THE PRINCIPLE OF LEGAL PERSONALITYAND THE PROTECTION OF

MINORITY MEMBERS AND OTHER NON-MEMBERS CONSTITUENTS

3.1 Introduction
This chapter examines the legal personality principle under the Nigerian Company Law, the
concept of lifting the veil and the rights of minority members and other non-member
constituents and the protection of such rights.

3.2 Overview of the Legal Personality Principle under Nigerian Company Law
The legal personality principle is a universal legal concept, which postulates that an
incorporated company is, as a matter of law a separate legal entity distinct from the
individual(s) who are its shareholders and directors and are in control of its operations. The
business (and the debts and other obligations) of the company is the company’s business (and
debts and obligations) and not that of the shareholders’ or directors’. This concept was laid
down under the common law in the celebrated case of Salomon v. Salomon and Co Ltd.1

In that case Salomon a leather merchant and boot manufacturer in

1892 formed a limited company to take over his business. Salomon
and six other members of his family subscribed to its memorandum
for one share each, and two of his sons were appointed directors.
The Company paid about ₤39.000 to Salomon for the business, the
mode of payment being to give Salomon ₤10.000 in debentures
secured by a floating charge on the Company’s asset and ₤20,000
shares of ₤1 each, the balance of ₤9,000 was paid to Salomon in
cash. The business did not however prosper and when it was wound
up a year later its liabilities (including debenture debt) exceeded its
asset by ₤8,000. The liquidator representing the unsecured creditors
claimed that the Company’s business was in actual fact still
Salomon’s liability for debts incurred in carrying it on and therefore
Salomon should be ordered to indemnify the Company against its
debts and payment of the debenture debt to him should be suspended
until the Company’s other creditors are paid. The trial judge agreed
with the reasoning of the liquidator and he further held that all the
subscribers of the memorandum (except Salomon) held their shares
as mere nominees because Salomon’s motive in forming the
Company was to use it as an agent to manage his business for him.
A similar position was taken at the Court of Appeal and Salomon went further to contest the
issue at the House of Lords where Lord McNaughten stated the position as follows.2

1
(1897) AC 22.
2
Ibid, p. 51.

13
 “When the memorandum is duly signed and registered, though
there be only seven shares taken, the subscribers are a body
corporate “capable forthwith, of exercising all the functions of
incorporated company”. Those are strong words; there is no
period of minority on its birth, no interval of incapacity. I
cannot understand how a body corporate such as this made
capable by statute can lose individuality by issuing the bulk of
its capital to one person, whether he be a subscriber to the
memorandum or not. The Company is at law a different person
altogether from the subscriber… Nor are the members
(subscribers) liable…”

It is submitted that this ratio by the learned Lord settles the principle of legal personality,
which confers personae juris on a company.
Upon incorporation of company, a company is capable of enjoying legal rights to own
property, has a perpetual succession and its liabilities limited. In buttressing this position, the
court in the case of Lee v Lee’s Air Farming Ltd3 and DHN Food Distributors Ltd v Tower
Hamlets Lbc4 held that the shareholders of such Companies are separate Legal personalities
inter se.

As a legal consequence of this principle, a company can subscribe to the memorandum of

another company as a shareholder, like an individual. Similarly, it can be a partner in a
partnership and participate in the running of partnership business. The company can also act
as an agent or as principal and in the latter capacity; it can employ people including any of its
shareholders5 and enter into a contract of employment with them.

Furthermore, with respect to the corporate personality, according to Gower, the concept of
Corporate Personality was inter-alia introduced to cater for circumstances which tends to
accumulate all the debts and liabilities upon an individual. The doctrine therefore act as a
shield and helmet to such individual(s) who owns all or substantial amount of shares of a
company.6
The consequences and effects of the incorporation of a company are set out in section 37 of
CAMA and it provides as follows-
“As from the date of incorporation mentioned in the
certificate of incorporation, the subscribers of the
memorandum together with such other person as may, from
3
(1960) 3 ALL E.R 420.
4
(1976) 3 ALL E.R 462.
5
Lee v Lee Air Farming Limited (supra)
6
Gower, L.C.B Principles of Modern Company Law, 6th ed.,(London: Sweet & Maxwell, 1997) p. 6-11

14
 time to time, becomes members of the company, shall be a
body corporate by the name contained in the memorandum
capable forthwith of exercising all the powers and
functions of an incorporated company including the power
to hold land and having perpetual succession and a
common seal, but with such liability on the part of the
members to contribute to the asset of the company in the
event of its being wound up as is been mentioned in this
Act.”7

The Nigerian court further affirmed the principle of legal personality in the case of Emenite
Ltd v. Oleka8 were it held that the legal personality of corporate body can only be established
as a matter of law by the production in evidence of the certificate of incorporation, but that
where, by the state of pleading, the legal personality of a corporate body is not in issue, there
will be no need to prove the status and legal personality of a corporate body.

However, another dimension, which cannot be overlooked, was enunciated by Denning L.J
with respect to a legal personality of a company was stated in Bolton (Engineering) Co. Ltd. v
Graham and Sons9as follows:

“A Company may in many ways be likened to a human

body. It has a brain and nerve center, which controls
what it does. It also has hands, which holds the tools and
act in accordance with direction from the center. Some
of the people in the company are mere servants and
agents who are nothing more than hands to do the work
and cannot be said to represent the mind or will. Others
are directors and managers who represent the directing
mind and will of the Company and Control what it
does…..”
The above assertion by the Learned Lord Justice connotes the independent legal personality of
the Company as fundamental to the whole operation of business through Companies.

The above reasoning was given approval in the celebrated case of Lennards Carrying Co. v
Asiatic Petroleum Ltd where Viscount Haldane L.C said:

“A Corporation is an abstraction, it has no mind of its

own any more than it has a body of its own; its active
and directive will must consequently be sought in the

7
Section 37 of CAMA Cap C20 LFN, 2004
8
(2005) 6 NWLR (Pt. 921) 350
9
(1957) 1 QB 159

15
 person of somebody who for some purposes may be
called an agent but who is really the directing mind and
will of the corporation, the very ego and center of
personality of the Corporation.”

The principle of corporate personality which is a fundamental feature or consequence of

incorporation has given rise to other consequences or advantages of incorporation which
include the following:10

i. Ability to sue and be sued

An incorporated company is capable of suing and being sued in her corporate name. Being a
corporate body with the power of a natural person, it can institute an action to enforce its legal
rights in its corporate name without the necessity of joining any of the director or members as
parties.

ii. Perpetual Succession

Once a company has been incorporated, it has acquired the attribute of having a perpetual
succession. In other words, the company remains in existence until it is wound up [in
accordance with the provision of the law. Members’ retirement, bankruptcy, mental disorder
does not bring the company to an end. If a member dies, his shares in the company are vested
in the personal representative who shall, be the only person recognized by the company as
having any title to his interest in the shares. 11 The death of the members may be a ground for
winding up the company but does not itself mean the end of the company.12

10
Akomolede, I., Fundamentals of Nigerian Company Law (Lagos: Niyak Print & Publications; 2008) pg. 37-41
11
Section 154 of CAMA
12
Re Ebrahim (1971) 1 Ch. 799

16
iii. The Right to own Property
The company has the right to own property different from the property of members. The
company’s property belongs to the company itself and not to the individual members even
though the members or shareholders are the owners of the company. For instance, because the
properties of the company belong to her and not to the members, the members or the
shareholders do not have an insurable interest in the company’s properties. 13 This feature
distinguishes an incorporated company from partnership where the partners own the property
of the firm. In Phillips v. Abou-Diwan,14it was held that the shareholders of a company were
not the individuals to dispose of the company’s property.

iv. Liability of the Company different from liability of members

The liability of the company is different from that of the members and as such, members or
shareholders as individuals cannot be compelled to settle the liabilities. Conversely, the debts
of the members are not the debts of the company 15. Generally, there is no personal liability on
the part of the members for any debt incurred by a company. If the asset of a company during
winding up are not enough to pay its debt, a shareholder whose liability is limited by shares is
liable to contribute to the assets up to the amount, if any, unpaid on his shares. In partnership,
on the other hand, the firm’s debts are the debts of the partners. Consequently, the partners are
liable for the firm’s debts.

v. Formation of a Company
An incorporated company is qualified to join other person or corporate bodies to form and
incorporate a company, provided it complies with the requirements of CAMA in respect of
registration. For instance, such registered company must not be a corporate body in
liquidation.16

vi. Transfer of Shares

Incorporated companies are free to transfer their shares subject however, to the company’s
Memorandum and Articles of Association. The transferability of shares is limited to public
companies, private company is required to put a clause in her Article of Association
restricting transfer of shares17
13
Macaura v. Northern Assurance Co. Ltd (1925) A.C. 619
14
(1976) 2 F.R.C.R. 24
15
Banque De L’afriqueOccidentale v. Habu (1964) N. N. L. R. 30
16
Section 20 (3) of CAMA
17
Section 22 (2) of CAMA

17
vii. Liability in Contracts and Torts
The company, on incorporation, is liable in tort and in contract in respect of the acts of its
members or officers carried on behalf of the company and with her authority, apparent or
ostensible. Thus, where a director of a company enters into a contract in the name of or
purporting to bind the company, it is the company (the principal) that is liable on it, not the
director. The director is not personally liable unless he has shown that he does not have the
authority of the company to bind her. The foregoing is so because a company being an
artificial person, acts through her directors and officers who are the directing mind and will
(alter ego) of the company. The company must be willing to be held liable for acts of the
officers in tort or contract committed on behalf of the company.

viii. Borrowing Powers

An obvious advantage of incorporation is the powers of an incorporated company to borrow
money to carry out its business. A registered company can issue debentures and secure it with
a floating charge, for example, on the assets of the company while public companies quoted
on the stock exchange can invite the public to subscribe to its shares to enable it raise money
from the capital market.

3.3 The Concept of Lifting the Veil

There are a number of exceptions to the separate legal personality principle under the English
system; i.e. where the courts are prepared to lift the mask of incorporation and look at what
has really been going on behind the scene in the company. According to the dictum of Devlin
J, in Bank Handel v Slatford18 who opined as follows:
“… The legislature can forge a sledge hammer capable of cracking open the corporate
shell…” and Gower complements this by further opining that: “… The courts have sometimes
been prepared to have a crack…”19
It could however be deduced from the above reasoning that the veil of incorporation can be
pierced either by statutes or the courts to avert fraud and injustice on the person of the
company. In answer to the statutory flavor of lifting the veil, under the English law, section
16520was given approval in the judicial conclusion of the Master of the Rolls: Denning M.R

18
(1953) 1 Q.B 248 at 278
19
Ibid Gowers 4th Edition
20
of the UK Companies Act 1948

18
where he lend credence to this by asserting in Norwest Holst v Secretary of State for Trade 21
that;
“The whole management and control is in the hands of the directors. They are self-
perpetuating oligarchy; and are virtually unaccountable…. The question is asked:
quiscustodietipsos custodies? Who will guard the guards themselves” The answer to this
poser was put forward by the Learned Lord Himself 22 in the case of Waller Steiner v Moir23 as
follows: “It is because this legislations are beyond the reach of ordinary individuals that this
legislation has been passed so as to enable the Department of Trade appoint inspectors to
investigate the affairs of the Company”

Therefore, the veil of incorporation is the separation between a company and its members.
The phrase suggests that the affairs of the company are hidden or concealed from public view.
The legislature has always made it an essential condition that it be accompanied by wide
publicity.24 This veil has been described as being opaque and impassable as an iron curtain
and yet from time to time the legislature and the courts have disregarded the separate
personality of the company by lifting the veil, that is, by introducing inroads to this
principle.25

However, the courts are still reluctant to ’pierce’ the ’veil’ in certain situations
notwithstanding its consequences. This seems to imply that apart from its regulatory function,
the veil of incorporation is valued for its integrity. 26 It has been considered that the limited
liability of the shareholders is usually the reason why the courts or the law provide for this
piercing of the veil thus ignoring the existence of the company as a separate person and
looking beyond it to see who is responsible for any wrongdoing. According to Gower, the
Courts would lift the veil when legal personality is being manifestly used as a ‘cloak’ to
protect the shareholders from liability. The veil will only be lifted when the company is
simply being used as a sham or a facade and not when it is a real company. The English
courts will pierce the veil only when the company structure is a mere façade concealing the
true facts.27
21
Denning L.J Master of the Rolls
22
Op. cit
23
(1978) 3 ALL E.R 217 @ 292
24
Akinola, B., “A Critical Appraisal of the Doctrine of Corporate Personality under the Nigerian Company
Law” in http://www.nlii.org/files/NLiiwps002.pdf [Accessed 29 May 2014]
25
J. Nicholas, “Separate Legal Personality; Legal Reality and Metaphor”, Bond Law Review, 3, 1993, p. 217.
26
Ibid.
27
B. Hannigan, Company Law (London: Butterworths, 2003) p. 70.

19
It is not totally up to the discretion of the Court to lift this veil as the courts seem to follow
established categories. In fact, the Court is not free to disregard the principle merely because
it considers that justice so requires. According to Gower, the courts should be readier in some
circumstances to allow the lifting of the veil especially when a company is being used to
justify wrong and conceal fraud.28 In Gower’s words, “however, nowadays only two situations
are recognized as justifying such piercing; that of lifting the veil to impose personal liability
on shareholders and secondly to view a group of companies as one single body.”29

With respect to the lifting of the veil of incorporation, it could be exercise in two ways; the
statutory and the judicial piercing of the veil 30 The latter principally follow the approach that
’good faith is an overriding principle prevailing even over the fundamental principle of the
separate juridical personality of companies’.31 Judicial piercing of veil usually deals with the
company being used as a facade and the lifting of the veil to protect the public interest.
Legislative piercing of veil have been made primarily in the following cases; liability of a sole
member for the company’s debts, liability for the use of prohibited names, liability for
fraudulent trading and wrongful trading, the requirement of consolidated accounts and in
certain tax matters.32

Thus, one can see that although it is universally recognized that a company has its own
separate personality with all the rights and obligations that this gives rise to, in certain cases,
namely so as to protect third parties’ rights and to avoid abuse, procedures have been
established so as to permit this essential control.33
Accordingly, our legislatures, and the courts, have often been willing to disregard the separate
legal existence of a company, where to do otherwise, would lead to injustice. Where the court
refuses to apply the principle of corporate personality, to prevent the company from being
used to perpetrate fraud, for instance, such company would be described in such epithets as “a
mask”, or “a cloak” or “a stratagem” or “an alias”, or “a pretended association”, or “a
sham”, or “bogus”, or “a simulacrum” or “a screen” and the projected activity would be

28
L. C. B. Gower, Principles Of Modern Company Law, 6th edition, (London: Sweet & Maxwell, 1997) p. 17.
29
Ibid, p. 21.
30
Orojo, O. Company Law and Practice in Nigeria, 3rd edition,(Lagos: Mbeyi& Associates (Nig) Ltd, 1992) p.
17.
31
Ibid.
32
Ibid.
33
Gower, L.C.B., Principles Of Modern Company Law, 6th edition, (London: Sweet & Maxwell, 1997) p. 28.

20
disallowed.34. Thus, in Littlewoods Stores Ltd. v. I.R.C35Lord Denning, M.R sounded a
warning in the following words: the doctrine laid down in Salomon’s case has to be watched
very carefully, it has often been supposed to cast a veil over the personality of a limited
company through which the court cannot see. But that is not true. The courts can, and often
do, draw aside the veil. They can, and often do, pull off the mask. They look to see what
really lies behind. The legislature has shown the way with group accounts and the rest. And
the court should follow suit.36

Unfortunately, courts have not shown any consistent pattern or formula in lifting the veil of
incorporation37 from decided cases it would appear that the occasion for departing from the
strict application of the corporate personality principle varies from case to case as the justice
of the case demands. This may be conveniently categorized in the following

3.3.1 Lifting the Veil by the Court

i. Public Policy
The courts are always ready to lift the veil of incorporation where such veil tends to be used
as a shield contrary to public policy. Hence, in Daimler Co. Ltd. v Continental Tyre and
Rubber Co. Ltd38 the House of Lords lifted the veil after considering the fact that all except
one of the directors were Germans who possess an enemy character, having regard to the
enemy status of the majority shareholders. Also, in Part Cargo Ex M v. Glenroy 39. A German
subsidiary company was treated as “a breach” of its holding company, so as to taint with
enemy ownership goods in taint with enemy ownership goods in transit from the holding
company to the subsidiary.

ii. Evasion of Taxes

34
Salomon v. Salomon (supra)
35
(1969)1.W.L. R 1241
36
Ibid., p. 1254
37
Gower, L.C.B., Principles Of Modern Company Law, 6th edition, (London: Sweet & Maxwell, 1997) pg. 130-
131
38
(1916) A.C 307
39
(1945) A.C. 124

21
The veil of incorporation will further be pierced when a company uses its legal personality to
evade the payment of tax. According to Gowers,40 each case where they have regarded the
subsidiary as agent of the parent can be matched with another in which they have refused to
do. He further posited that the cases revealed no consistent principle beyond a refusal by the
legislature and judiciary to apply the logic of the principle laid down in Salomon v Salomon
and co ltd41where it is too flagrantly opposed to justice, convenience or interests of the
revenue. In Marina Nominees Ltd v. Federal Board of Inland Revenue 42 the Supreme Court
refused to lift the veil of incorporation and treat the tax paid by the incorporation of the
company as that of the company

Fraud and Improper Conduct

When the company is formed or used as a means of perpetrating fraud, or formed for the
purpose of doing wrongful or unlawful acts or after its formation, the controllers by using the
company direct a wrongful thing to be done, the veil of incorporation will be lifted to hold the
individual members as well as the company liable; the court will not allow the company to
use the doctrine of corporate personality to be utilized for fraud or improper purpose. Thus, in
Jones v. Lipmann,43 the defendant entered into a contract for the sale of his land to the
plaintiff. In order to avoid completing the sale, he conveyed the land to a company formed by
him for that purpose. The plaintiff brought an action for specific performance. The court lifted
the veil of incorporation and ordered the defendant and his company to specifically perform
the contract with the plaintiff, describing the company as the creature of the defendant, a
device and a sham, a mask which he holds in an attempt to avoid recognition.44

Also, in Gilford Motor Company v. Horne45 Mr. Horne, a former employee to the plaintiffs
had covenanted not to solicit the company’s customers. He attempted to evade this obligation
by forming his company, which undertook the soliciting. The veil of incorporation was lifted
and an injunction was granted against him and his company though the latter was not even a
party to the action, the company was described in the judgment as “a device, a stratagem and
a mere cloak or sham.”46 In Re Burgle Press Ltd.,47 two majority shareholders who held 90%
40
Supra
41
Supra
42
(1986) 2 N.W.L.R (Pt. 20) 48
43
(1962) 1 W.L.R 832
44
Ibid, 836 (per Russell, J.)
45
(1933) Ch. 935
46
Ibid, 956, 961, 969.
47
(1961) Ch. 270.

22
of the shares of a company wanted to buy out the third, the minority who held 10% of the
shares, but the latter refused. Section 209 of the Companies Act 1948 enables stake over
bidder who falls within the section and has acquired the requisite proportion of shares to
acquire the minority compulsorily. Knowing that they could not fulfill the requirement of this
section on their own, they formed a company to make a bid for all the shares of the company
to buy out the minority. Harman, L.J. held that they could not succeed, describing the new
company formed for this purpose as “nothing but a little hut built around” the minority
shareholders and the whole scheme as “a hallow sham”.48

Agency
Suffice to add that the courts have been careful in the construction of implied agency
relationship to seek some indicia of real agency relationship such as control by the holding
company over the management and finances of the subsidiary’s affairs. It is submitted that
within the corporate parlance agency is a means of avoiding the corporate personality
principle where the justice and circumstance of the case so demands. In Re F.G (Films) Ltd 49.
An American Film Company, seeking to gain the advantages afforded to British made films,
caused a company to be incorporated in England. That company had no place of business
other than a registered office and no staff other than three directors one of whom was the
president of the American company. Its capital was only 100 pounds of which the president
had 90 pounds. The finance and facilities for making the film were provided by the American
Company. The court held that in so far as the English company had acted at all in maki9n g of
films, it had done so as agent of the American company which was the true maker of the film.
Accordingly, the company was, in essence, an American concern and could not get any tax
advantage as a British company.

48
Ibid., 288 (1962) 1 W.L.R 832
Ibid, 836 (per Russell, J.)
(1933) Ch. 935
Ibid, 956, 961, 969.
(1961) Ch. 270.
Ibid., 288
49
(1953)1.W.L.R 483

23
Trust
Invariably, under the same guise, where a company is holding shares in trust for third parties
and the management of the company is in the hands of the trustees, the court may lift the veil
of incorporation so as to appropriate the company’s property with the terms of the trust.
Hence, in The Abbey, Malvern Wells ltd v Ministry of Local Government and Planning 50
Dankwerts J. accepted the fact that a company held all its property on charitable trust when all
the shares in it were so held and its article of association provided that the trustees were to be
its governing body. Also, in Littlewoods Stores v. I.R.C 51 the court relied on the trust concept
to lift the veil of incorporation in a tax case involving the parent case and the subsidiary.

Illegality
The veil of incorporation will be removed where the purpose for which it is used is illegal.
Where for example, the members of the company are nationals of an enemy country, the court
will not hesitate to lift the veil and discover the identity of the true national. Where the
corporate legal personality was acquire to achieve illegal purpose the veil of incorporation
will be lifted. This was the basis for the decision in the case of Merchandise Transport Ltd v.
British Transport Commission52where the court pierced the veil of incorporation to unmasked
those using the veil of incorporation to carry out illegal act

3.3.2 Lifting the Veil under Statute

The Act has made provisions for some situations when the veil will be lifted. Some of these
situations are as follows:53

i. Membership falling below the legal minimum

The minimum number of members required to form a company and carry on the business of
the company is two.54 If a company carries on business without the required minimum and it
does so for a period that is more than 6 months, every director or officer of the company
during the time of the default who were aware of the default shall be severally and jointly
responsible for whatever debt the company may incur during the period.55

50
(1951) Ch. 728
51
(1969) 1 W.L.R 124
52
(1962) 2 QB 173
53
Akomolede, I., Fundamentals of Nigeria Company Law (Lagos: Niyak Print & Publications; 2008)
54
Section 18, CAMA
55
Section 93, ibid

24
ii. Liability for Fraudulent trading
Under section 506 of CAMA, if in the course of winding up of the company, it appears that
any business of the company have been carried out in a reckless manner or with the intent to
defraud the creditors of the company or any other person, the court may disregard the legal
personality of the company and declare that such persons who were parties to such businesses
be personally liable for all or any of the company’s debt and other liabilities as the court may
direct

iii. Reduction in the Number of Directors

Under section 246(1) of the Act, every company registered either before or after the
commencement of the Act shall have at least two directors. Where the numbers of directors
falls below two, the company is expected to appoint another Director within one month.
Where a company carries on business with the knowledge that the number of directors has
fallen below two, a director or a member having that knowledge shall be liable for all the
liabilities and debt incurred by the company during the period when the company so carried
on business.56

iv. Liability of Directors and Officers

By virtue of provisions of section 290 CAMA, directors and other officers of a company are
personally liable where they have failed to apply money or other property received for the
purpose for which it was received with an intent to defraud. The defaulting directors or other
members shall be personally liable to the third party from whom the money was received.57

v. Holding and Subsidiary Companies

A subsidiary company is owned and controlled by the Holding company, but in law, they are
two separate companies. There are some instances where the separate legal personalities of
the companies will be disregarded and treat the subsidiary company as the holding company.
Section 336 of the Act requires a holding company to prepare group financial statements that
deal with the state of affairs and profit or loss of the company and the subsidiaries.58

56
Section 246 (3) ibid
57
Section 290 of CAMA
58
Section 290 ibid

25
vi. Company limited by Guarantee carrying on business for profit
Section 26(4) of the Act provides that a company limited by Guarantee shall not be
incorporated with the object of carrying on business to make profit and distributing same to its
members. Where this is done with the due knowledge of the members, they shall be
personally liable for the discharge of all debts and liabilities incurred by the company in the
course of carrying on the business59

vii. Illegal or unauthorized use of a company seal

Section 631 (4) provides that where an officer of a company uses or authorizes the use of the
company’s seal illegally or fraudulently or signs or authorizes to be signed a bill of exchange
or promissory note on behalf of the company, such officer shall be guilty of an offence and
shall be further personally liable to the holder of any such bill for the amount thereof.

3.4 Protection for a Minority Member

Upon incorporation, the company becomes a legal person of its own with a personality
separate from that of its members. The affair of the company is however run by its human
organs, namely the members in general meeting and the board of directors. 60 Only these two
organs can act or authorize an act to be done for the company. 61 Where a wrong is done to the
company, only the company can sue to redress the wrong.62

The decision to sue to redress a wrong against the company is a management decision for the
Board of Directors being the company organ responsible for management of the company. 63
Where the Board fails to discharge this responsibility, the members in a General Meeting may
institute legal proceedings in the name of the company.64

Thus, where a wrong is done to the company by the directors, members or even outsiders, the
company is the proper party to bring an action to remedy the alleged wrong. A shareholder or
minority shareholders that have brought an action on behalf of the company cannot sustain the
action by the operation of the land mark rule enunciated in the case of Foss v. Harbottle.65In

59
Section 26(4) ibid
60
Section 63(1), ibid
61
Section 63(1) of Companies and Allied Matters Act (CAMA), Cap. C. 20, Laws of the Federation of Nigeria,
2004.
62
Foss v. Harbottle (1843) Hare 461
63
Section 63(3) ibid
64
Section 63(5) (b) ibid
65
(1843) 2H. 416 (also reported as 67 E.R. 189).

26
this case, the plaintiffs, Foss and Turton were shareholders of the Victoria Park Company
which bought land for use as Pleasure Park. Harbottle and others were directors and
shareholders in the company. Some of the directors had sold their own lands to the company
at inflated prices. The plaintiffs sued to have the directors refund the excess price for
exploiting their position to defraud the company. The court held that the wrong was done
against the company and not to the plaintiff in their individual capacity. So they could not sue
on behalf of the company without its authorization.

The rule in Foss v. Harbottle66 was again clarified in MacDougall v. Gardiner67 where
MollishL.J. stated as follows:

“If the thing complained of is a thing which in substance the

majority of the company are entitled to do, or if something has
been done irregularly which the majority of the company are
entitled to do regularly, or if something has been done illegally
which the majority are entitled to do legally, there can be no use
having litigation about it. The ultimate end of which is only that
a meeting has to be called and then ultimately the majority gets
its wishes.”

The rule in Foss v. Harbottle68 is also called the majority rule or the proper plaintiff principle.
This rule avoids multiplicity of suits by the minority on a matter the majority is willing to
overlook.

In Nigeria, the rule in Foss v. Harbottle,69 was firstly adopted by the Supreme Court in the
case of Abubakar v. Smith.70Where the court held that it is only the company can sue to
remedy that wrong and only the company can ratify the irregular conduct. Today the rule has
been codified by section 299 of CAMA.The majority rule allows the majority to get away
with several irregularities towards the company since they can commend the simple majority
votes to ratify their acts which invariably, affect the minority. CAMA has however provided
some relief which acts as checks against the excesses of the majority 71 which over the years

66
Supra.
67
(1875)1 Ch. 13, at p. 25.
68
Supra.
69
Ibid.
70
(1973)6 EC 31.
71
Examples of such checks are illegal act, ultra vires, fraud, an act which is supposed to be done by special
majority and done by simple minority under section 300 (a)-(f) CAMA

27
had increased, resulting in fraud, oppression of the minority and breach of duties by the
directors who are usually also in control as majority shareholders.72
In order therefore to enforce such likely breaches of director’s duties and to protect the
minority shareholders, the law has provided remedies.

Apart from the protection afforded in the Act 73, the extent of the rights enjoyed by minority
shareholders was first determined as the exception to the rule in Foss v. Harbottle. The rights
constitute the circumstances labeled exception to the majority rule. In the case of companies
registered under the Act, the first line of protection for minority shareholders will be the
existence of the Memorandum and Articles of Association of the Company, which will not be
freely alterable by a simple majority of members74.

3.4.1 The proper plaintiff rule.

Where irregularity has been committed in the course of the Company’s affairs or any wrong
has been done to the company, only the company can sue to remedy that wrong and only the
company can ratify the irregular conduct. This was the principle laid down in Foss v.
Harbottle in 1843. Only the company could sue to redress wrongs to it. The majority
comprising the majority shareholders and the Board appointed by them sometimes abuse their
office and would not expectedly take any action against themselves. Section 299 of CAMA
has now codified this common law principle.

Under the common law however, before the CAMA was enacted, the courts has taken
cognizance of the hardships of the rule in Foss v. Harbottle on the minorities. The courts had
introduced some measure of relief under their equitable and inherent powers to reduce the
hardship of the rule in Foss v. Harbottle.In the case of Edwards v. Halliwell75, Jenkins L. J
enunciated the proper plaintiff rule in Foss v. Harbottle76 as containing two elements as
follows:

First, the proper plaintiff in an action in respect of a wrong

alleged to be done to a company or association of persons is
prima facie the company or association of persons itself.
Secondly, where the alleged wrong is a transaction which might

72
Section 300 (a)-(f)
73
Section 300(a)-(f) of CAMA Supra.
74
Section 598 of CAMA, 2004.
75
(1950) 2 ALL E.R 1064, CA
76
(1843) 2H. 416 (also reported as 67 E.R. 189).

28
 be made binding on the company or association and on all its
members by a simple majority of the members, no individual
member of the company is allowed to maintain an action in
respect of that matter for the simple reason that, if a mere
majority of the members of that company or association is in
favor of what has been done, then cadet quaestio.

While the first proposition is patently based on the separate legal personality of the company,
the second proposition is based on the principle of majority rule. However, the major pitfall of
this rule is that, though the company is the proper person to sue, it is artificial person and can
only act through its human agents usually the board of directors who may well be the actual
wrongdoers. These directors may decide not to sue, and further secure the approval of this
decision in the general meeting where they too could control a majority of the votes. The
result is that the minority shareholders are at the losing end to the majority shareholders who
stand to loot the company with impunity. 77This position is also recognized under section 299
of CAMA which stated that:
Subject to the provisions of this Act, where irregularity
has been committed in the course of a company’s affairs
or any wrong has been done to the company, only the
company can sue to remedy that wrong and only the
company can ratify the irregular conduct.

The foregoing section retains majority rule as the basis of industrial democracy in the
management of companies in Nigeria. However, exceptions are provided for in the Act and
the exceptions are protection against overzealous or obnoxious act of company’s directors or
the majority shareholders.78This lead to the development whereby, a minority shareholder
might sue despite the rule.79
These four exceptions or instances where the rule in Foss v. Harbottle80 does not apply have
now been codified in the CAMA. They are stated hereunder:

77
H.J. Farra, E.N. Furey, M.B. Hannigan and P. Wylie Philip, Farrar's Company Law 2nd ed.,(London:
Butterworth Edinburgh; 1988) pp. 382-384
78
Akomolede, I. Fundamentals of Nigerian Company Law (Lagos: Niyak Print & Publications; 2008) p.69
79
(1843) ENGR 478; (1843) 2 Ha 461; 67 ER 189.
80
Supra.

29
Members Direct Action. Section 300 of CAMA.
The provision of section 300 of CAMA provide thus:

“Without prejudice to the rights of members under sections

303 to 308 and section 310-312 of this Act, or any other
provisions of this Act, the court, on the application of any
member, may by injunctions or declaration restrain the
company from the following81-

a) Entering into any transaction which is illegal or ultra vires;82a minority shareholder or
an individual can sue to restrain an ultra vires transaction. He can also seek for a
declaration that an act of the directors is ultra vires the company. An ultra vires act is
more than a mere irregularity which the company can ratify through the majority83

b) purporting to do by ordinary resolution any act which by its constitution or the Act
requires to be done by special resolution;84if the constitution of the company or the Act
requires an act be carried out by a special majority, for example, through a special
resolution, if that act is done by a simple majority, through an ordinary resolution, the
minority can bring an action to remedy the breach of the Article or provision of the Act. In
Baillie v. Oriental Telephone Co.85 an action brought by a minority shareholder was
allowed to restrain a company from acting on a special resolution of which an insufficient
notice had been given.86

c) Any act or omission affecting the applicant's individual rights as a member; 87 the
section is a restatement of the Common Law position that where the personal and
individual rights of membership have been invaded, the rule has no application. In Pender
v. Lushington,88Jessel M.R said as follows: A member of a company may enjoy a right
alone or in common with other members of the company and the rule in Foss v. Harbottle
has no application when individual member sue, not in the right of the company, but in
their own rights as member

81
Section 300 CAMA
82
Section 300(a) of CAMA, 2004.
83
Edward v. Halliwell (1950) 2 All ER 1064
84
Section 300(b) Ibid
85
(1915) 1 Ch. 503
86
Nigerian Stores Workers Union v. Uzor and Six others (1971) 2A. L. R. Comm. 412
87
Section 300(c) Ibid
88
(1877) 6 Ch. D 70

30
 In that case, the constitution of the company allowed every member to be entitled to one
vote at a general meeting for every (10) shares held. The vote of the plaintiff was
disallowed as a result of which an amendment to a resolution which would have been
defeated was passed. It was held that the plaintiff was entitled to an injunction to restrain
the company from acting on the resolution

d) Committing fraud on either the company or the minority shareholders where the
directors fail to take appropriate action to redress the wrong done; 89if fraud is
committed on the company or the minority shareholders and the directors fail to take an
appropriate action to redress the wrong, the minority can maintain an action against the
directors or the company. The act complained of need not involve actual commission of
fraud. In Cook v. Deeks90 a minority shareholders action was allowed to compel the
directors to account to the company for the profit made out of a construction contract,
which they took in their own names. Also, in Daniels v. Daniels,91 the minority
shareholders of a company were allowed to bring an action against the company and the
directors where the directors had authorized the sale of a company land to one of them at a
price alleged to be below the market value. In that case, Temple man, J. proffered a wider
definition of fraud when he said as follows: if minority shareholders can sue if there is
fraud, I see no reason why they cannot sue where the action of the majority and the
directors though without fraud, confers some benefits on those directors and majority
shareholders themselves. Lastly, in Prudential Assurance Co. Ltd. v. Newman Industries
Ltd,92 a minority shareholder’s action was allowed against a fraudulent conspiracy of two
directors of the company in inducing the company to buy shares of another company at an
overvalued price

e) Where a company meeting cannot be called in time to be of practical use in

redressing a wrong done to the company or to minority shareholders; 93 a minority
action is allowed where a company’s meeting cannot be called in time to be of practical
effect to redress a wrong done to the company. This exemption was given judicial
imprimatur in the case of Hodgson v. National & Local Government Officers

89
Section 300(d) Ibid
90
(1916) 1 A.C 554
91
(1978) 2 All ER 89
92
(1982) Ch. 204
93
Section 300(e) Ibid

31
 Association94 where it was held that where a company meeting cannot be called in time to
be of practical effect to redress a wrong done to the company or to a minority, action on
behalf of the company or individual shareholder will lie

f) Where the directors are likely to derive a profit or benefit, or have profited or
benefited from their negligence or from their breach of duty.95 A minority action is
maintainable where the directors are likely to derive a profit or benefit or have profited or
benefited from their negligence or from their breach of duty. It was held in Daniels v.
Daniels96 that an action would lie against directors who have profited from their
negligence, even if fraud is not proved. Again in Alexander v. Automatic Telephone Co,97
a minority action was allowed where the directors benefited from a breach of their duty,
even though fraud was negative or not proved.

This exception was recognized by the Supreme Court in the case of Edokpodo & Company
Ltd. Sam Edo Wire Industries Ltd.98 In that case, the court permitted a minority shareholder’s
action to challenge a spurious allotment of shares by the majority shareholder which allotment
would have the effect of divesting the plaintiff’s interest in the company. In the word of
Aniogolu, Jsc; it appears to one that this is a clear case in which a minority shareholder
should, in the interest of justice, be allowed to sue as one of the exceptions to the rule in Foss
v. Harbottle.

3.4.2 Types of Minority Action

1. Personal Action
A personal may be commenced by a member to enforce a right due to him personally where
such rights have been abused by an act deemed to be that act of the company. 99 An example of
personal action would be where a shareholder sought to commence an action to enforce the
term of a contractual obligation with the company

94
(1972) 1.W.L.R 130
95
Section 300(f) Ibid
96
Supra
97
(1900) 2
98
(1954) 7 SC. 119
99
Section 301 ibid

32
2. Representative Action
Where an individual member’s right have been infringed, and the infringement affects other
members in the company, the appropriate action will be a representative action. By a
representative action, a member will be suing the company on behalf of himself and other
aggrieved members.100

3. Derivative Action.
A member may apply to the court for an order permitting him to either institute Personal,
Representative or Derivative action. In Derivative actions, the company bears the cost since
the action in its name or on its behalf unlike in members direct action where the action is
taken commenced in the applicant’s name and not on behalf of the company. 101 A member
may bring an action in court to seek relief where the he alleges that the affairs of the company
are being run in a manner that is unfairly prejudicial and oppressive to his interest as a
minority in the company.102

The set of reliefs that could be granted are outlined in section 312(2) of CAMA and includes
an order for the winding up of the company, an order setting aside the act constituting the
oppression or unfair prejudice, etc.

More so, a member may apply to the court for the winding up of the company on the grounds
that it is just and equitable to do so. The grounds for this action are not stated. 103 They are
therefore open and will be granted based on the merits of each case.

Section 303(1) of CAMA.

An action may be instituted by any individual member of the company to redress a wrong
done to him as a member.104 He reserves the right to apply to the court for an order of
injunction restraining the company from any act or omission affecting the applicant's
individual rights as a member or for a declaration 105. Here, the member suing is only entitled
to injunction or declaration and not claim for damages. Where two or more members have
their individual rights infringed, they may bring individual actions. But one of them may

100
Section 301(2) ibid
101
Section 204 (2) (c) & (d) Ibid
102
Section 310 & 311 of CAMA Supra.
103
Section 408(e) of CAMA Supra.
104
Section 301(1) Ibid.
105
Section 301(2) Ibid.

33
bring a representative action on behalf of him and other affected members to enforce the right
due to them. Even in this case, he will not be entitled to damages against the company but to a
declaration or an injunction restraining the company and directors from committing the
wrongful act.106 In any of the forgoing instances, the court may award cost to the suing
member irrespective of the success or otherwise of his court action. 107The grounds for
obtaining this kind of relief are as follows:

(a) The wrong doers are the directors who are in control of the company and will not take
any action.
(b) The applicant has given reasonable notice to the directors of his intention to apply for
derivative action if the directors do not take the necessary action to redress the wrong.
(c) The applicant acts in good faith.
(d) It appears to be in the company’s interest that the action be taken.108

3.4.3 Relief on the ground of Unfairly Prejudicial and Oppressive Conduct. S. 310 &
311, CAMA
A member may bring an action in court to seek relief where the he alleges that the affairs of
the company are being run in a manner that is unfairly prejudicial and oppressive to his
interest as a minority in the company.
The set of reliefs that could be granted are outlined in section 312(2) of CAMA and includes
an order for the winding up of the company, an order setting aside the act constituting the
oppression or unfair prejudice etc.

Investigation by the CAC

The corporate Affairs Commission may on the petition of a member direct an investigation
into the Affairs of a company to determine whether the affairs of the company are being
properly run. S. 314-330

Winding up on the Just and Equitable ground S. 408(e) of CAMA

A member may apply to the court for the winding up of the company on the grounds that it is
just and equitable to do so. The grounds for this action are not stated. They are therefore open
and will be granted based on the merits of each case.

106
Ibid.
107
Section 301(3) Ibid
108
Section 303 (2) (a)-(d) Ibid

34
In conclusion, the CAMA has made out adequate measures to ensure the protection of
minorities. Members of the company are therefore empowered to approach the courts for
redress. The legal mechanisms for minorities to seek redress are also potent to redress the
breach of duties by the Directors. These legal mechanisms operate as legal exceptions to the
proper plaintiff rule and operate as a limit to majority rule in the company.

3.5 Member Rights and the Equitable Treatment of Members

As part of the measures to secure and ensure the protection of minority shareholders, a
plethora of rights has been conferred on individual shareholders. This particularly marks part
of the recent trend in corporate governance with particular respect to the protection of the
minority shareholders.

Obtaining relevant and material information on the company on a timely and regular basis and
the right of shareholders to participate and vote in general meetings of shareholders: This
seems to be the most fundamental rights of shareholders as it allows them to make informed
decisions in a timely manner. To achieve this end, the various Acts have made provision for
this right.

i. Disclosure of Information by the Company: Under section 149 of CAMA, directors

are required to place before the shareholders at every annual meeting of the
shareholders comparative financial statement (present year and previous year), and the
report of the auditor, if any. This is an equivalent provision to section 214 of the
Nigerian Companies & Allied Matters Act 2004.
ii. Disclosure of Directors' Interest and Holding: This places an obligation on a
director or officer of a company who is a party to a material or proposed material
contract with the company (or who is director or officer of anybody or has a material
interest in any body that is a party to a contract or a proposed material contract with
the company) to disclose in writing as to the nature and extent of his interest.109
iii. Shareholders' Meetings: The Company must give notice to each shareholder,
director or auditor of the time and place for meeting. The notice must not be less that 7
days to the meeting day or more than 30 days before the proposed meeting.

109
Section 280(6) Ibid

35
Under CAMA, every member shall, notwithstanding any provision in the articles, have a right
to attend any general meeting of the company and to speak and vote on any resolution before
the meeting.110 The provision is to the effect that the articles may provide that a member shall
not be entitled to attend and vote unless all calls or other sums payable by him in respect of
his share in the company have been paid. 111 In other jurisdictions, the scope of this right has
been enormously widened.

Shareholders' participation is further strengthened by giving the right to any shareholder

entitled to vote at an Annual General Meeting and, further gives the shareholder the right to
discuss at the meeting any matter in respect of which he would have been entitled to submit a
proposal.112

Majority shareholders have a fiduciary responsibility to the minority and to the corporation to
use their ability to control the corporation in a fair, just and equitable manner. 113 Any use of
power must benefit all shareholders proportionately and must not conflict with proper conduct
of the corporation's business. There is rule of inherent fairness from the viewpoint of the
corporation and those interested therein. This rule applies to the officers, directors, and
controlling shareholders alike. For example; the majority excluding the minority. The
majority acted without regard to the resulting detriment to the minority. Such conduct is not
consistent with their duty of good faith and inherent fairness.114

All shareholders should have opportunity to participate effectively and vote in meetings of
shareholders and should be informed of the rules, including voting procedures that govern
shareholder meeting: By way of example, absent or foreign shareholders are recognized and
their rights preserved by use of proxies.115 The management of the company is mandated to
include a proxy form with every notice of meeting that it sends out. 116 A proxy holder is
given the same right as the shareholder who appointed him.117
3.5.1 Critique of the Statutory Powers and Protection for Minority Member

110
Section 81 Ibid
111
Section 81, Ibid.
112
Section 114 Ibid
113
Azu, U.E., Examination on Recent Trends in Corporate Governance as it Affects the Majority Rule and the
Minority protection” International Journal of Advanced Legal studies and Governance, 3(2), 2011 p.12
114
Ibid, p. 15. Supra note 102
115
Section 230(1) of CAMA Supra.
116
Section 230(2) Ibid
117
Section 230(4) Ibid

36
We have state above that, the directors manage a company and that ultimate control rests with
the majority members, this is because the majority can assume total control by commanding
three-quarter votes. They can also influence major decisions such as appointments and
removal of the board by just over half of the total membership votes. This is the principle of
majority rule, the basis of all members’ resolutions. The implication of this role is that there
will be some members whose opinions will not prevail because they will be outvoted. This
may happen regularly to the same members if their policy on how the affairs of the company
should be managed constantly conflicts with the view of the majority.118

The principle of majority rule is well established and emphasized in the matter of litigation by
the rule in Foss v. Harbottle119 It is in the view of this principle, that this thesis question the
minority of the members in a Nigerian public company. The obvious precarious position of
minority members of a Nigerian public company is responsible for the exception to the
majority rule principle otherwise called the exception to the rule in Foss v. Harbottle
provision codified in the Nigeria Company Act. 120Apart from the exceptions to the rule in
Foss v Harbottle, there are other provisions that are seemingly protective of members,
especially minority members. Some of these provisions, which are labeled “relief on the
ground of unfairly prejudicial and oppressive conduct”. 121 However, whether these protections
and powers provided for the minority members under the Act actually confer any strength on
the membership of the minority members is another matter.

The Act for example, provides that a member shall have a right to seek an injunction or a
declaration in court to restrain the company on any act or omission affecting the applicant
right as member.122 It has been argued been argued that this right is not really an exception to
the rule in Foss v. Harbottle.123 In the case of Pender v. Lushington,124 which is usually
associated with this provision,125 the court dealt with the attempted removal of the plaintiff

118
Davies, P. L., Gower & Davies Principles of Modern Company Law 7th ed., (London: Sweet & Maxwell;
2003) p 481
119
Supra
120
Section 330 CANA
121
Sections 310-313 CAMA. See also the provisions for the investigation of companies and their affairs by
inspectors appointed by the Corporate Affairs Commission (CAC) and the consequential powers of CAC and the
Attorney General of the Federation to Act on the reports of investigation contained in Section 314-329 CAMA.
122
Section 300(c) CAMA
123
Keenan, D., Smith & Kennan Company Law for Students, 9th ed., (London: Pitman Publishing; 1993) p. 265;
see also section 233 CAMA.
124
(1877) 6 Ch. 70
125
Sofowora, M. O., Modern Nigeria Company Law, 2nd ed., (Lagos: Soft Association Publisher; 2002) p. 479

37
shareholder (shareholder) right to vote. The view in this thesis is that this provision does not
enhance the membership of a minority member because the usefulness of his votes is called to
question where such vote is at variance with the view of the majority which will prevail in all
circumstances.

Another protection for the minority members is their right to bring derivative action in the
name of the company where fraud is committed against the company and directors fails to
take appropriate action to redress the wrong. 126The problem with this too is that, in a
successful action against the wrongdoers, where fraud is committed against the company it is
the company, which takes the direct benefit of the damage recovered. 127 There is no personal
advantage for the minority member because, even where the fraud of the majority results in a
fall in the value of shares, which is a personal loss to him, such losses have been held to be
irrecoverable128

Where the company enters a transaction, which is illegal or ultra vires, a member may have a
right of action to restrain the company from entering into such an illegal or ultra vires
transaction.129 This also has a shortcoming because the company may ratify such a transaction
by a superior majority (special) resolution. This is also the case where the company does by
ordinary resolution what is required under the Act to be done by special resolution. 130 The
courts are usually reluctant to make orders on matters touching on irregularity because the
company is able by a majority to ratify such irregularities.131

As was noted above, the Act provides for relief on the grounds of unfairly prejudicial and
oppressive conduct132and for the investigation of companies and their affairs. 133 A member has
power under the Act to bring application to the court for an order to restrain the controllers of
the company from conducting the affairs of the company in an illegal or oppressive manner. 134
Where the application is successful, the court has the power to make orders regulating the

126
Section 300 (d) CAMA
127
Griffin, S., Company Law: Fundamental Principles, 4th ed., (London: Pearson Education Limited; 2006) p.
403.
128
Prudential Assurance Co Ltd v. Newman Industries (1982) 1 All ER 354
129
Section 300(a) CAMA
130
Section 300(b)
131
Browne v. La Trinidad (1887) 37 Ch. 1
132
Section 310-319 CAMA
133
Section 314-329 CAMA
134
Section 311 CAMA

38
affairs of the company, including the power to wind up the company. 135 However, the power
to bring application under this provision is not exclusive to the minority members, as it is
open to all stakeholders, that is all those with interest in the company or against the company,
such as creditors, officers, directors, and even the Corporate Affairs Commission. 136
Generally, the problem with realizing this kind of right is that a minority member will have to
be aware of the affairs of the company for him to know that it is conducted in an illegal and
oppressive manner. A minority member will have to be aware of the affairs of the company
for him to know that it is conducted in an illegal and oppressive manner. A minority member
who has no direct access to the company has no way of knowing how the affairs of the
company are conducted and thus take advantage of this provision.

Members have the power to petition the CAC to investigate the affairs of the company. 137
However, it is the view in this thesis that the provisions for “other investigation of the
company”138 which may be undertaken by CAC if the court by order, declares that the affairs
of the company ought to be investigated may be more useful to minority members than
section 314, this is because the requirement of the twenty five per-cent threshold of the votes
of the members holding one class of shares to petition for investigation under section 314.
Another issue for the minority under section 314 is how they can organize their members to
archive the twenty-five percent of their class vote to be able to take advantage of this
provision. Apart from this problem identified above, there is also a problem with outcome of
the investigations. For example, where a civil proceeding is required to be commenced
against the persons investigated in the public interest, 139or any person is guilty of an offence
and thus criminally liable, the co-operation of the officers of the company is required to
proceed in both cases.140 This co-operation may be difficult to archive where those in charge
acted in concert with the wrongdoers.

It is obvious from the above that all the powers granted the minority members under the Act
would require the co-operation of the officer of the company to realize. It is doubtful that a
minority member can afford the time and expenses required to remedy any wrong committed

135
Section312 CAMA
136
Section 310 CAMA
137
Section 315 and Section 314 CAMA
138
Ibid section 315
139
Section 321 CAMA
140
Section 322 CAMA

39
against the company or against the member or cause, an investigation into the companies’
affairs with all the bottlenecks identified above

3.6 Conclusion
This chapter provides an overview of the legal personality principle, and the rights of
members of a company. The chapter reveals that a company’s separate personality gives rise
to important effects. One of the attributes is that a company, as separate from its members, is
capable of; owning its own property, having its own rights and being subject to its own
obligations. These rights, obligations and property will vary from the rights, obligations and
property of its members as what is enjoyed by the company is not necessarily enjoyed by its
members and what is borne by the company is not necessarily borne by its members. As such,
members of the company are therefore empowered to approach the courts for redress
whenever they are done wrongly.

40