6. Corporate capacity and liability

Abstract

This chapter focuses on the complex rules regarding who can act on behalf of the company, and how liability can be imposed on the company for the actions of others. A company can enter into a contract by affixing its common seal to the contract; by complying with the rules in ss 44(2)–(8) of the Companies Act 2006 (CA 2006); or by a person acting under the company's express or implied authority. Section 39 of the CA 2006 provides that a contract cannot be invalidated on the ground that the contract is outside the scope of the company's capacity. Meanwhile, section 40 of the CA 2006 provides that the power of the directors to bind the company, or authorize others to do so, is free of any limitation under the company's constitution. The chapter then considers the four methods of liability: personal liability; strict liability; vicarious liability; and liability imposed via attribution.