CORPORATE PERSONALITY UNDER THE UNIFORM ACT

Project Details

Department
LAW
Project ID
L053
Price
10000XAF
International: $20
No of pages
X
Instruments/method
Qualitative
Reference
yes
Analytical tool
Content analysis
Format
 MS Word & PDF
Chapters
1-5

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CHAPTER ONE

                   GENERAL INTRODUCTION

1.1 BACKGROUND TO THE STUDY

In law, the word ‘‘person’’ has a technical meaning. It means a “subject to rights and duties”. This includes natural persons, schools, churches, states, trade unions and companies etc. Almond defines a person as any being to whom they regards as capable of rights and duties. Any being that is so capable is a person in law.

Corporate personality is the fact stated by the law that a company is recognized as a legal entity distinct from its members. A company with such personality is an independent legal existence separate from its shareholders, directors, officers and creators. This is famously known as the veil of incorporation.

As a result of corporate personality, a company has perpetual succession. It simply means the company is everlasting and will continue to do business until it is properly wound up.

As a separate legal person, a company will not be affected by changes such as death, transfer of shares or resignation of any members but will continue to exist despite the number of times the changes of membership occur.

Even if all the members die, it will not influence the privileges, immunities, estates and possessions of a company. Although the Companies Acts were designed to facilitate group activity, the decision of the House of Lords in Salomon v. Salomon.

The case concerned claims of certain unsecured creditors in the liquidation process of Salomon Ltd., a company in which Salomon was the majority shareholder, and accordingly, was sought to be made personally liable for the company’s debt.

Hence, the issue was whether, regardless of the separate legal identity of a company, a shareholder/controller could be held liable for its debt, over and above the capital contribution, so as to expose such member to unlimited personal liability.

It was accepted in that case that the court could not “pierce the corporate veil” in order to prevent the interests of creditors from being prejudiced by resort to the device of incorporation. A recent illustration of the Salomon principle is Lee v. Lee’s Air Farming Ltd.

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 director.

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.

In cases where some fraudulent or improper conduct on the part of individuals is involved in hiding behind the screen of corporate personality, the courts have intervened and treated the corporate form as a sham.

One of the most recent examples is Jones v. Lipmann, where the defendant agreed to sell land and chattels to the plaintiff. In the interval between the signing and completion of the contract, the defendant transferred the land to a company which had been established with a nominal capital of £100 and consisted of Lipmann and a clerk from the firm of solicitors who were handling the matter.

In an action for specific performance by the plaintiff, the defendant pleaded that he was no longer able to perform the contract for the sale of the land owing to the fact that it had been transferred to the company.

The court, in ordering specific performance by the company, held that it was a mere creation of the defendant, “a device and a sham, a mask which he holds before his face in an attempt to avoid recognition by the eyes of equity.”

In the income tax field, too, the courts have on occasions treated one company as an agent for another-the other’s alter ego-for the purpose of the assessment of taxation on the profits of the company. In Thorpe’s Case, all of a New York company’s shares were held by an English company.

The business of the New York company was held by the Court of Appeal to be that of the English company and therefore properly subjected to English income tax Another example of the penetration of the corporate veil by the courts is found in cases decided on Trading with the Enemy legislation of 1914, the most famous being the Daimler Case where a company registered in England the shareholding of which was predominantly German was held to be tainted with an enemy character.

In Cameroonian law, the attributes of a company or corporation as a person flows from article 98 of the Ohada Uniform Act on Commercial Companies and Economic Interest Groups.

It states that all companies shall have legal personality with effect from the date registration unless otherwise provided for. In other words; the company becomes a corporate body. This in effect means that a company has a dual nature: it is an association of its members and at the same time a person separate from its members.

The term legal personality has not been defined by the Uniform Act, but in England, it was only after the case of Salomon v Salomon that the implications of incorporation were fully understood and analyzed. Here it was held that registration or incorporation resulted in two things;

The principle of corporate personality was laid down that once a company is registered, it acquires a legal personality and;

Strong support was given to the concept of limited liability

1.2  STATEMENT OF THE PROBLEM

A company in law is a separate person from its subscribers to the memorandum of association. In the principle of corporate personality, a company is classified as a separate person from its member. Therefore, the company as a separate legal entity should have perpetual succession, proprietary interest, debts, limited liability and may sue and be sued in its own name.

On the other hand, we shall also note that the main instances of lifting the veil of incorporation are the number of company members, fraudulent trading, and evasion of legal obligations, holding and subsidiary company and publication of names. All in all, we shall define that the effect of incorporation of a company means it has a separate existence.

1.3 RESEARCH QUESTIONS

This research seeks to accomplish the following questions

1.3.1 MAIN RESEARCH QUESTION

The concept of corporate personality in the Ohada Uniform Act and common law

1.4.1 SPECIFIC RESEARCH QUESTIONS

(1) What is corporate personality?

(2) When does a company become a person at law?

(3) Are there instances where this corporate veil can be lifted from the company?

(4) Are there any policy recommendations that can be made in view of improving the concept of corporate personality?

1.5 AIMS AND OBJECTIVES

This study seeks to answer the following objectives

1.5.1 GENERAL OBJECTIVE

The objective of this research is to examine the concept of corporate personality in OHADA company law in Cameroon. In achieving this objective, this research will examine the provisions of the OHADA uniform act of economic interest groups and related acts like the company act of 2006   of the OHADA uniform act of economic interest groups and related acts like the company act of 2006. 

1.5.2 SPECIFIC RESEARCH OBJECTIVES

The specific objectives of the work are;

(1) To examine the notion of corporate personality under the OHADA uniform act and under common law.

(2) To determine when a company becomes a person in Law.

(3) To examine instances where the veil of incorporation can be kept aside.

(4) To propose policy recommendations where we find loopholes.

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