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De facto corporation and corporation by estoppel are both terms that are used by courts in most common law jurisdictions to describe circumstances in which a business organization that has failed to become a de jure corporation (a corporation by law) will nonetheless be treated as a corporation, thereby shielding shareholders from liability. [1]
In order for a de facto corporation to be created, the following elements must exist:
If all of these requirements are met, then the business will be treated as a corporation for all purposes, except with respect to acts by the state itself. However, most states will not apply this doctrine to protect a person who was aware that the incorporation effort was defective at the time that they purported to act on behalf of the corporation.[ citation needed ]
Corporation by estoppel, on the other hand, applies when someone operates a business as if it were a limited liability entity or corporation, irrespective of whether there was a good faith effort by the business to incorporate. The person doing business with such an entity, as if it were a limited liability entity or corporation, may later be estopped from arguing that it is not in fact a limited liability entity, in an attempt to reach the assets of the incorporators. For the same reason, defendants who had acted as a corporation will be estopped from denying liability as a corporation when sued by a plaintiff who had relied on the defendant's corporate form when dealing with the defendant. [3]
In law, a legal person is any person or 'thing' that can do the things a human person is usually able to do in law – such as enter into contracts, sue and be sued, own property, and so on. The reason for the term "legal person" is that some legal persons are not people: companies and corporations are "persons" legally speaking, but they are not people in a literal sense.
Estoppel is a judicial device in common law legal systems whereby a court may prevent or "estop" a person from making assertions or from going back on their word; the person so prevented is said to be "estopped". Estoppel may prevent someone from bringing a particular claim. Legal doctrines of estoppel are based in both common law and equity. Estoppel is also a concept in international law.
A limited liability company is the United States-specific form of a private limited company. It is a business structure that can combine the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation. An LLC is not a corporation under the laws of every state; it is a legal form of a company that provides limited liability to its owners in many jurisdictions. LLCs are well known for the flexibility that they provide to business owners; depending on the situation, an LLC may elect to use corporate tax rules instead of being treated as a partnership, and, under certain circumstances, LLCs may be organized as not-for-profit. In certain U.S. states, businesses that provide professional services requiring a state professional license, such as legal or medical services, may not be allowed to form an LLC but may be required to form a similar entity called a professional limited liability company (PLLC).
A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares. Shareholders are able to transfer their shares to others without any effects to the continued existence of the company.
The law of agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-contractual fiduciary relationships that involve a person, called the agent, that is authorized to act on behalf of another to create legal relations with a third party. Succinctly, it may be referred to as the equal relationship between a principal and an agent whereby the principal, expressly or implicitly, authorizes the agent to work under their control and on their behalf. The agent is, thus, required to negotiate on behalf of the principal or bring them and third parties into contractual relationship. This branch of law separates and regulates the relationships between:
In a limited company, the liability of members or subscribers of the company is limited to what they have invested or guaranteed to the company. Limited companies may be limited by shares or by guarantee. In a company limited by shares, the liability of members is limited to the unpaid value of shares. In a company limited by guarantee, the liability of owners is limited to such amount as the owners may undertake to contribute to the assets of the company, in the event of being wound up. The former may be further divided in public companies and private companies. Who may become a member of a private limited company is restricted by law and by the company's rules. In contrast, anyone may buy shares in a public limited company.
A limited liability partnership (LLP) is a partnership in which some or all partners have limited liabilities. It therefore can exhibit aspects of both partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This distinguishes an LLP from a traditional partnership under the UK Partnership Act 1890, in which each partner has joint liability. In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation. Depending on the jurisdiction, however, the limited liability may extend only to the negligence or misconduct of the other partners, and the partners may be personally liable for other liabilities of the firm or partners.
A private limited company is any type of business entity in "private" ownership used in many jurisdictions, in contrast to a publicly listed company, with some differences from country to country. Examples include the LLC in the United States, private company limited by shares in the United Kingdom, GmbH in Germany and Austria, Besloten vennootschap in The Netherlands, société à responsabilité limitée in France, and sociedad de responsabilidad limitada in the Spanish-speaking world. The benefit of having a private limited company is that there is limited liability.
Legal capacity is a quality denoting either the legal aptitude of a person to have rights and liabilities, or altogether the personhood itself in regard to an entity other than a natural person.
Ultra vires is a Latin phrase used in law to describe an act that requires legal authority but is done without it. Its opposite, an act done under proper authority, is intra vires. Acts that are intra vires may equivalently be termed "valid", and those that are ultra vires termed "invalid".
A limited partnership (LP) is a form of partnership similar to a general partnership except that while a general partnership must have at least two general partners (GPs), a limited partnership must have at least one GP and at least one limited partner. Limited partnerships are distinct from limited liability partnerships, in which all partners have limited liability.
In tort law, a duty of care is a legal obligation that is imposed on an individual, requiring adherence to a standard of reasonable care to avoid careless acts that could foreseeably harm others, and lead to claim in negligence. It is the first element that must be established to proceed with an action in negligence. The claimant must be able to show a duty of care imposed by law that the defendant has breached. In turn, breaching a duty may subject an individual to liability. The duty of care may be imposed by operation of law between individuals who have no current direct relationship but eventually become related in some manner, as defined by common law.
Estoppel in English law is a doctrine that may be used in certain situations to prevent a person from relying upon certain rights, or upon a set of facts which is different from an earlier set of facts.
Salomon v A Salomon & Co Ltd[1896] UKHL 1, [1897] AC 22 is a landmark UK company law case. The effect of the House of Lords' unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the company's shareholders for payment of outstanding debts.
In commercial law, a principal is a person, legal or natural, who authorizes an agent to act to create one or more legal relationships with a third party. This branch of law is called agency and relies on the common law proposition qui facit per alium, facit per se.
In law, the principle of imputation or attribution underpins the concept that ignorantia juris non excusat—ignorance of the law does not excuse. All laws are published and available for study in all developed states. The said imputation might also be termed "fair notice." The content of the law is imputed to all persons who are within the jurisdiction, no matter how transiently.
A company, abbreviated as co., is a legal entity representing an association of legal people, whether natural, juridical or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals.
The Law of Property Act 1989 is a United Kingdom Act of Parliament, which laid down a number of significant revisions to English property law.
Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480 is a UK company law case, concerning the enforceability of obligations against a company.
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