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

Nova Ltd is a company with a single shareholder, Ines, who is also its managing director. Nova Ltd dismisses Ines from her role as employee. Which statement is correct?

Ines can be an employee of Nova Ltd. Because the company is a separate legal person from its sole shareholder, she can hold a valid employment contract with it, as in Lee v Lee's Air Farming, even though she owns and runs it.

  1. AInes cannot be an employee, because she is the owner
  2. BInes can be an employee of Nova Ltd, because the company and she are separate legal personsCorrect
  3. CInes is treated as a partner of Nova Ltd, so employment law cannot apply
  4. DInes's contract is with herself, so it has no legal effect

Explanation

Separate personality means a shareholder-director can have a genuine contract of employment with the company (Lee v Lee's Air Farming). The contract is between two distinct persons, so it is effective. Option D wrongly treats them as one person.

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