Company Law question

golum

Just wondering if anybody could explain-in as short and clear a manner as is feasible-what the diiference is between "Agency" and "Single Economic Entity" with regard to separate legal personality.
Thanks in advance

Ab roller plus

golum wrote: »

Just wondering if anybody could explain-in as short and clear a manner as is feasible-what the diiference is between "Agency" and "Single Economic Entity" with regard to separate legal personality.
Thanks in advance

An agency exists when one person, an agent, is authorised by a principal to bring the principal into a contractual relationship with a thrid party. An agent can be a company or an individual. An agent is generally not liable to a third part if the principal fails to honour a contract.

Single Economic entity - I think your referring to the idea of limited liability. A company when formed has a seperate legal personality from its members/shareholders. It can sue and be sued and is recognised in law as seperate and distinct from its members. So the assets of the company are company assets and not owned by the members. Same for debts and liabilites. Members/Shareholder are not liable for company debts. Members are only liable for amount shares which have been issued to them but not paid for. (Unpaid Share capital)

The case of Salomon and Salomon is a well known case on point.

You should note that in certain circumstances a court may look behind the "veil of incorportaion" and find the members and/or directors responsible for company actions, for example, in the case of fraud.

Jev/N

Agency and Single Economic Entity are two of the ways by which the courts will 'lift' or 'pierce' the veil of incorporation i.e. that they will not view the company in question as being separate and distinct from either it's members or other incorporated companies

Single Economic Entity is where a group of companies are considered, in the eyes of the law, as one entity for a specific overreaching purpose. This approach has declined in the UK but still continues on here.

Agency, on the other hand, is where a company or director is found to be the agent of another company, the principal - it is most often found that a company is the agent of another. Thus, the parent can become directly liable for the liabilities of the 'agent'.

The confusion arises as both of the above methods of lifting the veil were tried in Fyffes v DCC