LIMITED LIABILITY AND SEPARATE LEGAL PERSONALITY: THE GHANAIAN PERSPECTIVE

The issue of limited liability and separate legal personality has in no doubt contributed immensely to the development and growth of  business in the country. First of all, Limited liability means that members of a business liability is limited to the amount of unpaid shares or guarantee promised as payment if the company should default in the course of transacting business. Whereas, separate legal personality gives a company all legal rights and responsibility a natural person enjoys.

On incorporation under law, section 24 of the company code says a company becomes a separate legal entity as compared to its members. The company is different and distinct from its members in law. It has its own name and its own seal, its assets and liabilities are separate and distinct from those of its members. It is capable of owning property, incurring debt, and borrowing money, having a bank account, employing people, entering into contracts and suing and being sued separately.

There are several ways that these characteristics of a company have contributed to the development of business entity in the country and they include;

The concept of separate legal personality and limited liability makes it possible for companies to borrow monies for their daily activities as a company. It could enter into transactions of borrowing with other corporate organization as well as with individuals. This means that companies can expand its services or businesses which in the long run ensure that many people get employment opportunities. Lenders are prepared to lend monies to companies rather than individuals because they know that the company can use its assets to secure whatever loans it takes as well as create debentures and companies can secure the same through fixed or floating charges.

With this, should a company default with it payment of borrowed monies the individuals who manage the company are not liable for the inabilities of the company. Managers risks are therefore to some extent limited as in the case of Morkor v. Kuma where a CEO and the company where both sued for their inability to cover their indebtedness. The Supreme Court held that she was separate from the company and the company was responsible for its own.

The issue of limited liability and separate legal personality again has helped in the development of business in the country as it paves way for businesses to sue and be sued in its own name. A shareholder cannot be sued for the debts of the company, especially where it is a limited liability company. It can enforce its rights and sue for breaches, contractual obligations among others. In a country where the society is so polarized this features makes it possible for managers of companies and for companies to act professionally. Every contract should be met and personal emotions are separated from business transactions.

To add more, the concept of limited liability as defined in section 9 of the company code means that where a shareholder has paid up then he is not liable for the debts or liabilities of the company. The shareholder has no further liability in terms of the debt of the company so if the company is in debt and is in liquidation the shareholder will not be called to pay up.  

This feature enables companies to open up its shares for investors to pump monies into the company and for the public to invest in the company knowing that if they default they are not going to bare an extra cost. This also means that asset of the company belongs to it and not the shareholders and therefore the shareholders cannot use its asset to settle debts. The company therefore stands on its own two feet to defend whether or not to settle monies it owns in its own way without coursing it to collapse entirely in the normal sense. As in the case of Majdoub v. Bartholomew where it was held that the company was a limited liability company and the law must recognize it as such and because the partnership had ceased to exist at the time of the execution, the company was not liable for its debts