1. Corporate and Business Law (ENG)

2. 2 Section D: The formation and constitution of business organisations Designed to give you knowledge and application of: D1. Agency Law D2. Partnerships D3. Corporations & legal personality D4. Company formations

3. 3 Learning Outcomes D3: Corporations & legal personality  Distinguish between sole traders, partnership and companies.  Explain the meaning and effect of limited liability.  Analyse different types of companies, especially private and public companies.  Illustrate the effect of separate personality.  Recognise instances where separate personality will be ignored.

4. 4 Sole traders, partnerships and companies Business Structure Sole traderPartnership firm Only one personTwo or morePublic companyPrivate company Company Minimum 1, Maximum no limit Minimum 1, Maximum no limit

5. 5 The different types of companies, especially private and public companies Types of companies Limited companyUnlimited company Limited by sharesLimited by guarantee Public companyPrivate company

6. 6 The effect of separate personality Perpetual succession The continuation of a company’s existence despite the death of any owner or member, or any transfer of stock. Separate property A member cannot claim to be owner of the company's property as long as the company exists. Common seal The official signature of the company. Transferability of shares Shares in a company are freely transferable. Contractual capacity A company can enter into any contract in its own name and it is liable on any such contract. Separation of ownership from management A company is administered and managed by its managerial personnel i.e. the board of directors. Refer to Test Yourself 2 (page 279)

7. 7 Refer to Case study [Adams V Cape Industries PLC (1990)] on page D3.12 The instances where separate personality will be ignored Looking behind the company as a legal person, i.e. disregarding the corporate entity and paying regard to the realities behind the legal facade. Lifting of the corporate veil Where a director is found liable for fraud in their personal capacity Various situations where the separate personality will be ignored FraudGroup enterprises AgencyTrustTort Enemy character Tax

8. 8 Recap  Distinguish between sole traders, partnership and companies.  Explain the meaning and effect of limited liability.  Analyse different types of companies, especially private and public companies.  Illustrate the effect of separate personality.  Recognise instances where separate personality will be ignored.

9. [training@getthroughguides.com]