Company Is A Person Separate From Its Members

Five exceptions to the general legal principle that a company is a person separate from its members and also from its directors arise in the following instance:

* Where the number of members of a company falls below two other than the case of a company whose issued shares are wholly held by a holding company. If the number of shareholder is reduced to below two and it carries on business for more than six months while the number is so reduced, the shareholder concerned would e personally liable for the debts of the company contracted after those six months. The company and that shareholder shall be guilty of an offence against the Company Act-section 36, Company Act 1965.

* Where in the course of winding-up of a company in any proceedings against a company it appears to the court when hearing the application of liquidator or any creditor or contributory that any business of the company has been carried on with intent to defraud creditors or any other person or for any fraudulent purpose, the court may hold any other persons who were knowingly parties to the fraud personally responsible for all or any debts or any liabilities of the company as the court directs-section 304(1), Company Act 1965 a Re William Brs. Ltd (No. 1).

* Nationality Rules-The courts may look at the nationality of a company's members whilst determining the national status of a company. For instance, In the time of war if war, the foreign nationality of members may affect the national status of a company-Daimler Co Ltd v Continental Tyres & Rubber Co (Great Britain) Ltd.

* Holding and subsidiary companies-Although according to the separate legal entities principle, a holding company and its subsidiary company are two legal entities, there are instances where they are not really treated as separate. For example, where a holding company must produce group of consolidated accounts-section 169 and the Ninth Schedule, Company Acts