Question 1

What does it mean that a company is a legal person?

Accepted Answer

It means a company has a **legal identity separate from the people who own and run it** — it can own property, enter contracts, sue and be sued, and incur liabilities in its own name. This is called **separate legal personality**, and it is arguably the single most consequential concept in commercial law.

**The foundational case** is *Salomon v A Salomon & Co Ltd* (1897). Mr Salomon incorporated his boot business and sold it to the company, taking shares and secured debentures. When the company failed, creditors argued it was really just Salomon under another name and he should be personally liable.

The House of Lords disagreed unanimously. The company was a **separate person** in law, properly incorporated, and Salomon was not liable for its debts — even though he owned almost all of it and controlled it entirely.

**What follows from separate personality:**

**Limited liability.** Shareholders risk only what they invested. If the company fails owing money, creditors generally cannot pursue shareholders personally. This is the reason people incorporate, and the reason substantial economic risk-taking is possible at all.

**Perpetual succession.** The company continues regardless of who owns or manages it. Shareholders die; the company does not.

**Property is the company's**, not the shareholders'. Even a sole shareholder does not own the company's assets — they own shares.

**Contracts are with the company**, which is why counterparties check its finances rather than its owners'.

**Where the veil is pierced.** Courts will disregard separate personality only in narrow circumstances — principally where incorporation is used to **evade an existing legal obligation** or as a deliberate façade. The doctrine is applied restrictively, as confirmed in *Prest v Petrodel* (2013).

**Where directors remain personally liable:** **wrongful trading** and **fraudulent trading**, personal guarantees they have signed, breach of directors' duties, some health and safety and environmental offences, and unpaid taxes in defined circumstances.

**Directors and shareholders are different roles**, frequently the same people in small companies.

Question 2

What is common law and how is it different from statute?

Accepted Answer

Statute is law made by Parliament. Common law is law developed by judges through decided cases. Both are binding law in England and Wales, and the system runs on both simultaneously. How common law

Question 3

What is the difference between civil law and criminal law?

Accepted Answer

They answer different questions, involve different parties, use different standards of proof, and produce different outcomes. Criminal law concerns conduct considered an offence against society. The

Question 4

What is a trust, and why do people set one up?

Accepted Answer

A legal arrangement in which one person holds assets for the benefit of another — separating legal ownership from the right to benefit, which is the whole mechanism and the source of everything

Question 5

What is a statutory declaration, and when do documents need witnessing?

Accepted Answer

A statutory declaration is a formal written statement of fact, signed before an authorised person, which carries criminal liability if knowingly false — which is what gives it weight in place of

Question 6

How are charities regulated, and what can a charity actually do?

Accepted Answer

Through a registration and oversight regime requiring that an organisation exists for recognised charitable purposes and for the public benefit — and that second requirement is doing more work than

Question 7

What is a quango, and what is an arm's length body?

Accepted Answer

Organisations carrying out public functions at a distance from ministers — and the deliberate distance is the point, though it creates a genuine accountability question that has never been fully

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