A Corporation Is An Artificial Legal Person 4au61

A corporation is an artificial legal person. It is an independent entity with rights before the law similar to those of a human being. A company has a separate legal personality and once it is formed it has its own liability in a corporate form. This basic feature of a company has led to an enormous economic growth worldwide due to an incredible increase in investments. Today, an investor can invest in companies, deal in securities, transact with the constant variations within stock markets and be a player in the active corporate game and at the same time have its liability limited to the amount of investments he has made in such companies. This is the fundamental of such an everlasting important principle of separate corporate personality. An independent corporate entity principle is however, not considered on some occasions and shareholders are held personally liable for acts of the company. This is what is construed as piercing the corporate veil. Likewise, where there is a group of conglomerate, parent company is held liable, on some occasions, for the acts of subsidiary. The corporate veil is generally pierced so that voluntary creditors who contract with the company and also involuntary creditors who become victims for acts of the company are safeguarded from assets of the parent company where subsidiary has limited assets to repay the loss or damage caused to such creditors. The legislature has attempted to incorporate statutory provisions for benefit of the creditors. However, in complex situations, and more specifically in case of involuntary creditors, where statutory provisions does not suffice the purpose, judiciary has considered the facts and circumstances of each case and laid down certain principles so that justice could be done in true sense and the interest of creditors could be safeguarded whilst at other times, it has maintained separate legal personality of the companies, where it was felt that there is no unity of interest and dominant control relationship between the parent and subsidiary company. However, it seems astounding as judicial approach towards corporate veil through different labels has led to different conclusions. There is no distinction between a corporation and a real person in most aspects of company law. A corporation is an artificial person permitted to do most things a human individual is permitted to do in of business - and some things humans can’t. This holding of human-equivalent standing before the law is called ‘corporate personhood’ or as some writers rather charmingly have it, ‘corporate personality’. Corporations cannot do everything a human can do - they cannot marry or vote, for example, but in business they are at least equal. For example, in the UK, corporations have an unlimited lifespan - one obvious advantage over real people. There are some principles of company law.

 The ultimate purpose of corporations is to serve the interests of society as a whole.  Corporations are distinctively able to contribute to the societal good by creating financial prosperity

 A corporation’s wealth should be shared fairly among those who contribute to its creation  Participatory, democratic corporate governance is the best way to ensure the sustainable creation and equitable distribution of corporate wealth According to Corporate law, it has separate legal personality, with limited liability or unlimited liability for its or shareholders, who buy and sell their stocks depending on the performance of the board of directors. It deals with the firms that are incorporated or ed under the corporate or company law of a sovereign state or their subnational states. The five defining characteristics of the modern corporation are

 Separate Legal Personality of the corporation (the right to sue and be sued in its own name i.e. the law treats the company as a human being.

 Limited Liability of the shareholders (so that when the company is insolvent, they only owe the money that they subscribed for in shares)

 Transferable Shares  Delegated Management, in other words, control of the company placed in the hands of a board of directors

 Investor Ownership, ownership by shareholders. This concept of a company as a separate legal personality has two consequences: 

a company’s property belongs to it and not to its directors, management or shareholders. Even if you are a sole director and a 100 per cent shareholder, you can still be found guilty of stealing from your own company. Liquidators and future owners will have an interest in pursuing claims for theft or misuse of assets where a company has been plundered by those in day to day control. Robert Maxwell was only one of the most prominent company chairmen to forget this basic principle.

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a company is responsible for its own debts and liabilities. The shareholders and, as a general rule, directors cannot be forced to pay them.