Law 520 Ethics and Legal Environment of

Business

Corporate Personality

Indemnity and
Guarantee

Corporate Personality
Corporate personality may be defined as the

doctrine that a company is for legal purpose an

independent person having an existence
separate from that of the human beings who
own, manage and serve it.
Salomon v Salomon
Identified that a company is not only an
association of its members, but also a
person separate from its members which is
extremely significant as it carries many
consequences.

Concept of
A company is formed by
Incorporation

the process of
incorporation. This is an administrative
procedure, and its correct completion is both
necessary and sufficient for the company to
exist as an independent legal entity.

Once the company is registered at the office

of Registrar of Joint Stock Companies

and Firms (RJSC) Bangladesh (Companies
House), the process of incorporation is said
to be done.

Legal Capacity and Legal

Personality
Once 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. It is distinct from its shareholders, directors
and employees. As a separate person it has its own
interests, which must be considered separately from those
of the humans involved with it.
Legal Capacity:

Legal capacity means that the company can own property

and can make contracts in its own name and on its own
behalf. In practice this will be done through the agency of
human beings, but it is essential to understand that as a
matter of law these acts will be the acts of the company.

What are the characteristics of

company?

Any Company Private or Public formed and registered

according to The Company Act of 1994 has the following
salient features:
1. A separate legal entity ;
2. An artificial legal body or person;
3. An organized and incorporated body ;
4. Perpetual (continuous )succession
(In company law, perpetual succession is the
continuation of a corporation's or other organization's
existence despite the death, bankruptcy, insanity,
change in membership or an exit from the business of
any owner or member, or any transfer of stock, etc. )

5. Limited range of liabilities ;

(For example in a limited liability company namely C
corporation or ABC Company, where the business owners
or business partners are personally protected from any
risk or obligations incurred by the business entity, and a
business owner with unlimited liability in the form of
a sole proprietorship, becomes personally responsible for
all obligations and operations of the business entity)
6. Common seal (it is an official seal used by a company)
7. Right to enter in contracts
8. Right to own property
9. Right to sue
10. Flexibility of investment

The Memorandum and Articles of

Association

Memorandum of association
The memorandum confirms that the subscribers wish

to form a company under the Companies Act and

agree to become members of the company. In the
case of a company that is to have a share capital,
they undertake to receive at least one share each.
Articles of association
The articles of association set out how the company

is run, governed and owned. The articles can put

restrictions on the companys powers which may be
useful if shareholders want comfort that the directors
will not pursue certain courses of action, at least
without shareholder approval.

 The memorandum and articles of association together are

the constitution of the company. Whereas, the memorandum

specifying the form and legal capacity this artificial legal
person is to have, and the articles regulating its internal
dealings. Both are registered at the office of Registrar of
Joint Stock Companies and Firms (RJSC) Bangladesh
(Companies House).
Both a memorandum of association and articles of
association are required for a company formed in
Bangladesh under the Companies (Bangladesh ) Act,
1994 . The memorandum of association is the document
that sets up the company and the articles of association set
out how the company is run, governed and owned. The
articles of association will therefore include the
responsibilities and powers of the directors and the means
by which the members apply control over the board of
directors.

The Articles should cover the following:

Liability of members;
Directors powers and responsibilities;
Directors meetings, voting, delegation to others and

conflicts of interest;
Retaining records of directors decisions;
Appointment and removal of directors; etc.

Salomon v
Salomon

In the case Salomon v Salomon it was held that:

a company is a separate legal entity and thus a
juristic "person" in the eyes of the law.
Whereas, a JURISTIC PERSON means a body of
persons, a corporation, a partnership, or other
legal entity that is recognized by law as the
subject of rights and duties called also artificial
person, conventional person, fictitious person etc.

Private and Public

company
Distinguish between private and
public company?
Private Company

A privately held company or close corporation is a

business
company
owned
either
by
nongovernmental organizations or by a relatively small
number of shareholders or company members
which does not offer or trade its company stock
(shares) to the general public on the stock market
exchanges, but rather the company's stock is
offered, owned and traded or exchanged privately.

Public Company
A public, publicly traded, publicly held
company or public corporation is a
corporation whose ownership is dispersed
(isolated) among the general public in
many shares of stock which are freely
traded on a stock exchange or in over
the counter markets.

MODE OF WINDING
DEFINITION of 'Winding Up: The process of selling
UP
all the assets of a business, paying off creditors,
distributing any remaining assets to the principals or
parent company, and then dissolving the business.

(Section 234 (1-2). companies Act, '94)

The winding up of a company may be

either (a) by the Court; or
(b) voluntary; or
(c) subject to the supervision of the Court.