2. Separate Legal Personalities and Groups of Companies

Created by: KG1999!
Created on: 16-08-23 18:55

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Separate Legal Personalities and Groups of Companies
- Companies have own legal personalities
  - Capacity to own property, be party to Contracts, C or D, pay tax on profits
  - No legal separation between partner and business
  - Companies Act 2006
  - If a company cannot pay debts then creditors must take legal action against company, not members/directors
- Shareholders
  - Own assets required to run the business
  - A company can be a SH in another company
  - Members of the company are entered onto the register
- Types of Companies
  - Unlimited - s3(4) - no limit on member's liability (both company and personal assets)
  - Limited - s3(1) - limited by shares or guarantee
  - Public Limited s4(2) - must invest specified min amount of money and can raise money from the public
  - Publicly traded - can join the UK stock market
- Groups of Companies
  - Parent company buys some or all - these become subsidiaries
  - If the company is a member then they have the right to appoint/remove majority of directors
  - Benefits: confines risk within each group, tax efficiency, keeps operations separate, easier to sell off parts
  - Can still be a wholly owned subsidiary even with more than one shareholder
- Getting around this
  - 1. Corporate Veil - barrier between owners and company. Means SH responsible where there is motive to avoid legal obligations i.e. fraud, breach of trust
  - 2. Single economic unit - s399 preparing accounts for groups as if they were single to ensure SHs see true financial state
  - 3. Agency - authority granted by principle. They cannot be inferred from control.
- Directors
  - s214 Insolvency Act 1986 - directors personally liable to contribute to assets where they have gone into insolvent liquidation and new they could not avoid it.
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2. Separate Legal Personalities and Groups of Companies

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