Its difference will be highlighted via reference to the facts of the case. where the fraudulent act is done to a customer (s) of the company. It is a legal person with its own legal personality separate from that of its shareholders or directors. See the Lennard’s Carrying Co Ltd v Asiatic Petroleum Co Ltd(supra). The court however found that the company was only a mere facade intended for receiving cash and operated no business at all. Company becomes an “individual person”. This remedy is less drastic and has been used in instances where it is necessary for legislative purposes to know who the people controlling the company are for example, for purposes of BBEE compliance. INTRODUCTION The concept of a separate legal entity is the guiding principle that Company Law has been based on. This has significant implications in tort cases, wherein tort creditors of a company in a group could only enforce their legal right against the debtor company. By this natural persons will not be held personally liable if an act is done in the name of a company. See the case of Jones v Hellard where the chief executive of a company was held liable for including the title fellow of the Royal Institute of British Architects (FRIBA) after his membership expired. However, the courts began to recognise that instances existed whereby there has been some form of abuse of this privilege of separate legal personality by directors or shareholders whereby it then becomes necessary to create exceptions to the fundamental principle of separate legal personality. However such a person may be prosecuted at anytime for such criminal act and if found guilty maybe sentence to period spanning 10 years and maybe disqualified under section 2 the CDDA 1986. See also the case of Kensington International Ltd v Republic of Congo where the veil was lifted to expose the Republic of Congo as the sellers of oil and receiver of profit from the sale. The company ran into some financial difficulties and sort a loan of £5,000 from one Mr Edmund Broderip who granted the loan. Additionally, it refers to how upon incorporation, companies are considered separate legal entity from its members with the legal capacity to own assets and liabilities. However, it will be argued that the courts development of these exceptions has safeguarded against the threat of destroying this foundation of company law and is a necessary tool to ensure that separate legal personality is respected. In Foss v Harbottle, the Court upheld the principle of separate legal personality and held that in the event that the company is involved in legal proceedings, it must be initiated in the name of the company, and not in the name of the shareholders or directors as it is the company, which exists as its own legal person, itself being sued or suing. Posted in Artificial intelligence Technology and innovation. See the case of Jones v Lipman where the court held the first defendant liable to the plaintiff and not the company as in the word of the judge the company was a ‘cloak’. See also the case of Woolfson v Strathclyde Regional Council where the court ruled that the court will only deny corporate status where the company is found to have been incorporated for the purpose of carrying out a fake business or not for the purpose for which it makes others believe. Where a court simply ‘lifts the corporate veil’, there is no removal of the protection that is afforded to shareholders and directors and the court merely takes into consideration who the shareholders and directors of the company are, rather than attributing liability to these natural persons. Where natural persons have acted in their capacity as employees of a company it is only reasonable that liability goes to the company. Contrast this with case of Ord v Belhaven Pubs Ltd where the court argued that where there is no sufficient evidence to pierce a company’s veil if will refrain from doing such. It is separate from its owners (the members/shareholders) and those people who run it on a day to day basis. There is no doubt that the decision in Salomon’s case established the separate legal personality of a company, allowing shareholders to carry on trading with minimal exposure to the risk of personal insolvency in the event of a collapse. See the case of Dimbleby and Sons Ltd v National Union of Journalist where Lord Diplock pointed out this difficulty. See the case of Tunstall v Steigmann . See the case of Jones v Lipmam (supra) where the court orders specific performance against the defendant company which was merely a hoax. One exception to this principle of separate legal personality exists in the remedy of ‘piercing the corporate veil’ which developed through common law and empowers the court to ‘pierce the corporate veil’ and as a result, remove the protection that is afforded to shareholders and directors and examine the substance of the company, rather than the form under which it has been incorporated. Moreover, the courts have retained a balancing act in order to ensure the fundamental principles of separate legal personality is protected and only disregarded when the balance tips in favour of mitigating the abuse of this privilege. Not to be confused with Corporate personhood. It is necessary to further distinguish between ‘piercing the veil’ and ‘lifting the veil.’ In instances where the court pierces the corporate veil, the court will completely disregard the separate legal personality of a company and as a result, attribute the liabilities of the company on the shareholders or directors and remove the protection afforded by separate legal personality. By incorporation it means a company becomes a corporation or body corporate. Save my name, email, and website in this browser for the next time I comment. Separate Legal Personality. Subsequently the company went into more financial difficulties and was unable to pay its debt of which an action for liquidation was carried out against it. Piercing the corporate veil reframed as evasion and concealment Consequently, the target becomes a subsidiary retaining its separate legal personality. The second instance in which the court will not hesitate to pierce the veil and go after a natural person is where the company had been incorporated to escape liability to third parties. See also the case of Director General of Fair Trading v Pioneer Concrete (UK) Ltd and the case of Bank of Credit and Commerce International SA where the court attributed the ‘directing mind and will’ to individuals who were not part of the directing body in order to prevent the directing mind and will of the company from escaping liability. The stricto sensu rule emanating from the case is that upon incorporation companies have a ‘separate legal personality’ which acts as a ‘corporate veil’ protecting the persons operating and running the company from liability. The Act has however failed to define what constitutes an ‘unconscionable abuse’ of separate legal personality and therefore, the common law principles which have been developed serve as a useful guideline for the courts. 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