Consequences of incorporation

Legal Personality
Once an unincorporated association is incorporated it becomes a body corporate with rights and subject to obligations, with certain capacities and incapacities. This is the most fundamental attribute of incorporation from which all other consequences flow. This is the so-called rule in Salomon V. Salomon and Co. Ltd (1897) vide: when a company is formed it becomes a legal person distinct and separate from its members and managers.

  1. Limited Liability: members as a general rule, are not liable to make good the debts of the corporation. In registered companies, members can only be called upon to contribute the amount due on their share or the amount they undertook to contribute the amount due on their share or the amount they undertook to contribute.
  2. Perpetual succession: A corporation is a creation of law. It has not body, mind or soul. Its life lies in the intendment of law. Death of member has no effect on its existence. It has capacity to exist in perpetuality.
  3. Sue or be sued: As a legal person with rights and subject to obligations a corporation has capacity to sue to enforce the rights and can be sued on its obligation. When a wrong is done on a corporation the corporation is prima facie the proper plaintiff. It was so held in Foss V. Harbothe (1973).
  4. Owning of property: A corporation has capacity to own property. The Property of a corporation is vested in it and does not belong to its members. It can therefore insure such property since it has an insurable interest. It was so held in case of Macaura V. Northern Assurance Co. Ltd (1925)
  5. Capacity to contract: An incorporated association has legal capacity to enter into contractual relationship in pursuit of its objects. In addition, it has capacity to hire and
    fire it was so held in Lee V. Lees Air Forming Co. Ltd (1981.)

KASNEB Revision kits and past papers with answers

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