LEGAL PERSPECTIVE: Perpetual Succession Unique Feature of Companies, by Dr AbdelGadir Warsama, Legal Counsel

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A company is a “legal person” with juristic entity, established by “natural persons” to perform on their behalf specific objective with certain rights and duties. The proprietor(s) or owner(s) of the company “natural person” is generally not personally responsible about such rights and duties, in other words they are distinct different persons with different legal entities and obligations. The company, is a juristic person with no flesh and blood and cannot be incapacitated by illness, mental or physical and even it may not have an allotted span of life. This makes companies very different from its natural owners. However, this is not to say that the death or incapacity of its owners may not cause the company embarrassment or catastrophic events. As such may occur, if all directors die or are imprisoned or there are few members to hold valid meetings. The death of a company comes from bankruptcy, dissolution or other legal act, whereas the death of a member leaves the company unchanged, as members may come and go but the company can go on for unlimited tenure. The insanity of the Chairman or managing director, will not be calamitous to the company provided that he is removed promptly and replaced by other competent person.

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The continuing existence of a company, irrespective of changes in its membership is very helpful in many instances and is required. When an individual sells his business to another, difficult questions may arise regarding the performance of existing contracts by the new proprietor, the assignment of rights of a personal nature, and the validity of agreements made with customers ignorant of the change of proprietorship. Similar problems may arise on a change in the constitution of a company or partnership. Where the business is incorporated and the sale is merely of the shares, none of these difficulties arises. Legally, the company remains the proprietor of the business, the company performs the existing contracts and retains the benefits of them and continues to enter into future agreements. The difficulties attending vicarious performance assignments and mistaken identity simply do not arise as in the case of natural persons. Legally, perpetual succession of companies is of prime legal importance to the corporate structure and related business. Natural persons may die at any time, however, their death is not necessarily the death of their companies. Companies continue and this could be very beneficial.

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