4 In the context of company law explain: 
    　　(a) the doctrine of separate personality 
    and its consequences; (6 marks) 
    　　(b) the circumstances under which separate 
    personality will be ignored. (4 marks) 
    　　(10 marks) 
    　　答案：4 This question asks candidates 
    to consider the doctrine ofseparate personality, 
    one of the key concepts of company law. It also 
    　　requires some consideration of the occasions
    when the doctrine will be ignored, and the veil 
    of incorporation pulled aside. This latter part 
    will demand consideration of 
    both statute and common law provisions. 
    　　(a) Separate personality 
    　　Whereas English law treats a partnership
     as simply a group of individuals trading collectively, 
    the effect of incorporation is 
    　　that a company once formed has its own distinct legal 
    personality, completely separate from its members. 
    　　The doctrine of separate or corporate personalityis 
    an ancient one, but the case usually cited in relation 
    to separate personality 
    is: Salomon v Salomon & Co (1897). Salomon had been in 
    the boot and leather business for some time. Together with other 
    　　members of his family he formed a limited company 
    and sold his previous business to it. Payment 
    was in the form of cash, 
    　　shares and debentures. When the company 
    was eventually wound up it was argued that 
    Salomon and the company were 
    　　the same, and, as he could not be his own creditor, 
    his debentures should have no effect. 
    Although earlier courts had decided 
    　　against Salomon, the House of Lords 
    held that under the circumstances, 
    in the absence of fraud, his debentures were valid. 
    　　The company had been properly constituted and 
    consequently it was, in law, a distinct legal person, 
    completely separate from  
    　　Salomon. Prior to the Companies Act 2006 
    (CA 2006) true single person limited companies, 
    with only one member, could 
    　　be formed but these were exceptional and in 
    the event of the membership of an ordinary 
    company falling below one, the 
    　　remaining member assumed liability for the debts 
    of the company. Now under s.123 CA 2006,
    if the number of members 
    　　of a limited company falls to one, all that is 
    required is that the fact be entered in the 
    company’s register of members, with 
    　　the name and address of the sole member. 
    　　A number of consequences flow from the 
    fact that corporations are treated as having 
    legal personality in their own right. 
    　　(i) Limited liability 
    　　No one is responsible for anyone else’s 
    debts unless they agree to accept such responsibility. 
    Similarly, at common law, 
    　　members of a corporation are not responsible 
    for its debts without agreement. However, 
    registered companies, i.e. those 
    　　formed under the Companies Acts, are not 
    permitted unless the shareholders agree 
    to accept liability for their company’s debts. 
    In return for this agreement 
    the extent of their liability is set at a fixed amount. 
    In the case of a company limitedby shares the level of 
    liability is the amount remaining unpaid on the 
    nominal value of the shares held. In the case ofa company 
    limited by guarantee it is the amount that shareholders 
    have agreed to pay in the event of the company being 
    　　wound up. 
    　　(ii) Perpetual existence 
    　　As the corporation exists in its own 
    right changes in its membership have 
    no effect on its status or existence. Members 
    　　may die, be declared bankrupt or 
    insane, or transfer their shares without 
    any effect on the company. As an abstract legal 
    　　person the company cannot die, although 
    its existence can be brought to an end through 
    the winding up procedure. 
    　　(iii) Business property is owned by the company 
    　　Any business assets are owned by the company 
    itself and not the shareholders. This is normally 
    a major advantage in that the companys assets
     are not subject to claims based on the 
    ownership rights of its members. 
    It can, however, cause 
    　　unforeseen problems as may be seen 
    in Macaura v Northern Assurance (1925). 
    The plaintiff had owned a timber estate 
    and later formed a oneman company 
    and transferred the estate to it. 
    He continued to insure the estate in his own name. 
    　　When the timber was lost in a fire it was 
    held that Macaura could not claim on the insurance 
    as he had no personalinterest in the timber, 
    which belonged to the company. (iv) Legal capacity 
    　　The company has contractual capacity in its
     own right and can sue and be 
    sued in its own name. The extent of the 
    company’s liability, as opposed to the members,
    is unlimited and all its assets may be used to pay off debts. The 
    　　company may also be liable in tort for 
    any injuries sustained as a consequence 
    of the negligence of its agents or employees. 
    　　(iv) The rule in Foss v Harbottle 
    　　This states that where a company suffers 
    an injury, it is for the company, 
    acting through the majority of the members, 
    　　to take the appropriate remedial 
    action. Perhaps of more importance 
    is the corollary of the rule which is that anindividual 
    cannot raise an action in response to a 
    wrong suffered by the company. 
    　　(b) Lifting the veil of incorporation 
    　　There are a number of occasions, 
    both statutory and at common law, 
    when the doctrine of separate personality will not be 
    　　followed. On these occasions it is 
    said that the veil of incorporation, 
    which separates the company from its members,
    is pierced, lifted or drawn aside. 
    Such situations arise as follows: 
    　　(i) Under the companies legislation 
    　　Section 399 of the Companies Act 2006 
    requires accounts to be prepared 
    by a group of related companies, thus 
    　　recognising the common link 
    between them as separate corporate 
    entities. Section 213 of the Insolvency Act 1986 
    　　provides for personal liability in relation 
    to fraudulent trading and s.214 
    does the same in relation to wrongful trading. 
    　　(ii) At common law 
    　　As in most areas of law that are 
    based on the application of policy 
    decisions it is difficult to predict when the courts will 
    　　ignore separate personality. 
    What is certain is that the courts
    will not permit the corporate form to be used for a clearly 
    　　fraudulent purpose or to evade 
    a legal duty. Thus in Gilford Motor 
    Co Ltd v Horne (1933) an employee 
    had covenanted not to solicit his former employer’s 
    customers. After he left their
    employment he formed a company to solicit those 
    　　customers and it was held 
    that the company was a sham 
    and the court would not permit it to be used to avoid the 
    　　contract. 
    　　As would be expected the 
    courts are prepared to ignore
    separate personality in times 
    of war to defeat the activity of 
    　　shareholders who might be 
    enemy aliens. See Daimler Co Ltd v Continental
    Tyre and Rubber Co (GB) Ltd (1917). 
    　　Where groups of companies have been 
    set up for particular business ends the 
    courts will usually not ignore the separate 
    　　existence of the various companies unless
    they are being used for fraud. There i
    s authority for treating separate 
    　　companies as a single group as in 
    DHN Food Distributors Ltd v Borough 
    of Tower Hamlets (1976) but later authorities 
    　　have cast extreme doubt on this decision. 
    See Woolfson v Strathclyde RC (1978) and 
    National Dock Labour Board v Pinn & Wheeler (1989). 
    The later cases would appear to 
    suggest that the courts are 
    becoming more reluctant to ignore 
    　　separate personality where the 
    company has been properly established 
    (Adams v Cape Industries plc (1990) and Ord 
    　　v Belhaven Pubs Ltd (1998)).