Law

Law

Law

Introduction

Separate Corporate Personality is a concept with which companies are signified as a separate legal formality, which is distinct from the shareholders of the firm. The company bears the liabilities, but the shareholders are not affected by the same[1]. Therefore, the business lacks the physical existence but maintains a legal existence according to the company law. On the other hand,  according to Andreas and Wooldridge, Limited liability is a situation where the investment that one has on business or partnership is limited to a fixed sum of money, and thus if the company under judgment, the investors, and owners are not liable to the sue, and thus they exist as distinct persons from the enterprise[2]. The intention of this paper is to debate the implications of Kahn-Freund to business formation according to the concept of Separate Corporate Personality and the Limited Liability.

Discussion of Major Concerns

According to the Kahn-Freund, traders or groups of traders are tempted by the enforced law to register their business under the alias of a limited company since there is no risk of being sued in cases where outside parties sue the firm. Kahn-Freund argues that the formation of the limited companies has become an easy path of evading taxes and liabilities of the business. [3]Therefore, business owners hide behind the covers of the limited companies and conceal the primary interests of the firms, their main goal being to evade the liabilities if they may occur. According to Mancuso, the shareholders are not liable for the debts of the company other than the invested amount to the company and for any shares that remain unpaid. Although the stated is true, the investors are still liable for their acts such guarantees for debts, which they will be responsible for as explained by McLaughlin.

When regarding the cooperate personality, Kahn-Freund argues that firms exhibit a separate identity from that of the shareholders, but the law recognizes the entire company as a member of the trade association[4]. He poses questions asking whether it is ethical to let business persons assume the responsibility of co-operating owners regarding beneficial aspects and refrain from the blame when the liabilities are to be levied on the company. Mancuso argues that the regularity of piercing the veil of the corporate is applied by the court of law to impose the exception of to the separate legal identity principle. Therefore, the court can regard both the shareholder and the firm as one person[5]. In such cases, the shareholder is held responsible for the actions of the corporation as if it is they are the actions being undertaken by a legal person. According to Samad veil of incorporation may be lifted in cases where the company is charged with an abuse of separate identity or there is a suspicion of fraud within the cooperate.

Regardless of the two twin cases of Separate Corporate Personality and the Limited Liability, some limitations exist, and they may cause adverse effects in cases where the owners of the firms have a separate identity from that of the Company[6]. On other terms, Law has the permits to uncover the veil and regard the two entities as one party depending upon given cases.

Bibliography

Andreas, M., and Wooldridge, F., European Comparative Company Law, Cambridge University Press, 2009.

Kahn-Freund, O., Some Reflections on Company Law Reform’s The Modern Law Review, 1944, pp. 54-66.

Mancuso, A., Your Limited Liability Company, Berkeley, California: Nolo, 2013.

McLaughlin, S., Unlocking Company Law, Abingdon, Oxon: Routledge, 2015.

Samad, M., Court Applications under the Companies Acts, Haywards Health, West Sussex: Bloomsbury Professional, 2013.

[1] Andreas, M., and Wooldridge, F., European Comparative Company Law, Cambridge University Press, 2009.

[2] Kahn-Freund, O., Some Reflections on Company Law Reform’s The Modern Law Review, 1944.

[3] Mancuso, A., Your Limited Liability Company, Berkeley, California: Nolo, 2013.

 

[4] Mancuso, A., Your Limited Liability Company, Berkeley, California: Nolo, 2013.

[5] McLaughlin, S., Unlocking Company Law, Abingdon, Oxon: Routledge, 2015.

[6] Samad, M., Court Applications under the Companies Acts, Haywards Health, West Sussex: Bloomsbury Professional, 2013.

 


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