Lecture 1 - Introduction to Corporate Personality.pptVIP

NB tax implications!  Co. has a separate entity of its own Co. is liable for its own tax, under the tax regime of the jurisdiction where it is formed Co. doesn’t have to be formed or registered in the same jurisdiction as where its shareholders are based or its business operations take place Therefore could set up a company in (say) Gibraltar – very low tax rates – but still operate in England (or could register co. in Scotland or NI but still operate in England) Implications: ownership of property Macaura v Northern Assurance Co Ltd [1925] AC 619 (HL) Macaura owned an estate in Ireland. He sold all of the timber on the estate to Irish Canadian Sawmills Ltd. In consideration he was allotted all of the shares in the company. He then took out fire insurance with Northern Assurance Co? He took out the insurance in his own name. Two weeks later, the timber was destroyed by fire. Mr Macaura tried to claim under the insurance policy. Was he successful? Insurance co. argued that he had no insurable interest in the timber, which was owned by the company, not by himself HL agreed with the insurance company: Even though he owned all the shares in the co., he had no insurable interest in the property of the company. Lord Sumner: “It is clear that the appellant had no insurable interest in the timber. It was not his…. He owned almost all of the shares in the company, and the company owed him a good deal of money, but neither as creditor nor shareholder could he insure the company’s assets.” Lord Wrenbury: “even if he holds all the shares he is not the corporation, and that neither he nor any creditor of the company has any property legal or equitable in the assets of the corporation.” SUMMARY: A company is a person A company has corporate personality A company has artificial personality A company has separate personality Shareholders have limited liability Salomon v Salomon Co Advantages and disadvantages Outstanding questions: Can the format be abused?