This is an association of persons recognized as a legal entity. It is an independent legal existence.
It has own rights and is subject to obligations. It has capacity to own property, contract, sue or be sued and perpetual succession.
This is an association of persons recognized as a legal entity. It is an independent legal existence.
It has own rights and is subject to obligations. It has capacity to own property, contract, sue or be sued and perpetual succession.
CREATION/FORMATION OF CORPORATIONS
An incorporated association may be brought into existence in any of the following ways:
1. Registration: This is a process of incorporation provided by the Companies Act1.
It is evidenced by a certificate if Incorporation which is the „birth certificate‟ of the corporation. Corporations created by registration are Public and Private Companies.
2. Statute: Acts of parliament often create incorporated associations. The corporation owes its existence to the Act of Parliament.
3. Charter: Under the Universities Act2, when a private university is granted by charter, by the relevant authority it becomes a legal person of discharging its powers and obligations.
TYPES OF CORPORATIONS
1. Corporations Sole
This is a legally established office distinct from the holder and can only be occupied by one person after which he is succeeded by another. It is a legal person in its own right with limited liability, perpetual succession, capacity to contract, own property and sue or be sued. Examples include:
a) Office of the public trustee
b) Office of the Permanent Secretary to the Treasury
2. Corporations Aggregate
This is a legal entity formed by two or more persons for a lawful purpose and whose membership consists of at least two persons. It has an independent legal existence with limited liability, capacity to contract, own property, sue or be sued and perpetual succession. Examples include: public and private companies.
3. Registered Corporations
These are corporations created in accordance with the provisions of Companies Act. Certain documents must be delivered to the Registrar of companies to facilitate registration of the company. These include memorandum of association, articles of association, and statement of nominal capital.
Examples of registered corporations are; public and private companies
4. Statutory Corporations
These are corporations created by Acts of Parliament. The Act creates the association, gives it a name and prescribes the objects. Examples: Kenya Wildlife Services, Agricultural Finance Corporation, Public Universities, Central Bank etc.
5.Chartered Corporations
These are corporations created by a charter granted by the relevant authority.
The charter constitutes the association a corporation by the name of the charter. e.g. Private universities.
FEATURES OF CORPORATIONS
1. Legal personality: A corporation is a legal person distinct and separate from its members and managers. It has an independent legal personality. It is a body corporate with rights and subject to obligations. In Salomon v. Salomon & Co Ltd (1897), the House of Lords stated that “…the company is at law a different person altogether from the subscribers to the memorandum”.
The ratio decidendi of this case is that when a company is formed, it becomes a legal person, distinct and separate from its members and managers.
2. Limited liability: The liability of a corporation is limited and as such members cannot be called upon to contribute to the assets of a corporation beyond a specified sum. In
registered companies liability of members is limited by shares or guarantee. Members can only be called to contribute the amount, if any, unpaid on their shares or the amount they undertook to contribute in the event of winding up. This is liability limited by shares and by guarantee respectively.
3. Owning property: a corporation has the capacity to own property. The property of a corporation belongs to it and not to the members. The corporation alone has an insurable interest in such property and can therefore insure it as was in the case of Macaura v. Northern Assurance Co Ltd (1925). In this case the plaintiff was the principal shareholder and the company owed him £19,000. The Company had bought an estate of trees from him and later converted them to timber. The plaintiff subsequently insured the timber with the defendant company but in his own name. The timber was destroyed by fire two weeks thereafter. The Insurance Company refused to compensate the plaintiff for the loss and he sued. It was held that he wasn’t entitled to compensation since he had no insurable interest in the timber.
4. Sue or be sued: Since a corporation is a legal person, with rights and subject to obligations, it has the capacity to enforce its rights by action and it may be sued on its obligations e.g. when a wrong is done to a company, the company is the prima facie plaintiff.
It was held in Foss v Harbottle, where some directors had defrauded their company but members had resolved in a general meeting not to take any action against them. However, two minority shareholders sued the directors for the loss suffered by the company. The action was struck off on the ground that the plaintiff had no locus standi as the wrong in question had been committed against the company.
5. Capacity to contract: A corporation has capacity to enter into contracts; be they employment or to promote the purposes for which they were created. For example; a company has capacity to hire and fire. It was so held in Lee v. Lees Air farming Co. Ltd(1961)
6. Perpetual Succession: Since a corporation is created by law, its life lies in the intendment of law. It has capacity to exist in perpetuity. It has no body, mind or soul. For example, the death of directors or members of a company cannot determine a company’s life. It can only be brought to an end through the legal process of winding up.
UNINCORPORATED ASSOCIATIONS
These are associations of persons who come together to promote a common and lawful purpose.
They have no independent legal existence and property if any is jointly owned or is held in trust for the benefit of all members.
The rights of individual members are contained in the Constitution of the association.
Members are personally liable for debts and other liabilities of the association and are liable to lose personal assets if the association is unable to pay its debts (insolvent).
The associations can sue or be sued through their principal officers (chairman, secretary, treasurer).
The law which regulates those associations is the law which regulates the activities they engage in. e.g. Partnerships, Trade Unions, clubs, Welfare Associations, Staff Unions, political parties.
INCORPORATION
This is a legal process by which a partnership or other form of unincorporated association is converted to a registered company.
It thereupon becomes a legal person in its own right. The most fundamental attribute of incorporation from which all other consequences flow is that when an association is incorporated it becomes a legal person, separate and distinct from its members and managers.
It acquires an independent legal existence. It becomes a body corporate. This was the rule in Salomon-v- Salomon &co Ltd.
