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BUSINESS ORGANISATIONS AND AGENCY 383 CORPORATE PERSONALITY Although companies have to comply with certain legal formalities in both formation, management and winding up, and although there are possibilities that owners might lose control, these are relatively minor disadvantages giving the many benefits of incorporation. The separate legal personality of companies is the basis of company law and would not be disturbed by the court except in exceptional circumstances. Where the principle of corporate personality is abused or where the company itself is illegal or a sham, the courts may disregard the concept of separate legal personality and hold accountable those behind the company. • The doctrine of lifting or piercing of the corporate veil is designed to preserve the integrity and essence of the law on corporate personality. • The circumstances in which the veil of incorporation may be lifted are varied but limited, and usually involve some form of misuse of the facility of incorporation. • Where companies are organised in a group, the separate personality of all the companies in the group would be respected unless the group structure is a sham or designed for, or used to commit, fraud. 20.8 PRACTICE QUESTIONS 1. Discuss four reasons why an incorporated company would be a preferable form of business organisation to a partnership. 2. Explain the concept of “veil of incorporation”. Discuss four main circumstances in which this veil might be lifted in ordinary companies. 3. Alpha Ltd and Beta Ltd are wholly owned subsidiaries of Gamma plc, which appointed their boards of directors. Gamma plc had agreed to sell a piece of land to Omega plc. There is a legally binding contract for this sale. However, Gamma plc subsequently received a better offer for the land and wishes to pull out of the agreed sale to Omega plc. Accordingly, Gamma plc transferred the land to Beta Ltd. Omega plc has now commenced legal proceedings against Gamma plc and Beta Ltd for the specific performance of the original contract of sale. Advice Omega plc on its chances of success. Download free eBooks at bookboon.com
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BUSINESS ORGANISATIONS AND AGENCY 384 COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY 21 COMPANY CONSTITUTION AND CONTRACTUAL CAPACITY 21.1 INTRODUCTION Apart from the Companies’ Act 2006 that provide overarching legal rules, companies also have internal documents that regulate their functions and operations. These constitute their constitution. Apart from this, constitutions may set limits to the contractual powers of companies or the authority of their directors to bind them. This chapter considers the constitutional documents of companies, their nature, and their relationship with the Companies’ Act, as well as their effects and procedure for amendment. It also considers the
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  • Fall '19
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