Veil of Incorporation

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C ONTENTS
Introdcution ...................................................................................................................................................................2 Definition of a Company ............................................................................................................................................2 Features of a Corporation ..........................................................................................................................................3 Difference Between a Company and Its personnel .......................................................................................................4 Shareholders ..............................................................................................................................................................4 Directors ....................................................................................................................................................................4 Directors as agent: .................................................................................................................................................5 Directors as Trustees: ............................................................................................................................................5 The Veil of Incorporation ...........................................................................................................................................5 Cases ..............................................................................................................................................................................6 Conclusion .....................................................................................................................................................................8 Bibiliography ..................................................................................................................................................................9

I NTRODCUTION
“A company at law is distinct from its members. A director or a shareholders is neither the agents nor the trustee of the company”
The quotation stated above is a part of the statement delivered by Lord MacNaughton in the House of Lords to provide direction towards maintaining the principle of corporate traits, as set out in the Companies Act 1862. The remaining part of the statement is as follows: ‘The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustees for them.’

The above quote typically describes the company law of Corporate Personality. Corporate personality refers to the fact that as far as the law is concerned a company really exists. As a result of this, a company can sue and be sued in its own name, hold its own property and –crucially – be liable for its own debts. This implies that owners generally are not held liable for the firm’s obligations in excess of the value of their investment. However, certain actions by the corporation or its owners can lead to instances in which a court will determine that the “veil” of limited liability ought to be “pierced.” It is this concept that enables limited liability for shareholders to occur as the debts belong to the legal entity of the company and not to the shareholders in that company.

D EFINITION OF A CO MPANY
A company is a ‘corporation’- an artificial person created by law. It is called a ‘legal’ person. A human being is called ‘natural’ person. A company thus has legal rights and obligations in the same way that a natural person does. The term company is used to describe an association of a number of persons, formed for some common purpose and...
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