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

Which consequence follows directly from a company having separate legal personality?

The company can sue and be sued in its own name and has perpetual succession, so it continues despite changes in membership or a shareholder's death. It also owns its own property, and shareholders are not automatically liable for its wrongs.

  1. AShareholders are automatically liable for the company's torts
  2. BThe company can sue and be sued in its own name and continues despite a change in its membersCorrect
  3. CThe company ceases to exist if a major shareholder dies
  4. DThe company cannot own property in its own name
  5. Directors become the owners of the company's assets

Explanation

A separate legal person has capacity to sue and be sued in its own name and enjoys perpetual succession, so membership changes or a member's death do not end it. It owns its own property, and shareholders are not liable for its torts merely by being members.

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