CORPORATE PERSONALITY

Corporate Personality



Corporate Personality

Corporate Personality

Corporate personality is, in fact, a corporate legal personality. The concept of corporate personality is not modern day contemplation. The corporation as a legal entity is in existence from the last 500 years. Nonetheless, with the traditional connotation the concept of a corporation to exist as a legal person is not more than 100 years old. The modern corporate personality concept supports a corporation even if the business is not earning profit or is there only to limit the shareholders liabilities (Clark 1996, pp. 299-367). According to the UK company laws, a corporate personality exists in actuality, discretely and different from its owners. Therefore, according to the law, a company (as a corporate person) can sue and can be sued in its own name and identity. Moreover, the company as a corporate personality can own and hold its own property. By virtue of that, it is liable for its own debts.

Rationale for the Principle

The rationale behind this doctrine is that it limits the liability of the shareholders. Therefore, all debts and liabilities belong to the legal, corporate personality of a company and not to its shareholders. Corporate legal personality and the limited liability are not synonymous terms. Limited liability of shareholders is a legal consequence of the discrete corporate personality in existence under the company laws. The shareholders no doubt have to lose their initial investment in shares, but they are never responsible for the debts of a company. A company incorporated under the law is a separate legal entity and is responsible for its own debts. After the liquidation of a company, the assets meet with its liabilities and the properties of its shareholders remain intact (Frederic 1997, pp. 177-185). The evaluation of UK company law with reference to corporate personality concerns the basic idea that a company or corporation is a distinct legal personality distinguishable from its shareholders or owners including employees, as well. This concept had developed with the promulgation of UK Companies Act 1862 that incarnated in the modern times in the shape of Companies Act 2006.

This is the longest law in the law making history of the British Legislature. This is a law stretched over 700 pages, contains 1300 sections and 15 schedules. Superseding the Companies Act 1985, its enforcement took place in stages and that law enforcement process finalized in October 2009. The concept of corporate personality stands unshaken in the law history with the historical court case of Salomon vs. A Salomon & Co. Ltd (1897). Mr. Salomon, a leather boot manufacturer, got a limited company incorporated. His wife and the five children were the shareholders. Soon, his company faced problems and had to get a loan of Pound Sterling 5000 from one Edmund Broderip. Nevertheless, the business failed and eventually liquidated. Broderip got his money back, but others could not (Kershaw 2009, pp. 266-348).

Circumstances of cases against the owners

The liquidator in Salomon's case regarded the very company of Salomon as charade and required ...