, Corporations formed by Royal Charter and Corporation Sole
6 of 27
What does 'liability to members is limited to capital they contribute' mean
they will only have to contribute any amount unpaid of their shares
7 of 27
Company has unlimited liability for who
its own debts and can be held liable for torts + crimes.
8 of 27
Guarantee Companies
can omit limited from their names. Typically charities . They are set up by government.
9 of 27
Unlimited companies
no limit to members liability and no requirement to file accounts
10 of 27
Community interest companies (CICs)
Used by not-for-profit social enterprises that provide some sort of community benefit, wishing to operate under a corporate structure. Limited by guarantee or shares.
11 of 27
When can CICs issue investor shares that are eligible for dividends.- level of dividends will be capped
Limited by shares rather than guarantee
12 of 27
Who are CICs not available to
Political parties or political fundraisers
13 of 27
What are CICs unable to do
obtain charitable status BUT charitites can set up CICs as subsidiaries
14 of 27
What must CIC do
produce and file annual report containing CIC relevant information.
15 of 27
What does the veil of incorporation mean
Members shielded from those who deal with the company
16 of 27
Salomon V Salomon Ltd
39K made of 9K cash, 20K shares + debentures of 10K in company. S=19994 share family took remaining failed. Assest 6K + creditors. S claimed 6K as he was secured creditor. Held:S claimed 6K
17 of 27
What are the implications of the effect of separate legal personality
Members liability is limited - nominal value of shares they own, perpetual succession - company will carry on, ability to own property - belong to company not members, transferability of shares - easy to transfer ownership of company from members
18 of 27
Raising finance is generally easier for companies why?
Companies can grant fixed and floating charges, companies can issue shares without giving up management rights, becaue they appear better organised and easier to appraise
19 of 27
Who is liable under the S.213 insolvency Act (IA) 1986 - fraudulent trading (civil)
Anyone carrying on trade with the intention of defrauding creditors can be liable. On winding up the person may be forced to contributed to the assests of the company
20 of 27
If a company goes into liquidation what does the Wrongful trading Act (Civil) state
Directors + shadow directors may be forced to contribute to the assets of the company
21 of 27
in cases of fraud, other illegality or simply sharp practice what will the courts look for
the controlling mind of the company by lifting the veil
22 of 27
Gilford motor co V Horne - evade legal responsibilities
H had been employed by G under a contract preventing him from competing for a period after leaving G. H set up company to compete and claimed that he was not competing personally. Held: Veil lifted, injunction granted against H
23 of 27
Ebrahimi V westbourne gallerires - fair + equitable
Courts drew back veil to grant Director of a 'partnership type company' similar rights to a partner in a partnership
24 of 27
Daimler V Continental tyre and rubber company - public interest
D bought tyres, Uk registered company. Following outbreak of First World War, Daimler refused to pay for tyres as Germans controlled CTR. Held: D didn't have to pay debts until war ended,
25 of 27
Groups of companies are treated as
separate entities - holding companies are not generally liable for the debts of their subsidiaries
26 of 27
Adams V Cape industries
Corporate structure being used as a facade. statute provides for group to be treated as a single economic entity and S acts as agent for H.
27 of 27

Other cards in this set

Card 2


their memebers


Who do corporations have separate legal personality distinct from

Card 3


they can be sued and can sue


Preview of the back of card 3

Card 4


Companies Act 2006


Preview of the back of card 4

Card 5


registered corporations aggregate


Preview of the back of card 5
View more cards


No comments have yet been made

Similar Accounting resources:

See all Accounting resources »See all ACCA F4 resources »