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Law 520 Ethics and Legal Environment of

Business

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Corporate Personality

Indemnity and

Guarantee

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Corporate Personality

Corporate personality may be dened as the

doctrine that a company is for legal purpose an

independent person having an existence

separate from that of the human beings whoown manage and serve it!

Salomon v Salomon

"dentied that a company is not only anassociation of its members but also aperson separate from its members which is

extremely signicant as it carries many

conse#uences!

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Concept of

Incorporation

$ company is formed by the process of%incorporation&! 'his is an administrativeprocedure and its correct completion is bothnecessary and su(cient for the company toexist as an independent legal entity!

)nce the company is registered at the o(ceof Registrar of Joint Stock Companies

and Firms *RJSC+ Bangladesh *Companies,ouse+ the process of %incorporation& is saidto be done!

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ega apac y an egaPersonality

)nce a company is duly incorporated it has both

Legal personality- and Legal capacity!

Legal Personality:

Legal personality means that the company exists as a

legal person! "t is distinct from its shareholders directorsand employees! $s a separate person it has its owninterests which must be considered separately from thoseof the humans involved with it!Legal Capacity:

Legal capacity means that the company can own propertyand can ma.e contracts in its own name and on its ownbehalf! "n practice this will be done through the agency ofhuman beings but it is essential to understand that as amatter of law these acts will be the acts of the company!

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What are the characteristics ofcompany

$ny Company /rivate or /ublic formed and registeredaccording to 'he Company $ct of 11 has the followingsalient features3

! $ separate legal entity -

2! $n articial legal body or person-4! $n organied and incorporated body -

! /erpetual *continuous +succession

*"n company law perpetual succession is the

continuation of a corporation6s or other organiation6sexistence despite the death ban.ruptcy insanitychange in membership or an exit from the business ofany owner or member or any transfer of stoc. etc! +

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5! Limited range of liabilities -

*7or example in a limited liability company namely %C&corporation or $BC Company where the business owners

or business partners are personally protected from anyris. or obligations incurred by the business entity and abusiness ownerwith unlimited lia!ility8 in the form ofa sole proprietorship becomes personally responsible forall obligations and operations of the business entity+

9! Common seal *it is an o(cial seal used by a company+

:! ;ight to enter in contracts

1! ;ight to sue

0! 7lexibility of investment

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"he #emorandum and $rticles of$ssociation#emorandum of association

'he memorandum conrms that the subscribers wishto form a company under the Companies $ct andagree to become members of the company! "n thecase of a company that is to have a share capital

they underta.e to receive at least one share each!

$rticles of association

'he articles of association set out how the company

is run governed and owned! 'he articles can putrestrictions on the company&s powers8 which may beuseful if shareholders want comfort that the directorswill not pursue certain courses of action at leastwithout shareholder approval!

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'he memorandum and articles of association together are

the constitution of the company! >hereas the memorandumspecifying the form and legal capacity this articial legalperson is to have and the articles regulating its internaldealings! Both are registered at the o(ce of Registrar of

Joint Stock Companies and Firms *RJSC+ Bangladesh

*Companies ,ouse+!Both a memorandum of association and articles of

association are re#uired for a company formed inBangladesh under the Companies %&angladesh ' $ct()**+ ! 'he memorandum of association is the document

that sets up the companyand the articles of association setout how the company is run governed and owned! 'hearticles of association will therefore include theresponsibilities and powers of the directors and the meansby which the members apply control over the board ofdirectors!

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"he $rticles should co,er the follo-ing:Liability of members-

?irectors& powers and responsibilities-

?irectors& meetings voting delegation to others andcon@icts of interest-

;etaining records of directors& decisions-

$ppointment and removal of directors- etc!

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Salomon v

Salomon

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"n the case Aalomon v Aalomon it was held that3a company is a separate legal entity and thus auristic person in the eyes of the law!

>hereas a D;"A'"C /E;A)F means a body ofpersons a corporation a partnership or otherlegal entity that is recognied by law as the

subect of rights and duties Gcalled also articialperson conventional person ctitious person etc!

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Pri,ate and Pu!lic

company?istinguish between private andpublic companyHPri,ate Company

$ privately held company or close corporation is a

business company owned either by nonIgovernmental organiations or by a relatively smallnumber of shareholders or company members

which does not oJer or trade its company stoc.*shares+ to the general public on the stock markete.changes but rather the company6s stoc. isoJered owned and traded or exchanged privately!

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Pu!lic Company

$ public publicly traded publicly held

company or public corporation is acorporation whose ownership is dispersed

*isolated+ among the general public inmany shares of stoc. which are freelytraded on a stock e.change or in overthe counter mar.ets!

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#/01 /F WI20I2G

3P01FI2I"I/2 of 6Winding 3p%3 'he process of sellingall the assets of a business paying oJ creditorsdistributing any remaining assets to the principals orparent company and then dissolving the business!

*Aection 24 *I2+! companies $ct 61+'he winding up of a company may beeither I

*a+ by the Court- or

*b+ voluntary- or

*c+ subect to the supervision of the Court!

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