Explain the statement that “a company is a legal entity quite separate from the persons who constitute it.”

It is a trite principal of law that when a company is incorporated or registered it becomes a legal person distinct and separate from its members.
• It becomes a body corporate.
• It acquires an independent legal existence with rights and subject to obligations.
• This is the rule in Salomon V. Salomon and Co. Ltd (1897) where Lord MacNaghlen was emphatic that “…..The company is at law a different person altogether from the subscribers to the memorandum.”
• The principle of legal or corporate personality of a company is now contained in Sec 16(2) of the Companies Act.
• That the company is a legal entity separate from its members is illustrated by the following arguments.
– Limited Liability: Liability of members for its debts and other liabilities is limitedby shares or guarantee. This principle is contained in Section 4 (2) (a) and (b) of the Companies Act.
– Sue or be sued: a company has capacity to enforce its rights and may be sued on itsobligations. It was so held in Foss V. Harbottle (1843).
– Perpetual Succession: the life of a company lies in the intendment of law. This isbecause it is a creation of law.
– Owning of Property: a registered company has capacity to own property (Sec 16
(2) “power to hold land.” The property of a company is vested in it. It was so held in Macaura V. Northern Assuarance Co. (1925)
– Capacity to contract: a registered company has capacity to enter into contractualrelationships. It has capacity to hire and fire. It was so held in Lee V. Lee Air Farming Co. Ltd. (1961).
– Common Sea: Under Sec 16 (2) of the Companies Act, a registered company has acommon seal to authenticate its transactions.

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