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ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality

Kestrel Ltd is a private company limited by shares. Its sole shareholder, Dmitri, also acts as its only director. Kestrel Ltd enters a lease of premises and later defaults on the rent. Which statement is correct?

Kestrel Ltd is liable for the rent, not Dmitri personally. A company has separate legal personality, even if one person owns all the shares and acts as director. Personal liability would require a guarantee or a court lifting the corporate veil, neither of which applies here.

  1. ADmitri is personally liable for the rent because he is the sole shareholder and director
  2. BKestrel Ltd is liable for the rent, and Dmitri is not personally liable merely because he owns and controls the companyCorrect
  3. CThe landlord can only sue Dmitri because a one-person company cannot be a party to a lease

Explanation

A company is a separate legal person from its members, even where one person owns all the shares and controls it. The lease is the company's contract, so the company is liable. Dmitri would be liable only if a personal guarantee existed or the court lifted the veil, neither of which is stated.

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