. A company is an artificial legal person in the sense that on the one hand, it is created by a process other than: nah oral birth and does not possess the physical attributes of a natural person, and on the of her hand, it is clothed Ninth many of the nights of a natural person. It is invisible Immortal (la No lone can disso N e it) and exists only in the eyes of law it leas no body N: no soul, no conscience, neither it is subject to they imbecilities of the body. It is because of those physical disabilities that a company is called am artificial person. But it cannot be treated as aft cities tenth because is really exists. As a rule, a comp my may acquire mad dispose of property, it may enter into contracts through the agency of Nan al persons,: it may be fined for the contra mention of the provisions of the Companies Act Thus fog most legal purposes a company is a legal person just like a natural person, w ho has rights and duties at lave. In short, it may be said, therefore, that a company being an artificial legal person can do ever Thug hake natural person, except of course that, it cannot take oath. cannot appear in its own person in the court (must be represented by counsel), cannot be sent to jail, cannot practice a learned profession like law or medicine. nor c m it
3. Independent legal entity. A company is a legal person having a justice personality entirely district from and independent of the individual persons who are for the time being its members (.Arian are Industries Ltd. vs. C G of Evacuee property it has the right to own mad transfer the title to property in any way it likes. N To member can either individually or jointly claim any ownership rights in the assets of the company during its existence or in this winding up (Mrs. BE Gander vs. The Commissioner of Income Tax). it can sue and be sued in its own name by its members as well as outsiders. Creditors of the cm are creditors of the company alone and they cannot directly proceed against the members personally
person. A company is not merely the sum total of its component members, but it is something superadded to them. In mathematical language it may be defined person, NN lure n stands for the total number of members and the me the person for the company itself. Even if a shareholder owns virtually the whole of its share, the company is a separate legal entity in the. eyes of law as distinguish from such a shareholder. This principle was judicially recognized by the House of Lords in the famous case of Salmon vs. Salomon & Co. Ltd
Case study. In this case, Mr. Salmon, who carried on a prosperous business as a leather merchant, sold his business for the sum of £30,000 to
Salomon & Co. Ltd'. which consisted of Salomon Itself, his wife and daughter and his four sons? The purchase consideration was paid by fife company by allotment of 20,000 fully paid '£1 shares and £10,000 in debentures conferring a floating charge over ail the company's assets, to Mr. Salomon. One share of £1 each was subscribed for in cash by the remaining six members of lust family. Salomon was the Managing Director of the company
INCORPORATION OF A Company 41
‘presence of at least trio directors and of the secretary or such other person as tile Board: mad aplomb for the purpose, ate those two directors and the secretary or; other person aforesaid shall sign even instrument to which the scat of the company-is so affixed in their presence Under its common seal a company may, in v riling, appoint any person as its attorney to Execute deeds on its-behalf Limited habit. The liability of the for the debts of the company is limited to the amount unpaid on their shares howsoever heavy losses the company might have suffered. For example, if a share older buys IW shares of Rest. 10 each and pays Est. 5 off each share, he has paid Rest. 500 and can be made to pay another Rest. 500, but he canniest be made to pay more
‘than Rest 1,000 in all. No shareholder canoe called upon to pail more than the nominal or face value of shares held by him in case of a company with hmmtedbability. (Later we shall see that the Act also Infidel for the creation:
of a cbmparly Limited bygnarantee' and a company with ‘Uri limited Liability’, but cornpones with ‘limited liability’ is most popular) Tutus, by virtue of this characteristic the personal properly of the shareholder cannp, t is seized for the: d bats of the company, of lie hold a fully paid-up share.
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