Answer to Question #156492 in Law for Muuu

Question

What is separate legal personality and how does it come about?

Answer 1

The concept of separate legal personality was developed in company law and it is often related to legal status between a company limited by its shares and its owners. The principle results in a limited liability in the sense that the liability of shareholders for the company's debt is limited to the amount that they have paid the company for its shares and cannot be held personally liable for the debts of the company. It also comes about by the fact that the property and assets of the company belong to the company and not the shareholders or directors and following this, the debts and liabilities are that of the company and the shareholders cannot be compelled to pay the debts of the company.