276 Chapter 10Companies (1): Characteristics and formation
p. 319). Second, they can insist that the owners of the company personally guarantee that
the loan will be repaid.Perpetual succession
A company can be liquidated at any time if the members of the company pass a special
resolution that it should be liquidated. (A special resolution is passed if at least three-
quarters of company members who vote on the resolution are in favour of passing it.) If
a company is liquidated, then the company will cease to exist. However, companies can
continue in existence indefinitely, and therefore they are said to have perpetual succession.
Shareholders, of course, must die. But even if all the shareholders in a company die, their
shares will be inherited by others and the company will continue in existence. For example,
the Hudson’s Bay Company has been in existence since 2 May 1670. Generations of its
shareholders have died, but the company still exists.
As we shall see in Chapter 12 on p. 343, the death of a partner ends a partnership. The
existing partners might agree to carry the partnership on but, technically at least, the firm
will be dissolved when a partner dies.Ownership of property x Contents
A company can own property, and this property will continue to be owned by the company
regardless of who owns the shares in the company. This can be important when a company
is trying to borrow money because the company can give its own property, both present
and future assets, as security for a loan.Contractual capacity
A company has the power to make contracts and can sue and be sued on these contracts.
This power must be delegated to human agents, and it is the company directors and other
agents who actually go through the process of forming the contracts. But the important
point is that it is the company itself which assumes the rights and liabilities which contracts
create.
A company can also sue and be sued in tort. (A tort is a civil wrong other than a breach
of contract, for example negligence, trespass or defamation. See Chapter 8.)Criminal liability
To commit a crime a defendant must generally commit a guilty act while having a guilty
mind. At first sight it would seem that companies cannot commit crimes because they have
not got minds of their own. However, the courts are sometimes prepared to regard the
controllers of the company as the minds of the company.
In Tesco Supermarkets Ltd vNattrass (1971)the House of Lords held that a person who
was sufficiently senior in a company could be regarded as the mind of the company. If a
person senior enough to be regarded as the mind of a company had a guilty mind then the
company could be regarded as having a guilty mind. Persons who were not senior enough
could be regarded only as the hands of the company. If such a person had a guilty mind
then this could not be regarded as the guilty mind of the company. In the case it was held
that a supermarket manager employed by Tesco Ltd was not senior enough to be regarded
as the mind of the company, whereas a very senior manager might have been.