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

Nadia, the sole shareholder of Orchid Ltd, is injured when Orchid Ltd's negligent employee drops equipment on her at work. Nadia is also its managing director. Which argument is most consistent with the consequences of incorporation?

Nadia can claim against Orchid Ltd. The company is a separate legal person, so it can owe duties to its sole shareholder, who can also be its employee, as in Lee v Lee's Air Farming. Her ownership does not defeat the claim.

  1. AOrchid Ltd cannot be liable because Nadia owns it
  2. BOrchid Ltd can be liable to Nadia as a separate legal person, and Nadia can be a claimant in her own rightCorrect
  3. COnly the other directors can sue on behalf of Nadia
  4. DNadia's claim fails because she cannot be both employee and shareholder

Explanation

Because the company is separate, it can owe duties to and be sued by its members, and a shareholder can also be an employee (Lee v Lee's Air Farming). Ownership of the shares does not remove the company's separate liability. Option D is wrong as dual status is permitted.

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