Company as Legal Entiy

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THE MOST DISTINGUISHED CHARACTERISTIC OF THE COMPANY AS A FORM OF BUSINESS IS THAT IT IS A LEGAL ENTITY.EXPLAIN WHAT IT MEANS. A company is considered a legal entity( artificial person created by the law).The law treats a company as being a separate person from its members and those who manage it.(The modern law review vol 31-pg 481) The following are characteristics which makes a company a legal being: a)Has a right to own properties.

A company owns its own properties. Directors and shareholders do not own the company’s properties, the company does.(no shareholder has any right to any item of property owned by the company, he has no legal or logical interest in it. Example.

MACAURA v NORTHERN ASSURANCE CO LTD (1925) AC 619
“Macaura own land on which stood timber. He sold the land and timber to a company he formed and received as consideration all the fully paid shares. The company carried the business of felling and milling timber. A fire destroyed all timber which had been felled. Macaura had earlier insured the timber against loss of by fire in his own name. He had not transferred the insurance policy to the company. When Macaura made a claim his insurers refused to pay arguing that he had no insurable interest in the timber. Only persons with a legal or equitable interest in property are regarded as having interest in it. The insurers were not liable. Only Macaura’s company, as owner of the timber, which had the requisite insurable interest in it. Only the company, and not Macaura, could insure its property against loss or damage. Shareholders have no legal or equitable interest in their company’s property”( http://syarikat.tripod.com/english.html) b)Can sue or be sued.

It can sue and be sued in its own name. The members of the company generally cannot take any legal action on behalf of the company. Only the company itself can enforce its rights. Example
FORSE V HARBOTTLE
Richard Foss and Edward Starkie Turton were two minority shareholders in the...
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