Basic Principles in a Case
As stipulated by the law, a company is a corporate body of a corporation and an artificial legal person. This consequently means, once a company is merged it becomes a legal personality, a juristic body, which is separate and discrete from its associates and shareholders. According to the law, the company’s predetermined capacity in its own right and can sue and also be sued in law, such that those laws are not able to bind the company. For the reason that it is not a natural person and hence referred to as artificial person as such it is run by the board of directors. The obligations of members are limited by the shares held. Directors are not therefore supposed to act as the owners of the company and not also as agents nonetheless they are required to undertake their responsibilities in accordance with the laws of the company. Artificial person lawful entity and it is permanent until or unless wound up for a set of reasons and under the processed laws of the company.
Macaura v Northern Assurance Co. Ltd (1925).
This case clearly depicts an illustration of the impact of separate personality and limited liability. In Macaura’s case, he was the owner of both an estate as a well as some timber. He agreed to sell all the timber on the estate in return for the entire issued share capital of Irish Canadian Saw Mills Ltd. The timber which amounted to almost the entire asset of the company, was later on stored on the estate. After two weeks, a fire broke out and destroyed all the timber on the estate, a move which prompted Mr. Macaura to claim under the insurance. In a turn of events, the insurance company refused to pay arguing that Mr. Macaura did not have insurable interest in the timber, since the timber belonged to the company (C. R. N. W., 1926). In addition, the insurance company also went ahead and charged Mr. Macaura on accounts of fraud, nonetheless the case lacked evidence. Ultimately, the issue arrived to the House of Lords who found out the timber belonged to the company and not to Mr. Macaura. In as much as he owned all the shares in the company, he did not have insurable interest in the company’s property. The mistake he had made was insuring the timber under his name.
Luguterah v. Northern Engineering Co. Ltd (1972) 1 GLR 153
On the other hand, in Luguterah’s case, he was summoned to attend an extraordinary general meeting which had been signed by the company’s secretary. The meeting was attended by eight respondents which included the company’s acting managing director, who held 25 per centum of the company’s shares. Nonetheless, initially, all the eight respondents had initially paid the company a total of ₡6,000 as deliberations for the shares in the company, but to Luguterah’s realization, none of the members name had been entered in the company’s members register. The meeting therefore passed a resolution to replace the initial board members with new seven member board of directors. Hence the applicant filed an instant, on the issue, however the sixth respondent who was the acting managing director said that the company in the year 1975 had increased the company shares from 10,000 to 100,000, and went ahead to submit that the applicant had not been served with prior notice (Nartey, 2017). The Case was ruled in favour of Luguterah by Taylor J. who stated that the shareholders have a right as members of the company to have company’s affairs conducted in accordance with the regulation of the company.
Findings from both Cases
The company is legal person, hence it can participate in contractual relationship, even with the owners. The owner does not have the authority to make decisions without consulting the shareholders, since in as much as he might be the majority shareholder of the company. For instance, in Luguterah v. Northern Engineering Co. the acting managing director did not have the authority of not registering all the members, but was confined to the company’s rules and regulations. A breach of regulations cannot therefore be categorized under mere anomalies (HG.org., 2019). On the contrary, a company is a legal person, hence it has its own debts as well assets. This is in relation to Mr. Macaurah’s case, whereby he insured the timber under his own name, and stored it in the estate which was under a registered company. Even though he owned all the shares in the company, he was entitle to insurance interest, since the timber was stored in a company’s premises. Henceforth, a company can only stand for itself, in matters involving debt or insurance since it is a sole entity. Similarly, the company is not an agent of the shareholders, but a legal person. The rules and regulations of a company are what govern it, hence nobody has the authority of manipulating the company in a specific, regardless of the amount of shares he or she owns in the company. Furthermore, shares do not have legal or impartial interest in the company’s property. The company runs only the set principles and not on the influence of the highest shareholder.
Reference
HG.org. (2019). Ghana Has a New Companies Act - The Companies Act 2019 (ACT 992). HG.ORG Legal Resources.
- R. N. W. (1926). Extent of Shareholders' Interests. Macaura v. Northern Assurance Co., Ltd. [1925] A.C. 619. The Cambridge Law Journal,2(3), 397-399. Retrieved May 22, 2020, from www.jstor.org/stable/45151
Nartey, S. (2017). Did The Minister for Finance Flout Corporate and Banking Rules for Political Interests? Gahna Law Hub.
