As per Companies Act, 2013 Separate legal entity means a corporation which is registered under this act as Non profit organization , private Ltd. , public company , government company and chit fund company shall have legal identity of its own and can have rights under law and can treated as separate entity from its shareholder. It can own property in its own name and may enter into contracts with other person and may represent itself in court of law through its representative.
Separate legal entity also act as veil between company and its member. Which means that assets of the corporate shall be used just for the target of the corporate as set in Memorandum of association and its liabilities should be paid by itself and not from personal asset of the member of the corporate
CASE NAME : CATHERINE LEE V LEE’S AIR FARMING LIMITED
CITATION(S) :  UKPC 33,  AC 12
JUDGES SITTING: VISCOUNT SIMONDS, LORD REID, LORD TUCKER, LORD DENNING, LORD MORRIS OF BORTH-Y-GEST
RULING COURT : JUDICIAL COMMITTEE OF THE PRIVY COUNCIL
In 1954 the appellant’s husband Lee formed the corporate named LEE’S AIR FARMING LTD. for the aim of carrying on the business of aerial top-dressing with 3000 thousand shares of 1euro each forming share capital of the corporate and out of which 2999 shares were owned by Lee himself. Lee was also the director of the company. He exercised unrestricted power to regulate the affairs of the corporate and made all the choice concerning contracts of the corporate. Company entered into various contract with insurance agencies for insurance of its employees and few premiums of the policies were paid through companies checking account for the private policies taken by Lee in its own name but it had been debited within the account of Lee in companies book. Lee aside from being the director of the corporate was also a pilot. In March, 1956, while piloting the aircraft Lee died during the course of aerial top-dressing. Lee’s wife who is appellant claimed worker compensation under New Zealand Workers’ Compensation Act, 1922 as she claimed that Lee during work as employee of the company. The New Zealand Court of Appeal declined the claim of appellant because it refused to carry that Lee was a worker, holding that a person couldn’t in effect, employ himself.
Respondent company claimed that Lee was owner of the corporate and had maximum number of shares within the company so his wife isn’t entitled for workmen compensation as he was not the employee of the company. Respondent claimed that Mr. Lee couldn’t be the owner of the corporate as there’s no master-servant relation that exist between him and therefore the company.
This judgement may be a vital with reference to U.K company law and Indian Companies act because it lays the precedent that Company is separate legal entity and it can enter into contract with its own member as both are separate legal entity.
In the case of Salmon v. Salmon co. ltd. the concept of separate legal entity was first introduced. Separate legal entity may be a double sided sword because it are often utilized in bad faith also by interested stake holder to cover behind corporate veil that it provides between the company and its member.
There has been case law where concept of separate legal entity has been refused by court as within the case of Gilford Motor Co V Horne where court lifted the corporate veil and treated the respondent and his company together entity to assure the validity of the contract that appellant had with respondent. Also just in case of insolvency the concept of separate legal entity doesn’t apply and company and its member are treated together entity.