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Introduction:

A fundamental tenet of company law is that a company is a separate legal entity from its members or shareholders. As such, the members are not liable to be sued in respect of a breach of the companys obligation. In an extension of this principle, the courts have held that proof of the commission of a tort by a company does not automatically prove that the directors who manage its affairs are also guilty of the tort. The law has carved out an exception to this principle. Where directors order an act by the company which amounts to a tort by the company, they may be liable as joint tortfeasors on the basis that they have procured or directed the wrong to be done.

Meaning:
The separate legal personality of a company means that is a different legal existence to the shareholders. A company may sue and be sued in its own name and holds property separately to its shareholders. As such the shareholders do not own the assets of the company, nor are they liable for its debts: they are the assets and liabilities of the company. It is this separate legal personality that makes companies an attractive vehicle for commercial ventures, as the liability rests with the company, rather than the shareholders, directors, members or company officers. The separate legal entity forms the basis for limited liability of shareholders. Shareholders' liability is limited to the nominal value of the shares allotted to them. This separate legal personality has the consequence that a company has perpetual succession. Its legal existence survives its shareholders and directors. Its existence is ended when it is wound up pursuant to the Companies Acts.

Definition:
A fundamental tenet of company law is that a company is a separate legal entity from its members or shareholders.

Separate Legal Entity:


Some Business entities like corporation, LLC can exist separately from its owners. In a common language that a corporation is a separate entity of its owners and corporation itself is an entity like human being created through legal or official process. Corporation lives and does its activities at its own existences and is treated in its own capacity. It does the business, it generates the revenue, it can incur losses, it hires the employees and it pays its own taxes. It is a better form of existence for the reason it takes its responsibilities itself, owners are free from their personal liabilities and owners enjoy limited personal liability (risk) only

up to their investments in stocks, though there may be certain situations where their personal responsibilities can exceed from limited liability concept. Separate Entity Concept is better choice and it has better features because corporation enjoys separate entity concept, has indefinite life (perpetual). Management and ownership may change but corporation will exist indefinitely at its own existence, unless it is officially dissolved or merged. Corporation has a better scope for large & multiple businesses, expending business, securing debts, attracting investors, retaining professional setup and engaging professional management, promoting & achieving new ideal, expanding its activities at local to global level. Under Separate Entity Concept, Corporation is treated in its own capacity, but it is not a human being, it is an artificial being, therefore, it has to be managed by people in different capacities such as owners, directors, managers or employees, those are supposed to work ethically and represent it in their vested authorities. Corporation seal is used for corporation signature on important and legal documents.

Company as a Separate Legal Entity:


A corporation is a separate legal entity from its owners. In other words, if a corporation, in the course of doing business, is involved in any legal action, then the corporation, for legal purposes, is its own person. The corporation is liable for its taxes - not the owner. This is how corporations may sue and be sued, and their assets are tracked separately. If a corporation is sued, then the owners will not have their personal belongings at risk unless those belongings were purchased with illegal returns from the corporation. In a sole proprietorship or partnership, the owners personally liable. For all intents and purposes, all acts taken by these two company types are taken by the owners themselves. The company becomes a legal person in its own right, distinct from the

Case Study Of Company As a Separate Legal Entity:


The case of Salomon v Salomon & Co. firmly established the principle of the separate legal personality of a company i.e. that a company, once incorporated, is a legal person in its own right and is to be regarded as a separate entity from its members. The court in that case did however recognize that there could be instances where the courts would have to deviate from the principle of separate legal personality (commonly called " lifting the veil of incorporation") by stating that the principle was to be of general application provided that there was "no fraud and no agency and if the company was a real one and not a fiction or a myth."

The case of Salomon v Salomon & Co. firmly established the principle of the separate legal personality of a company i.e. that a company, once incorporated, is a legal person in its own right and is to be regarded as a separate entity from its members. The court in that case did however recognize that there could be instances where the courts would have to deviate from the principle of separate legal personality (commonly called " lifting the veil of incorporation") by stating that the principle was to be of general application provided that there was "no fraud and no agency and if the company was a real one and not a fiction or a myth." The cases in which the corporate veil has been lifted fall into four main categories namely: 1. Where a relationship of agency is found to exist 2. Where the company is being used as a mechanism to avoid legal obligations 3. In the case of a group of companies, where the justice of the case requires that the companies within that group should be regarded as a single economic entity 4. Where the corporate veil is lifted to ensure compliance with a court order

Advantages:

1. Permanent Existence: A company enjoys permanent legal existence. It has a separate legal entity quite distinct from its members. The deaths, insanity, insolvency of shareholders do not affect the existence of the company. The transfer of shares by one person to another also does not stand in the way of its continued existence. 2. Limited Liability: Most of the companies are formed as limited liability concerns. The liability of the shareholders of a company is limited to the extent of face value of the shares held by them. 3. Transferability of Shares: The shares of a public company are freely transferable. The owners of shares do not commit their money for the entire life of the company. They can easily dispose of their shares when ever they so like. This is the most distinct advantage in case of a company form of business.

4. Financial Advantage: A company can raise any amount of capital from the general public by issuing shares and debentures provided it is duly approved by the appropriate authority. Thus accumulation of fund is generally not a problem to undertake any large scale operation. In fact, where large-scale business is to be undertaken in which huge amount of investment is to be made, company organization is the best method. 5. Better Management: The management of companies is done by the directors elected by the shareholders. Due to this, shareholders elect only such directors who are experts and posses special knowledge and skill in their respective field so that management of the business may be done with maximum efficiency and ability. 6. Economies of Scale: Large scale operations result in several advantages to the company as well as the consumers such as economy in purchasing, distribution overhead expenses and others. As a result the cost of production of goods become minimum leading to higher profit, consumer, enjoys cheaper price leading to higher demand. 7. Ability to cope-up with changing Business Environment: Modern business units operate in an uncertain economic, political, social and technological environment. Continuous changes in the wants and needs of customers, replacement of old machinery by new one, changes in the processes and techniques of manufacture make it compulsory for business units to invest huge recourses in conducting researches in various field connected with business life. Only large scale business units can afford for such changes. 8. Diffusion on Risk: In sole trading, all risk are rest with a single individual. In partnership, the risk of business is distributed among the few who are partners. But contrary to these situations, in case of company the risk is distributed among large number of share holders and as such no body feels the burden of risk. From the point of view of an investor, this is the specialty with company form at business.

9. Scope of Expansion: With large amount of capital, a company can expand its business activities as much as its likes. In this way, the company can enjoy all the advantages of conducting business on a large scale. In fact, there is also a great scope for self-generating growth by reinvestment of the surplus in the same business. 10. Greater Public Confidence: From the birth to its liquidation, there is full legal control of the activities of a company. Therefore, public has greater confidence in companies than they have in sole trading or partnership. 11. Better use of Economic recourses: The company organization makes a great contribution in making the best use of the economic recourses of a country. It draws the funds in form of share capital from general public as well as institutional investors. Institutional investors collect fund from public. Thus fund in small lot are gathered and invested in big projects the project also utilities the material, human resources of the country in more productive ways. 12. Democratic Organization: As in a democracy the representatives elected by people take up administration for the people, similarly the management of the company is done by the elected board of directors on behalf of and for the shareholders of the company. Thus, the organization of the company is democratic. 13. Social Benefits: The company form of organization is an effective medium for mobilizing the scattered savings of the community and investing them in different commercial and industrial enterprises. It is indirectly helping the growth of financial institution like banks, insurance companies etc. by providing avenues for the investing of their funds into shares and debentures. It offers employment to many people. Further, it produces largest volume of goods and services for the consumers and contributes the major share of revenue of the Government both through direct and indirect taxes. It also takes up many a social activity like education, health, environment, housing and others.

14. Statutory Regulation: Formation and working of companies are well-regulated by the provisions of the companies Act. The provisions regarding compulsory publication of some documents, accounts, directors, reports etc. create public confidence. Thus, the law ensures healthy management of the companies in the interests of the share holders and the public.

Conclusion:
It is clear from the case law in this area that the courts are keen to reaffirm the importance of the Salomon principle in company law and that the separate legal personality of a company will not be disregarded with ease.

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