Discuss the consequences of incorporation

• Limited liability: members are as a general rule not liable to make good the debts of corporation. In registered companies, members can only be called upon to contribute the amount unpaid on their share or the amount they undertook to contribute.

• Perpetual succession: a corporation is a creation of law. It has no body, mind or soul.Its life lies in the intendment of law. Death of a member has no effect on its existence. It has capacity to exist in perpetuity.

• Sue be sued: as a legal person with rights and subject to obligations, a corporation has capacity to sue to enforce the rights and may be sued on its obligation. As was the case in Foss V. Harbottle (1843).

• Owning of the propery: a corporation has capacity to own property. The property of a corporation is vested in it and not on its members. It can therefore insure such property as it has an insurable interest in it. It was so held in Macaura V. Northern Assurance Co. Ltd. (1925).

• Legal or corporate personality: corporations are legal persons in their own right i.e.they have an independent legal existence with distinct rights and subject to obligations. In company law, once a company is formed it becomes a legal person, distinct and separate from its members – it was so held in Salomon V. Salomon and Co. Ltd.

• Capacity to the contract: corporations have legal capacity to enter into contractual relationships in pursuit of their objects. Additionally, they have capacity to hire and fire. It was so held in Lee V. Lees Air Farming Co. Ltd (1961)



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