UNIT 3

CORPORATE PERSONALITY

Corporate personality refers to the legal notion that a company has its own legal identity, separate from its shareholders, directors, and employees. This means that a company can own property, enter contracts, sue and be sued in its own name. The concept of corporate personality is enshrined in Section 37 of the Companies and Allied Matters Act (CAMA) 2020 which states that upon incorporation, a company becomes a body corporate with perpetual succession and a common seal. See the case of Salomon v Salomon & Co Ltd [1897] AC 22 which laid the foundation for the principle of corporate personality globally, influencing Nigerian law and it established that a company, once legally incorporated, is a separate entity from its shareholders and the case of Maritime Ventures Co. Ltd. v. Century Insurance Co. Ltd (2001) 3 NWLR (Pt. 700) 396 where the Nigerian Supreme Court upheld the principle of corporate personality, confirming that a company is distinct from its members.

CONSEQUENCES OF INCORPORATION

1. Separate legal entity: this is where upon incorporation, a company becomes a separate legal entity, distinct from its members. This means it can own assets, incur liabilities, and conduct business in its own name.
2. Perpetual succession: this is where incorporation grants a company perpetual succession, meaning its existence is not affected by changes in membership or management. The company continues to exist until it is legally dissolved.
3. Limited liability: this is one of the key benefits of incorporation is limited liability. Shareholders' liability for the company’s debts is limited to the amount unpaid on their shares. This protects personal assets from being used to satisfy company debts. See the case of A. C. B. Ltd v Apugo & Sons Ltd (1995) 6 NWLR (Pt. 399) 65 where the Nigerian Supreme Court emphasized the concept of limited liability, protecting shareholders from the company’s liabilities beyond their investment.
4. Capacity to sue and be sued: this is where a company can sue and be sued in its own name. This legal capacity ensures that it can enforce its rights and be held accountable independently of its members.
5. Ownership of property: this is where as a separate legal entity, a company can own, buy, and sell property in its own name. This is crucial for operational and investment purposes. See the case of Union Bank of Nigeria Ltd v Penny-Mart Ltd (1992) 5 NWLR (Pt. 240) 228 where the court reaffirmed that an incorporated company is a separate legal entity capable of owning property and entering contracts in its own name.
6. Transferability of shares: this is where incorporated companies can issue shares, which can be freely transferred, subject to the company’s articles of association. This facilitates capital raising and investment opportunities.

LIFTING THE VEIL OF INCORPORATION

Lifting the veil of incorporation refers to situations where the court disregards the company’s separate legal personality to hold the shareholders or directors personally liable for the company’s actions or debts. This is usually done to prevent fraud or injustice. Under CAMA 2020, certain provisions allow the lifting of the corporate veil. See section 93 which addresses the liability of directors and members when the company carries on business without a registered office. See also the case of Adeniji v The State (2001) 13 NWLR (Pt. 730) 375 where the Nigerian Supreme Court lifted the corporate veil to hold the directors personally liable for fraudulent activities conducted through the company.

CIRCUMSTANCES FOR LIFTING THE VEIL

1. Fraud or Improper Conduct: this is where the courts may lift the veil where the company is used to perpetrate fraud or other improper conduct. See the case of Kanu Sanyaolu v C.B.N (1991) 5 NWLR (Pt. 603) 144 where the court pierced the corporate veil to address the misuse of the company structure to avoid legal obligations.
2. Group Enterprises: this is where in some cases, the veil is lifted to treat a group of companies as a single economic entity, especially where they operate as one. See the case of Union Beverages Ltd v Pepsi Cola International Ltd (1994) 2 SCNJ 157 where the court lifted the veil to treat a group of companies as a single entity, given their integrated operations and shared management.
3. Agency or Trust: this is where a company acts as an agent or trustee for its members, the veil may be lifted to hold the principals liable.
4. Quasi-Partnerships: this is where in situations resembling partnerships, courts might disregard the corporate form to reflect the true nature of the relationship.

CONCLUSION

By understanding corporate personality, the consequences of incorporation, and the circumstances under which the veil of incorporation can be lifted, stakeholders can navigate the legal landscape of company law in Nigeria more effectively.