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

Kofi owns all the shares in Delta Ltd. He transfers his own business premises to Delta Ltd, then insures the premises in his own name. A fire destroys them. The insurer refuses to pay because Kofi has no insurable interest. Applying the rule in Macaura v Northern Assurance, what is the likely outcome?

Kofi will fail. Once the premises are transferred, they belong to Delta Ltd as a separate legal person, and a shareholder, even a sole one, has no insurable interest in company assets, so the insurer need not pay him under the Macaura principle.

  1. AKofi succeeds, because as sole shareholder he owns the company's assets in substance
  2. BKofi succeeds only if he is also a director of Delta Ltd
  3. CKofi fails, because the premises belong to Delta Ltd, a separate legal person, and a shareholder has no insurable interest in company assetsCorrect
  4. DKofi fails, because the policy is void as soon as a company is formed with a single shareholder

Explanation

Property transferred to the company belongs to the company, not its members, even a sole shareholder. Kofi therefore has no insurable interest in the premises, as held in Macaura. His directorship is irrelevant. The policy is not void just because the company has one member; the problem is the lack of interest in the asset.

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