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Separate Legal Personality and Limited Liability - Term Paper Example

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The paper 'Separate Legal Personality and Limited Liability' focuses on a Company that can be considered as a legal person and laws associated with an individual can be applied to the company as well. It is not possible to formulate laws for the functioning of a company by considering it…
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Separate Legal Personality and Limited Liability
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Download file to see previous pages Even in America itself, it is not possible for a company to function with a unique law in different states. In other words, companies need to function with respect to the laws prevailing in the location where they operate.
Separate legal personality and limited liability are two common terms associated with the company law. Wiss (2010) describes separate legal personality as an incorporated company, “united or combined into an organized body” having rights and liabilities. In her opinion, a company is a fictitious person who can enter into contracts, own property and even commit crimes. At the same time when a private company limited by shares, the creditors deal with the company, not with the individuals and it can be termed as a limited liability company. In such cases, if the company becomes bankrupt, the creditors or the investors do not get paid regardless of the personal financial capabilities of its members (Wiss 2010). Separate legal personality and limited liability are two advantages of corporate status. But under certain circumstances, these advantages will become invalid and this paper briefly explains such circumstances in which separate legal personality and limited liability will become invalid.
It is not possible for a company to take undue advantages in the name of limited liability or separate legal personality. Corporate law has mainly identified seven instances in which the corporate veil (law that protects the members or founders of a company in case a problem arises) can be lifted; fraud, agency, trust, group enterprise, tort enemy character, tax (Sadhu, n. d)
Richard Wachman (2005) has mentioned that fraud is costing British business £72 billion a year, 6% of the annual revenue of British businesses (Wachman, 2005). The recent corporate scandals involving Enron, WorldCom, Parmalat, and Refco, have not taught any lessons to the authorities or the investors. Fraud can attain many forms; some companies may overstate their profits, some other companies may transfer the corporate asset to overseas or offshore accounts, money laundering, etc. ...Download file to see next pagesRead More
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