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IAI Actuarial Core Principles · Business Management · Separate legal personality, directors' duties, shareholders and partnerships

Nisha Kapoor is an actuary who is a director of a small company, Kapoor Advisory Pvt Ltd, which she wholly owns. A client alleges negligent advice given by the company. Which statement is most accurate about perpetual succession and liability?

The company continues to exist despite changes in its members and is primarily liable for its negligent advice. Separate personality does not shield Nisha from consequences of her own professional conduct, but she is not automatically liable for all company debts.

  1. AThe company continues to exist despite changes in membership and is the primary party liable, though Nisha may face personal professional consequences for her own conductCorrect
  2. BThe company ceases to exist if Nisha sells her shares, ending any liability
  3. CNisha is automatically personally liable for all company debts because she is the sole member
  4. DThe client can claim only against the Institute of Actuaries of India
  5. The company cannot be sued because advice is given by individuals only

Explanation

A company has perpetual succession, so changes in membership do not end its existence or liabilities. Liability for the company's acts rests primarily with the company. Nisha's own professional conduct can still attract personal or disciplinary consequences.

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