Question
It is a basic doctrine of company law that a company is a separate legal entity. Discuss the consequences of the separate legal entity doctrine.
It is a basic doctrine of company law that a company is a separate legal entity. Discuss the consequences of the separate legal entity doctrine.
Explain the doctrine e.g., once a company is formed it is an artificial legal entity separate and distinct from its members (shareholders) and its management (directors). Discuss Salomon v A Salomon & Co which established that this principle applies even if the company is managed and controlled by a single shareholder.
Discuss the various consequences of separate legal entity e.g. has the legal capacity of a natural person, may sue and be sued, may own property, may issue shares, enjoys perpetual succession, etc. Coupled with limited liability, the corporate veil ensures that shareholders are not personally liable to creditors of the company.
Explain why this doctrine of separate legal entity may result in undesirable consequences, e.g. the company may be misused for dishonest purposes. Explain with examples when the corporate veil will be pierced (support your answers by citing cases and statutory provisions). When using case law ensure you explain the reasons behind the decision.
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