Question

Explain how company is an artificial person.

Answer 1

The incorporation of a company is an artificial entity recognized by the law as a legal person that exists independently with rights and liability. This means that a company is treated as a separate person from its participants. It is owned by at least one shareholder and managed by at least one director. This separate legal personality has the consequence that a company has perpetual succession. The life of the company is not affected by the death, disability, insolvency or disagreement of a shareholder. Its existence is ended when it is wound up pursuant to the Companies Acts.The shareholders may come or go the life of the company like an artificial person is least affected by these changes. The liability of the shareholders is limited to the value of the shares held by them, it means if a company fails to pay its obligations, the personal properties of the shareholders cannot be sold for the settlement of business debts.