Corporate Personality
The core rule
On incorporation the company becomes a body corporate with perpetual succession, capable of suing and being sued, owning property, contracting and holding a common seal. It is a legal person distinct from its members, directors and promoters: Salomon v A Salomon & Co Ltd [1897] AC 22. Limited liability is a consequence of incorporation, not the same thing - an unlimited company is still a separate person.
Consequences examiners expect
- Property belongs to the company, not shareholders: Macaura v Northern Assurance Co Ltd [1925] AC 619 (a shareholder had no insurable interest in company timber).
- A director may also be an employee: Lee v Lee's Air Farming Ltd [1961] AC 12 (governing director's widow recovered workers' compensation).
- Wrongs to the company are enforced by the company, not by individual members: Foss v Harbottle (1843) 2 Hare 461.
- Perpetual succession: death or insolvency of members does not dissolve the company.
- Criminal liability attaches through the directing mind and will (Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd; Tesco Supermarkets Ltd v Nattrass).
Worked example
Chief Ade holds 90% of XYZ Ltd and treats its bank account as his own, paying school fees from it. A creditor sues Ade personally. Issue: is Ade liable? The starting point is no - the debt is the company's. The creditor must plead an established exception (fraud, sham or alter ego, agency). Mere sole ownership and control is not enough; Adams v Cape Industries plc [1990] Ch 433 requires a specific ground.
Traps
Saying incorporation "limits liability" without distinguishing unlimited companies; treating control as proof of identity; forgetting Foss v Harbottle when a shareholder sues for a loss that is really the company's.