Ron Sheeley

Ron Sheeley

Need For Incorporation of Business


Firstly are the expenses of individual investors or loan bosses observing the riches position of different investors, and, secondly, the expenses and different complications of every investor or leaser checking the dangers of the executives actions. Third, restricted investor risk makes it less exorbitant and simpler for investors to enhance their speculations.

₤20,000 shares of ₤1 each, the balance of ₤9,000 was paid to Salomon in cash. Mr Salomon also at this point paid off all the sole trading business creditors in full. Mr Salomon thus held 20,001 shares in the company and his family held the 6 remaining shares.

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Incorporation alone confers upon a business concern a separate legal personality, and resultant legal characteristics like limited liability of members, perpetual succession, etc. as shall be observed in this study. The corporate veil may be lifted in a number of circumstances, for example where a subsidiary company is in liquidation in the context of a group of companies as illustrated in Steel & Tube Holdings Ltd v Lewis Holdings Ltd.

  • Or “shadow directors”, defined under IA 1986 s 251 as “a person in accordance with whose directions or instructions the directors of the company are accustomed to act”.
  • In an unincorporated association, the property is under the ownership of its members.
  • Under conflict of laws principles, this could only be done if Cape Industries plc was treated as “present” in America through its US subsidiary (i.e. ignoring the separate legal personality of the two companies).
  • This principle goes on and on and it is one of the most used principles in today’s world.
  • Something to keep in mind in deciding whether to qualify the entity or change its state of formation is that if you qualify, you will have to comply with certain obligations of two business entity laws — those of the formation state and of the foreign state.

However, there has been a tendency on the part of the courts to pierce the corporate veil-to look beyond the formal features of incorporation and to ascertain who are the flesh and blood individuals responsible for the acts performed by the corporation. Where a wife was held entitled to compensation under Workers’ Compensation legislation as against the defendant company for the death of her husband who was the controlling shareholder of the company and sole governing CONSEQUENCES OF INCORPORATION Separate Legal Personality director. A company is a legal entity formed by a group of people to engage in business. Learn how to start a company and which is the richest company in the world. Essentially, a company appoints a liquidator who sells the corporation’s assets. The company pays any creditors and distributes any remaining money to the shareholders. Most states require the owners to file articles of incorporation with the state and then issue stock to the company’s shareholders.

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A company’s capital adds up to all of the cash or the value of assets received by a company from investors in return for the company’s shares…. A foreign limited liability company may apply for authority to do business in the State of New York by filing an Application for Authority pursuant to Section 802 of the Limited Liability Company Law. A Biennial Statement Amendment may be filed to amend the name and address of a business corporation’s chief executive officer and/or the address of the corporation’s principal executive office. The form for filing a Biennial Statement Amendment is provided by the New York Department of State. You are required to use the Biennial Statement Amendment form provided by the New York Department of State. Once established, a service company/drawdown account may be used to pay for copies of documents, certificates of status, name availability, service of process, and most filings.

Corporate Law Update – Macfarlanes

Corporate Law Update.

Posted: Fri, 30 Sep 2022 07:00:00 GMT [source]

The principle of limited liability is however not absolute, and shall not be available to an incorporated company in certain circumstances specified in the Companies Act. However, this ultimately affected business, and the legislators realized that the solution lay not in not in discouraging the formation of companies, but in ensuring that companies do not commit frauds. Only in 1944 with the passing of the Joint Stock Companies Act in England, did incorporation emerge as a solution.

Becoming a Corporation

The subsidiary company was placed into liquidation and the plaintiff sought the debt owed by the subsidiary from the group of companies rather than the subsidiary as a separate entity. The Court of Appeal agreed with this approach as the subsidiary was not run as a separate legal entity. Some of the factors the Court considered were that the directors of the subsidiary managed the subsidiary as officers of the parent company and did not hold separate board meetings for the subsidiary.

  • Being a qualified pilot as well, he appointed himself as the chief pilot of this company, under its articles.
  • The company owes its existence to the law, and its existence must therefore be brought to an end, only by the means of the law.
  • The creditors must go against the company and it is only if the company is being wound up and there is some evidence of fraud that they may possibly have recourse against the shareholders.
  • If a company’s investors do not do this, so their limited liability is not “contracted around”, their assets will be protected from claims of creditors.
  • The judge found the company was but a façade or front for Mr Lipman and granted an order for specific performance.

Therefore, it reaffirmed the value of the fundamental principle of the separate legal personality of a company. However, the trend to consider a company separate from its employee has not been followed. Indeed, the application of the principle of separate legal personality of a company in similar circumstances has recurred recently. Therefore, such decision denied the principle of the separate legal personality of a company as affirmed in the Lee case and consequently it disclaimed the demand of redundancy laid by Mr. Buchan. Moreover, another example that shows a company as a separate legal personality it is related to the company’s property. In fact, also in this case it is the company which owns its property, not the members.


In fact, it has been developed the idea that at least in some particular circumstances the separate legal personality can be disregarded. Thus, the veil of incorporation and its consequences have affected the decisions of the courts. In other word, considering that a company becomes a separate personality with the incorporation, it has not been easier to affirm when and how to pierce the veil of incorporation. To this concern, two approaches related to the consequences of the separate legal personality have developed. Section 15 of the Companies Act 1993 (“Act”) states that a company has a legal personality in its own right and is separate from its shareholders. This is a principle known as the Salomon principle, originating from the case of Salomon v A Salomon & Co Ltd.


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