In spite of the obvious economic connection between companies within the same group, English law has steadfastly maintained its policy of treating such companies as distinct legal entities.- Consider the need for reform - Essay Example

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The English Company law asserts that companies in the United Kingdom should be treated as separate legal entities from their owners. Different cases have plagued the English law culminating to the creation of different names that are aimed at delineating the separate legal entity that exists between companies within the same group. …
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In spite of the obvious economic connection between companies within the same group, English law has steadfastly maintained its policy of treating such companies as distinct legal entities.- Consider the need for reform
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Extract of sample "In spite of the obvious economic connection between companies within the same group, English law has steadfastly maintained its policy of treating such companies as distinct legal entities.- Consider the need for reform"

Download file to see previous pages In the case of I.R.C. v Sansom the term polite invective has been used to describe the issue of legal entity between corporations. See also Broderip v Salomon where the concept of separate legal entity has been defined as a myth and a fiction. Moreover, in the case of Salomom v Salomon & Co the separate legal entitiy of companies has been described as a pretended association while in it has been defines as a bubble. Legal abstraction has also been used as a term to describe the legal entity of corporations in the case of Continental Tyre & Rubber C. (G.B.) Ltd. V Daimler Co. Ltd . See also Houghton & Co. v Nothard, Lowe and Wills Ltd where the legal entity concept was described as an abstract conception and as a cloak in the case of Gilford Motor Co. Ltd v Horne . These cases reveal that the concept of separate legal entity has been widely used in the United Kingdom and thus necessitating the need to discuss this statement. Whether there is need for reforms as pertains to the treating of companies within the same group as legal entities will be delineated.
The Essence of Treating Companies within the Same Group as Distinct Legal Entities
Distinct legal entity in companies is treated as a multifaceted concept in the United Kingdom and there are various principles that need to be adhered to comprehend this concept. Companies as legal entities that separate from their owners, consumes and third parties do not exist in a vacuum and are thus anchored on three major principles. The first principle aims at assessing to what extent the company’s legal competence prevails. This is aimed at evaluating the legal competence of a company in achieving the legal requirements. Secondly, the nature of the legal capacity of the corporation needs to be identified for the separate legal clause to apply sufficiently. Finally, the manner in which the company will exercise its distinct legal entity needs also to be evaluated. It is documented that until the three principles are addressed competently, the issue of companies as separate legal entities will always appear hazy and seems like a mirage.8 Principle 1: Extent of the Legal capacity of a Company The legal capacity of an individual is very distinct from the legal capacity of a Company. A company in comparison to an individual faces restrictions as pertains to the extent of liabilities and rights that are accorded to the company compared to an individual. According to the case of Ashbury Railway Carriage and iron Co. v Riche9 it was avowed that the law has powers as pertains to the circumscription and imposing limitations on the company and the performance of activities. This has in turn shifted form a theoretical to a practical perspective as in the case of Daimler Co. Ltd. V Continental Tyre & Rubber Co. (G. B.) Ltd10 where a company was defined as a generation of law made for the management of the company, property holding, and the involvement of individuals in business transactions. this can further be elaborated in two ways: one way being that by the law requiring companies to declare their objects during the incorporation stage, the companies in turn adopt a restricted capacity. Consequently, upon adoption of a restricted capacity, the law is given the mandate of imposing its legal restrictions on the company. This asserts that there is a greater legal capacity of a company hence explaining why companies are treated as separate legal ...Download file to see next pagesRead More
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