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CA Foundation · Business Laws · The Companies Act, 2013

Anita holds 40% of the shares in Surya Pharma Ltd. A fire destroys the company's godown containing stock worth Rs 20 lakh. Anita claims she can recover her proportionate share of the loss from the insurer under a personal fire policy she took on the stock. Which principle of company law defeats her claim?

Anita's claim fails because the company's assets belong to the company, a separate legal person, and not to its shareholders. A shareholder has no insurable interest in company property, regardless of her 40% holding, as shown in Macaura's case.

  1. AShareholders have no insurable interest in the company's property because the company, as a separate entity, owns the assetsCorrect
  2. BShareholders may insure property only if they hold more than 50% of the shares
  3. CA shareholder can insure company property only with the Registrar's permission
  4. DInsurance by a shareholder is valid but limited to the face value of her shares

Explanation

Based on Macaura v Northern Assurance Co, the company's assets belong to the company, not its shareholders. A shareholder therefore has no insurable interest in them, whatever the percentage held. The claim fails for that reason and not because of any 50% threshold or Registrar permission, which do not exist.

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