Abstract

In Cameroon, companies possess a distinct legal status, affording shareholders limited liability. When a company is unable to meet its financial obligations, creditors usually cannot hold shareholders or directors responsible for these debts. However, challenges arise when shareholders and directors misuse the separate legal identity of the company. The concept of piercing the corporate veil, originally a common law solution employed by courts to address corporate personality abuse, was later incorporated into statutory law for companies through the OHADA UNIFORM ACT of 2008. Notably, the Act does not provide clear criteria for defining ‘unconscionable abuse,’ leaving it subject to interpretation by the courts. The formation of company groups can further exacerbate the potential for misuse.

This dissertation aims to investigate and scrutinize the statutory practice of piercing the corporate veil, with a focus on assessing its effectiveness in safeguarding the interests of creditors and investors when corporate identity is exploited, particularly within the context of company groups. This research aspires to serve as a valuable resource for creditors, offering guidance and insights into the determination of ‘unconscionable abuse,’ both in general and within the realm of company groups. Ultimately, this study will shed light on the potential evolution of piercing the corporate veil as a legal remedy.

CHAPTER ONE GENERAL INTRODUCTION

1.1 Background of the Study

Within the realm of law, the concept of a “legal person” encompasses any individual or entity capable of engaging in legal actions akin to those typically undertaken by a human person. This includes the ability to enter into contracts, institute legal proceedings, own property, and more. The term “legal person” is employed because certain entities, such as companies and corporations, possess legal personhood, despite not being individuals in the conventional sense.

Legal entities can be categorized into two main groups: natural persons, referring to human beings, and non-human persons, known as juridical persons (also termed juridic, juristic, artificial, legal, or fictitious persons, and in Latin as “persona ficta”). Juridical persons encompass entities like corporations, firms (in some jurisdictions), and numerous government agencies, all of which the legal system treats as if they were human beings.

Crucially, natural persons acquire legal personality “naturally” simply by their birth or, in some legal systems, even before that. In contrast, juridical persons must have legal personality conferred upon them through a distinct, non-natural, legal process. This is why they are sometimes referred to as “artificial” persons. In the most common scenario, the acquisition of legal personality involves registering with a government agency established for this purpose, such as when incorporating a business. In other instances, legal personality may be granted through primary legislation, as exemplified by the Charity Commission in the UK. Notably, the United Nations Sustainable Development Goal 16 emphasizes the provision of legal identity for all, encompassing birth registration, as part of the 2030 Agenda.

Legal personality serves as a prerequisite for legal capacity, which is the capacity of any legal person to amend rights and obligations, including entering into contracts and transferring rights. It is also essential for an international organization to sign international treaties in its own name.

It’s important to acknowledge that the term “legal person” can be ambiguous because it is often used interchangeably with terms that exclusively pertain to non-human legal entities, particularly in contrast to “natural person.”

The concept of artificial personality, juridical personality, or juristic personality pertains to a non-living entity that, in the eyes of the law, possesses personhood status. A juridical or artificial person (also known as persona ficta or juristic person) is bestowed with a legal identity, along with associated rights, protections, privileges, responsibilities, and liabilities in the legal realm, akin to those attributed to a natural person. This concept is a fundamental legal fiction, having significant relevance to the field of corporate law, especially in the context of corporations.

Juridical personhood allows one or more natural persons (known as a universitas personarum) to function as a single entity, often referred to as a body corporate, for legal purposes. In numerous jurisdictions, this legal person can be considered separately from its individual members, such as in the case of a company limited by shares and its shareholders. These entities can engage in legal actions, including initiating or being party to legal disputes, entering into contractual agreements, incurring debts, and holding property. Legal entities with this status may also be subject to specific legal obligations, such as the payment of taxes. Importantly, an entity with legal personality can shield its members from personal liability.

In some common law jurisdictions, a distinction is drawn between a corporation aggregate (like a company with multiple members) and a corporation sole, which represents a public office possessing legal personality separate from the individual holding that office. Historically, many corporations sole had religious or ecclesiastical origins (e.g., the Archbishop of Canterbury’s office is a corporation sole), but today, various public offices are established as corporations sole.

It’s crucial to recognize that the concept of juridical personality is not absolute. The legal principle of “piercing the corporate veil” comes into play when the individual natural persons acting as agents in a company’s actions or decisions are scrutinized. This may lead to a legal determination in which the rights or obligations of a corporation or public limited company are treated as the rights or liabilities of its members or directors.

The notion of a juridical person is a fundamental element in Western legal systems, prevalent in both common-law and civil-law countries and extending to nearly every legal system worldwide.