Introduction
One of the most important features of company law is the concept of legal personality. This principle recognizes a company, once incorporated, as a separate and distinct entity from the individuals behind it. It is the foundation of modern corporate practice, ensuring that companies can hold rights, bear obligations, and participate in legal and commercial transactions independently of their members, shareholders, and directors.
Nigerian courts have consistently upheld this doctrine as a cornerstone of corporate law, particularly in determining liability and ownership of assets.
The Concept of Corporate Personality
In OCTOPUS INVESTMENTS & FINANCE CO. LTD v. VASWANI & ORS (2015) LPELR-25755(CA), the Court described a company as “an artificial person, invisible and intangible, created by law, with perpetual succession and a common seal.”
The law is settled that a company, though an artificial person, acts through its directors, officers, and other agents, the acts and liabilities incurred in the name of the company belong to it and not its members.
This position reflects the classic authority of Salomon v. Salomon & Co. Ltd (1897) AC 22,where the House of Lords established that once incorporation occurs, the company becomes a separate legal entity distinct from its shareholders. Nigerian courts have repeatedly affirmed this principle, ensuring that directors and shareholders cannot be automatically liable for the acts of the company.
Statutory Backing under CAMA
Section 42 of the Companies and Allied Matters Act (CAMA) provides that as from the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum together with such other persons as may become members of the company, shall be a body corporate by the name contained in the memorandum, capable of exercising all the powers and performing all functions of an incorporated company including the power to hold land, and having perpetual succession, but with such liability on the part of the members to contribute to the assets of the company in event of its being wound up as is mentioned in the Act.
This provision encapsulates the doctrine of separate corporate existence, which underpins commercial transactions in Nigeria.
Legal Personality and Jurisdiction of Courts
The issue of legal personality also touches on jurisdiction. The Court of Appeal in WHITE DIAMONDS PROPERTY DEVELOPMENT CO. LTD v. TRADE WHEELS LTD (2018) LPELR-44572(CA)reaffirmed that only natural or juristic persons may sue or be sued. If a party in a suit is not recognized as a legal person, the entire action is incompetent. This principle ties back to the landmark decision in MADUKOLU v. NKEMDILIM (1962) 1 ALL NLR (Pt. 4) 587, where the Supreme Court outlined the elements necessary for a court to be competent to entertain a case.
Proof of Corporate Existence
Where a company’s legal personality is challenged, the best evidence remains its certificate of incorporation. In ETHIOPIAN AIRLINES NIG. LTD v. DANJUMA & ANOR (2023) LPELR-60898(CA), the court stressed that merely appending “Ltd” or “Plc” to a name is insufficient proof. Instead, the certificate of incorporation is the conclusive evidence of juristic personality.
Similarly, in E. EKESONS BROS (NIG) LTD v. NURTW (2021) LPELR-53465(CA), the Court held that once the juristic status of a company is impugned in pleadings, the production of its certificate of incorporation becomes necessary to sustain the action.
Juristic Personality vs. Locus Standi
It is important to distinguish between juristic personality and locus standi. In CALABAR MUNICIPAL GOVT & ORS v. HONESTY & ORS (2021) LPELR-58391(SC), the Supreme Court clarified that juristic personality is about the legal recognition of a party’s existence, while locus standi refers to whether a recognized legal person has sufficient interest to maintain an action in court. In essence, only a legal person can then raise the question of standing.
Practical Implications
Companies can own property in their own name.
Shareholders do not own company property.
Companies can sue and be sued independently of their directors or shareholders.
Liabilities of companies are separate, ensuring that creditors cannot automatically enforce debts against individual shareholders unless in exceptional cases (e.g., lifting the corporate veil).
Corporate continuity is assured through perpetual succession, meaning the company survives changes in ownership or management.
If you need to take legal proceedings against a company or bring a claim involving a company, our practical guide on How to File a Case in Court in Nigeria explains the general process of commencing a court case.
Conclusion
The doctrine of legal personality remains a cornerstone of corporate law in Nigeria. It provides companies with the independence needed to conduct business, enter contracts, and enforce rights while shielding shareholders and directors from personal liability. Courts have consistently reaffirmed that incorporation is the dividing line between individuals and the artificial legal entity created under the law. For any business seeking to enjoy these protections and advantages, proper incorporation is not optional—it is essential.
Disclaimer:
This blog post is for informational purposes only and does not constitute legal advice. Readers are encouraged to seek professional legal counsel for advice specific to their circumstances.
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