Meaning of Legal Personality in Company Law | ANG
  • October 4, 2023

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Legal personalities granted to companies registered as separate legal entities protect members and shareholders from liability, ensure the operation of the company in the event of the death of a member and ensure the legal and financial independence of the company. Based in part on the principle that corporations are simply organizations of individuals, and in part on the history of the legal interpretation of the word “person,” the U.S. Supreme Court has repeatedly held that certain constitutional rights protect corporations (such as corporations and other organizations). Santa Clara County v. Southern Pacific Railroad is sometimes quoted for this statement because the court reporter`s comments included a statement by the Chief Justice made before the hearing began, telling counsel during pre-trial preparation that “the court does not wish to hear arguments as to whether the provision of the Fourteenth Amendment to the Constitution, which prohibits a State from denying equal protection of the law to any person within its jurisdiction applies to such corporations. We all agree that this is the case. The concept of legal personality for organizations of persons is at least as old as in ancient Rome: a multitude of collegiate institutions enjoyed the advantage of Roman law. The doctrine became Pope Innocent IV. , which seems to have at least helped spread the idea of persona ficta, as it is called in Latin. In canon law, the doctrine of persona ficta allowed monasteries to have a separate legal existence from monks, which simplified the difficulty of balancing the need for these groups to have infrastructure, even if monks took a vow of personal poverty. Another effect of this was that a monastery as a fictitious person could not be convicted of the crime because it had no soul, which helped protect the organization from non-contractual obligations to the surrounding communities. This effectively transferred this responsibility to the people acting within the organization, while protecting the structure itself, as individuals could be seen as moving and therefore negligent and excommunicated.

[18] Registered trade unions are legal persons. They may, by uniform representation proportional to their members, conclude collective agreements binding on all persons belonging to the categories specified in the agreement. Solomon is the case study in terms of distinct personality and states that once a company is legally incorporated, it becomes a legal entity with its own rights and obligations distinct from those of its members. One of the arguments against Mr. Salomon was that he had fraudulently “founded” the company, contrary to the true and deliberate meaning of the Companies Act, and that he should therefore be held liable for all his debts. However, the House of Lords rejected this proposal, reiterating that the policy of the Act is to allow people to set up businesses to avoid further personal liability.[3] Lord Herschell rejected another proposed argument concerning freedom of action, stating that a company is not a representative of its members, so that shareholders cannot be obliged to offset the company`s debts.[4] Lord Macnaghten also noted that even if a company is the same after incorporation, “the same people are managers and the same hands receive the profits”[5], the company is not an agent of the underwriters, whether or not it has issued most of its capital to one person.[6] Members of a separate legal entity can effectively enter into a legal agreement with the company itself and, if necessary, take legal action against the company. This possibility for the company to be sued and liable provides the corporate veil or liability protection for which companies are known. Creditors can sue the company for debt, but not its owners or shareholders.

The law stipulates that companies and organizations may have rights and obligations, as may individuals and individuals. This applies to companies that have a legal form with legal personality, such as a private or joint-stock company (bv or nv). The company is then a legal person. You establish a legal person by means of a deed with a notary. If you have a company with legal personality, you are not personally liable with your own money for debts or claims for damages, for example. Instead, your business is responsible. In lawsuits involving corporations, shareholders are not liable for the company`s debts, but the company itself, as a “legal entity”, is obliged to repay those debts or be sued for non-repayment of debts. [22] A legal entity confers rights and obligations under the law on a person or organization. Since legal systems are designed for human use, legal personality is usually automatically attributed to human beings.

In the modern world, the concept is often part of discussions about the legal rights or responsibilities of entities such as companies that cannot be defined by a single person. The concept was and still is an important part of the human rights debate. A legal person has a board of directors: a president, a secretary, a director or a member of the board. These persons act for and on behalf of the legal entity. This means that they can enter into binding agreements on behalf of the legal entity. Another legal entity may also be a director represented by a spokesperson. For example, one bv may be on the board of directors of another bv. In the common law tradition, only one person could have legal rights. In order for them to work, the legal personality of a company has been established to include five legal rights: the right to a common treasure or safe (including the right to property), the right to a corporate seal (i.e. the right to conclude and sign contracts), the right to sue (to enforce contracts). the right to hire agents (employees) and the right to enact laws (self-government). [19] The importance of corporate personality is the idea that a company is its own entity.

Businesses, unlike intermediary types of business entities or unaccounted companies, can be taxed, buy and sell real estate, and participate in lawsuits. The “legal person” is also relevant in electoral law. In Citizens United v. Federal Election Commission, 558 U.S. 310 (2010), the Supreme Court upheld the legal personality of corporations wishing to contribute to political campaigns. Subsequent comments interpreted these comments prior to the oral argument as part of the legal decision. [26] Accordingly, the First Amendment does not permit Congress to pass legislation restricting the freedom of expression of a political company or action group or requiring reporting in a local newspaper,[27] and the Due Process Clause does not allow a state government to take possession of a corporation without due process and fair compensation. This protection applies to all legal persons, not just companies.