The Principle of Separate Legal Existence is a fundamental principle in the field of company law. According to this principle, the company is treated as an entity separate from its members.
In order to create a company, the promoters of the company must produce certain documents to the registrar of companies.
The registrar presides over the government agency known as the Companies House.
After checking the documents, the registrar will issue a certificate of incorporation and the company starts to exist as a corporate body.
The most important consequence of incorporation is that a company is regarded as a person. It has its own rights and the rights are different from the rights of its owners.
When Shareholders buy shares from a certain Company and pay a certain percentage amount of the shares rather than paying the full amount, and when the company is dissolved, then the shareholders are liable to pay the rest of the amount.
If a shareholder has paid the full amount, he/she is not liable to pay any amount upon dissolution of the company.
Therefore, shareholders have a limited liability.
This refers to the existence of any organization despite the death, bankruptcy, insanity, change in membership of any member from the business. In such instances, the shares are passed on to the next generation.
Certain properties can be owned by a company. These properties continue to be owned by the companies regardless of their shareholders and members.