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The Legal Nature Of Companies Explained

One of the qualities that separate a company from other business entities is that it is recognised as a separate legal entity from its shareholders and directors. What does this legal personality mean and what does it entail?

How can a company own properties?

A company’s separate legal nature means that it has its own rights to own properties under its name instead of under the name of any or all of its shareholders or directors.

Who can companies enter into a contract with?

A company is free to enter into contracts with its employees, directors, as well as members. Likewise, it can enter into contracts with its suppliers and customers.

Can a company be sued?

A company can be sued under its name, and conversely, it can also sue others under its name. This means that individual members of a company cannot sue or be sued for offences attributable to the company and not the individual.

Are the company’s liabilities transferrable to its individual members?

In the conduct of its business, a company’s obligations and liabilities remain its own and cannot be transferred to its individual members. Funds used to pay for debts, for instance, must be obtained from company coffers instead of individual shares or contributions.

If members of a company leave and are replaced with new ones, does the company change as well?

Regardless of any changes that may happen in the makeup of a company, such as when one or more directors are replaced, the company remains intact and unchanged.

Do company members and directors enjoy the rights of companies?

No, a company’s rights is as much its own as its liabilities. This means that members and directors cannot enjoy these company rights as individual persons. Specifically, they cannot invoke company rights in situations where the company is neither concerned nor will directly benefit from.