Corporate Legal Personality Case Study

The concept of Corporate Legal Personality is that a company is a separate legal entity to its owners, who share limited liability for it, unless the court rules against it. It is one the most defying concepts for company law and was first established in Solomon v Solomon case in 1912, where the house of lords ruled that " the company is at law a different person altogether from the subscribers to the memorandum " thus creating the concept of “Corporate Veil”. Currently, under the Company Act 2006, once the company fills in all the needed documentation and registrar issues the certificate, the company comes into existence as a separate legal personality and maybe continue to exist indefinitely (or until it get insolvent) and should be treated

First and foremost, since the company is treated as its own legal entity from the date of incorporation the ownership of all the property, contracts, debts belong to it, and therefore in normal circumstances in case of problems it would get sued, not the members of the company, thus letting them only have a limited liability over it (limited by their investment in the company), which allows to separate people who own the company from those who control it, since their interest might not be aligned in all times. It is particularly true in cases of large conglomerates, such as Barclays bank

Contracts that were entered before the incorporation are a bit of grey area. Normally the company would not benefit from it nor would it be held liable by it, unless they manage to adopt it through ratification. To do that they would have to prove that the contract was entered by a promoter on behalf of the company and that it would benefit it. This could be forced by the other party as well, should the newly incorporated company try to hide behind the fact that it was a pre-incorporation

However, this is not always a positive thing for a company as demonstrated in Macaura v Northern Assurance Co Ltd, where the owner insured timber on his own name, but when it burned the insurance company was able to claim that since the timber was not owned by him, but by his company, he had no interest in it and therefore refused to