In law, individual capacity is a term of art referring to one’s status as a natural person, distinct from any other role. For example, an officer, employee or agent of a corporation, acting “in their individual capacity” is acting as himself, rather than as an agent of the corporation. Thus, their actions, in their capacity as an individual would not generally incur a liability on the part of the corporation, nor would they have any protection from liability for their own actions as an individual.
In general, a person may be said by a second party to be acting in their capacity as an individual, whenever the person’s actions are the result of their own decisions, rather than being actions to which they are compelled in their capacity as an agent of another person or agency.
As a company is a separate legal entity so it can sue that director under the law of tort (Electrochrome v Welsh Plastics 1968, 1968).
DEFINITION OF A COMPANY
A company is a legal entity which is coordinated by legislation, where a group of people, act as shareholders, apply to the government for an independent organization to be created, which can then focus on pursuing set objectives and authorized with legal rights which are usually only reserved for individuals, such as to sue and be sued, own property, hire employees or loan and borrow money. A company is formed for some common purpose and registered according to the law related to companies.
According to Lord Lindley defines a company as follows: “By a company is meant associations of many persons who contribute money or money’s worth to a common stock and employ it for a common purpose. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute it or to whom it belongs are members. The portion of capital to which each member is entitled is his share.” (Mitra, Arun Kumar Sen & Jitendra Kumar, 2007-2008)
Shares of a company are easily transferable. It means the business can be transferred from one hand to another without attracting and taxes and duties.
Authorized Share Capital (ASC):
The Companies act, 1956 limits the power of board to issue share within the limit of ASC. The ASC can be increased at any time after complying with some formalities of the Act.
Paid Up Share Capital:
That portion of ASC for which shares have been issued by the company and shareholders had paid for those shares.
COMPANY AS A SEPARATE LEGAL ENTITY
Company is separate legal entity which is distinct from its shareholders. The major constituents of a company are its members, who are the ultimate owners and its directors. It is an important feature of the company form of business, that there is a gap between the ownership and control over the affairs of the company. In real sense the members are the owners of a company, but it is being managed by the directors who are elected representatives of its members, because it is absolutely necessary for it to have a human agency called as the Company’s board of directors. The Board of Directors comprises the directors.
CAPACITY OF CORPORATION
A company’s memorandum states both its objects and its powers. Capacity of a corporation depends on the provisions of the company’s memorandum of association, the operation of the doctrine of ultra vires (beyond the powers) and the impact of relevant statutory provisions.
THE OBJECTS CLAUSE AND THE DOCTRINE OF ULTRA VIRES
Prior to the revisions made to the Companies Act in 2004, the contractual capacity of a company was defined and limited by a statutorily mandated objects clause in the company’s memorandum of association. Section 22.1 required that the objects for which the company was built-in should be stated in the memorandum. This statement, which typically predetermined the type of commercial activities that the company would be involved in, came to define the company’s capacity. It then provided the foundation on which the doctrine of ultra vires operated.
According to the doctrine of ultra vires, any act which fell outside those specified in the objects clause was beyond the company’s capacity, example ultra vires. In other words, the company was incapable of doing anything that went beyond its statement of objects. As Lord Cairns LC put it, ‘the memorandum of association is… the area beyond which the action of the company cannot go’. This was explained as a consequence of the benefit of limited liability bestowed on companies registered under the Companies Act; it was for those who dealt with and extended credit to the company and who had no alternative against anyone else except the company, so that they should at least be allowed to know the scope of the company’s legitimate activities so as to decide whether or not to transact with the company.
Indeed, by the doctrine of constructive notice, anyone who dealt with a registered company was deemed to have had notice of the contents of its memorandum and articles of association. This meant that whenever a person contracted with the company, that person was treated as if they had seen and read the objects clause and was therefore fully aware of the limits placed on the company’s capacity. The risk of the transaction turning out to be ultra vires thus fell squarely on the person dealing with the company.
A corporation has the capacity and the rights, powers and privileges of a natural person. A corporation is able to carry its activities. It would have the capacity to carry out its activities and affairs and to exercise its powers in any jurisdiction outside the country to the extent that the laws of that jurisdiction permit. It is not necessary for a by-law to be passed to award any particular power on the corporation or its directors. The articles would contain the objects of the corporation set out in broad terms, and the corporation would be allowed to do all things related to or in support of those objects.
Historically, companies are artificial persons created by operation of law; the law prescribed what the company could and could not do. Usually this was an expression of the commercial purpose which the company was formed for, and came to be referred to as the company’s objects, and the extent of the objects are referred to as the company’s capacity. If an activity fell outside of the company’s capacity it was said to be ultra vires and void.
In terms of characteristic, the organs of the company were expressed to have various corporate powers. If the objects were the things that the company was able to do, then the powers were the means by which it could do them. Usually expressions of powers were limited to methods of raising capital, although from earlier times distinctions between objects and powers have caused lawyers difficulty. Most jurisdictions have now modified the position by statute and companies generally have capacity to do all the things that a natural person could do, and power to do it in any way that a natural person could do it.
As artificial persons, companies can only act through human agents. The main agent who deals with the company’s management and business is the board of directors, but in many jurisdictions other officers can be appointed too. The board of directors is normally elected by the members, and the other officers are normally appointed by the board. These agents enter into contracts on behalf of the company with third parties.
Company agents are obligated for duties to the company and indirectly to the shareholders to exercise those powers for a proper purpose. Rights of the Third parties’ are not charged if it is revealed that the officers were acting improperly. Third parties are entitled to rely on the ostensible authority (law of agency) of agents held out by the company to act on its behalf. A line of common law cases reaching back to Royal British Bank v Turquand established in common law that third parties were entitled to assume that the internal management of the company was being conducted properly, and the rule has now been codified into statute in most countries.
Accordingly, companies will normally be liable for all the act and omissions of their officers and agents. This will include almost all torts, but the law relating to crimes committed by companies is complex, and varies significantly between countries.
LAW OF TORT
The word ‘tort’ is derived from the Latin tortus, meaning ‘twisted’. It came to mean ‘wrong’ and it is still so used in French: ‘J’ai tort’; ‘I am wrong’. In English, the word ‘tort’ has a purely technical legal meaning – a legal wrong for which the law provides a remedy.
The law of tort took its present shape in the nineteenth century it has developed a long way since then. The main aim of Law of tort is compensation for the party who has suffered as a result of a breach of a duty fixed by law.
Law of Tort is a branch of the law which covers civil wrongs, such as offense and intruding, among many other contraventions. Under tort law, if someone suffers a physical, legal or economic harm, he or she may be entitled to bring suit. If the suit is deemed valid, damages may be awarded to the victim to compensate for his or her troubles. Most tort laws are found in regional, state, and national civil codes, which often spell out limits on damages and the statute of limitations for tort cases. If a person commits a tort, he is referred to as a “tortfeasor.” The victim of that tort can bring a private civil action against the tortfeasor to recover actual monetary damages, and in some cases also to recover disciplinary damages.
Law of tort is divided into three rough categories: Negligent torts, Intentional torts and Strict liability torts. Torts arising out negligence are civil wrongs caused by negligent behavior.
For example, if you are playing soccer in the street and you accidentally kick the ball through someone’s living room window, this may be a negligence tort. Medical malpractice and other forms of professional negligence are also covered under the umbrella of negligence torts.
Intentional torts are torts which involve a deliberate attempt to harm. Defamation is often viewed as an intentional tort, as is battery, fraud, false imprisonment, and interference with the economic operations of a company. Strict liability torts cover product liability; For example if a potato peeler takes your finger off when you operate it as directed, the manufacturer could be liable for this injury.
Distinction between an intentional tort and a negligent tort
The distinction between an intentional tort and a negligent tort is important for several reasons. First, if an individual wants to sue for an intentional tort, he must prove that the tortfeasor acted with “intent.” This is a separate legal requirement that the plaintiff must fulfill, in addition to proving all the other facts of the case and proving actual damages.
Tort law also covers issues like nuisances, such as noise pollution and loose livestock. In some countries, industrial pollution and releases of toxins are covered under tort law as “toxic torts,” allowing organizations and individuals to bring suit against companies which pollute. Nuisance torts can sometimes be challenging to prove, as the definition of a “nuisance” often varies from person to person.
In order for a tort case to succeed in court, the lawyers must generally be able to prove that the accused party had committed the wrong in question, and that the client suffered as a result. Damages may be awarded by a jury or a judge, depending on the case.
OBJECTIVES OF LAW OF TORT
The most obvious objective of tort is to provide a direction for compensating victims of injury and loss. Law of Tort is a process where issues of liability can be decided and compensation assessed and awarded.
• Protection of interests
The law of tort protects a person’s interests in land and other property, in his or her reputation, and in his or her bodily integrity. Various torts have been developed for these purposes. For example, the tort of nuisance protects a person’s use or enjoyment of land, the tort of defamation protects his or her reputation and the tort of negligence protects the breaches of more general duties owed to that person.
An element of retribution may be present in the tort system. People who have been harmed are sometimes anxious to have a day in court in order to see the perpetrator of their suffering squirming under cross-examination. This is probably a more important factor in libel actions and intentional torts than in personal injury claims which are paid for by insurance companies. In any event, most cases are settled out of court and the only satisfaction to the claimant lies in the knowledge that the defendant will have been caused considerable inconvenience and possible
Tort provides the means where a person who regards him or herself as innocent in a dispute can be vindicated by being declared publicly to be ‘in the right’ by a court. However, again it must be noted that many cases never actually come before a court and the opportunity for satisfaction does not arise.
• Punishment of wrongful conduct
Although this is one of the main functions of criminal law, it may also play a small part in the law of tort, as there are certain symbolic moral values which require the wrong doer to pay the victim. However, this aspect has become less valuable with the introduction of insurance. (Mark Lunney, Ken Oliphant, 2008)
THE IMPACT OF LAW OF TORT
Tort law impacts businesses and consumers both positively and negatively. Tort law is basically the branch of law that deals with civil cases in which one party sues another party. For consumers, the threat of litigation is beneficial. For example, take a restaurant that has meat spoiling in its refrigerator. The restaurant knows that serving bad meat can result in a $100 fine by the city (if the restaurant is caught). The restaurant might figure that the potential fine is worth it, since the total value of the meat is $1000. But enter the consumer. If the consumer (customer) gets sick after eating meat the restaurant knew was bad, the consumer might sue for $2000 ($1500 in medical bills and $500 in lost wages). The restaurant knows that customers who get food poisoning might sue, and this is a huge motivator in keeping businesses on the up-and-up. Of course, businesses hate tort law for this same reason.
CORPORATION’S CAPACITY AS A MINOR TO SUE AND BEING SUED
The “capacity to sue,” however, is a different concept. “Capacity” is defined as the ability to sue. A minor may not have the capacity to sue. Some business examples of the capacity issue are corporations and businesses doing business under a different name. Corporations are granted authority of specific corporate powers given to them by the Secretary of State. Other entities operate under fictitious business names, i.e., Jim Jones doing business as ACME Construction. In order to have the capacity in court, you must be able to prove to the court that you are in fact a corporation or alternatively, you are in fact the individual you say you are and that you are doing business under the fictitious business name that you have sued under. Failure to establish this capacity will keep you from either prosecuting your action or defending yourself if you are being sued.
The issue of whether a corporation could defend it-self due to lack of capacity came before the court. The defendant who was being sued was a corporation. The plaintiff found out that the corporation had been suspended several months previously for failure to pay taxes. On the day of trial, the plaintiff brought this fact up to the court and upon review; the court determined that the corporation had lacked capacity because its corporate powers had been suspended. The attorneys representing the defendants asked the court for a continuance of the trial to correct its corporate status and bring it back in line. The trial court denied this request and allowed the plaintiff to obtain the relief that they had requested by way of a default judgment. This is basically a judgment entered without any defense.
The defendant filed an appeal and upon review the Appellate Court overruled the lower court stating that the lower Court abused its discretion by not allowing the corporation to be given an opportunity to revive itself by bringing the corporate taxes current. As you can see, capacity can be, and often is, corrected. In this set of facts, the corporation must be given an opportunity to revive itself and if it does so before the matter has actually gone to trial, the corporation is deemed to have revived itself and thus can proceed with the prosecution and or defense of itself without any penalty.
As we came to know that corporations are separate legal entity like an individual person, so thus it contains the power of an individual but as it has no physical existence it needs representative. The elected board of directors plays the role of representatives for a company. Capacity of a corporation depends on the provisions of the company’s memorandum of association, the operation of the principle of ultra vires (beyond the powers) and the impact of relevant legal provisions. If a director enters in to a contract and due to his negligence the company suffers loss then he or she will be charged under the law of tort.
In conclusion, it is best to be involved in litigation check with the Secretary of State. While running a corporation it is necessary to make sure that the status of the company is in line with both the Tax Board and the Secretary of State and all the necessary taxes are paid in due time. So that company would not fall under lacked capacity, failure to establish this capacity will keep the company from either prosecuting its action or defending itself if sued. Thus we can say that Law of tort gives power to a corporation to sue the board of directors under any circumstances which can be harmful for the company. As a result board of directors will be cautious while going into a contract under the name of company.
(1). Books & Articles
Electro chrome v Welsh Plastics 1968
(Mitra, Arun Kumar Sen & Jitendra Kumar, 2007-2008)
The frustration expressed by the House of Lords in Cotman v. Brougham  AC 514
(Mark Lunney, Ken Oliphant, 2008)
(Carol Harlow, 1995)
Law of torts, available at http://www.knifecrimes.org/the_law_of_torts.pdf, retrieved on 19th March, 2012.
Company as a separate legal entity, available at http://www.smh.com.au/small-business -20090619-cnsh.html Retrieved on 23rd March,2012.
Company as a separate legal entity, available at http://www.iitk.ac.in/siic/what.html Retrieved on 23rd March, 2012.
Definition of a company, available at http://www.duhaime.org/LegalDictionary/C/Company.aspx retrieved on 19th March, 2012.
Definition of a company, available at http://www.smh.com.au/small-business -20090619-cnsh.html retrieved on 19th March, 2012.
Company formation, available at http://www.companyformationindia.html retrieved on 19th March, 2012
Capacity of corporation, available at http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s124.html Retrieved on 25th March, 2012
Capacity of corporation, available at http://www.accaglobal.com/content/dam/acca/global/pdf/sa_sep08_koh.pdf Retrieved on 25th March, 2012
Capacity of corporation, available at http://www.ic.gc.ca/eic/site/cilp-pdci.nsf/eng/cl00249.html Retrieved on 25th March, 2012
Law of tort, available at http://www.knifecrimes.org/the_law_of_torts.pdf Retrieved on 31st March, 2012.
Law of tort, available at http://www.londoninternational.ac.uk/current_students/programme_resources/laws/subject_guides/tort/tort_ch1to4.pdf Retrieved on 31st March, 2012.
Law of tort, available at: ftp://ftp.pearsoned-ema.com/HPE_Samples/…/9781405846943.pdf Retrieved on 31st March, 2012
Law of tort, available at: http://www.routledgelaw.com/textbooks/9780415458467/downloads/sample.pdf Retrieved on 31st March, 2012
Law of tort, available at: http://www.expertlaw.com/library/personal_injury/negligence.html
Retrieved on 31st March, 2012
Objectives of law of tort, available at http://www.upf.pf/IMG/pdf/13-Vranken_Review.pdf retrieved on 31st March, 2012.
Objectives of law of tort, available at http://www.wisegeek.com/what-is-tort-law.htm Retrieved on 31st March, 2012.
Objectives of law of tort, available at http://www.bu.edu/lawlibrary/facultypublications/PDFs/Simons/Crim_Torts_Distinction.pdf Retrieved on 31st March, 2012
Corporation’s capacity as a minor, available at http://answers.bloglines.com/Finance/how_does_tort_law_impact_businesses_and_consumers Retrieved on 1st April, 2012.
Corporations capacity as a minor, available at http://www.legalserviceindia.com/article/l228-Minors-In-Torts.html Retrieved on 1st April, 2012.
Corporations capacity as a minor to sue and being sued, available at: http://www.reevesjournal.com/Articles/Column/643f7cef62248010VgnVCM100000f932a8c0 Retrieved on 1st April, 2012.
Corporations capacity as a minor to sue and being sued, available at: http://www.jud.ct.gov/lawlib/Notebooks/Pathfinders/TortsofMinors.pdf Retrieved on 1st April, 2012.
 See Electrochrome v Welsh Plastics 1968.
 See http://www.duhaime.org/LegalDictionary/C/Company.aspx Retrieved on 23rd March, 2012.
 See (Mitra, Arun Kumar Sen & Jitendra Kumar, 2007-2008) Retrieved on 23rd March, 2012.
 See http://www.smh.com.au/small-business -20090619-cnsh.html Retrieved on 23rd March,2012
 See http://www.austlii.edu.au/au/legis/cth/consol_act/ca2001172/s124.html Retrieved on 25th March, 2012.
 See http://www.accaglobal.com/content/dam/acca/global/pdf/sa_sep08_koh.pdf Retrieved on 25th March, 2012
 See http://www.ic.gc.ca/eic/site/cilp-pdci.nsf/eng/cl00249.html Retrieved on 25th March, 2012.
 See http://www.londoninternational.ac.uk/current_students/programme_resources/laws/subject_guides/tort/tort_ch1to4.pdf Retrieved on 31st March, 2012.
 See ftp://ftp.pearsoned-ema.com/HPE_Samples/…/9781405846943.pdf Retrieved on 31st March, 2012.
 See http://www.routledgelaw.com/textbooks/9780415458467/downloads/sample.pdf Retrieved on 31st March, 2012.
19 See http://www.bu.edu/lawlibrary/facultypublications/PDFs/Simons/Crim_Torts_Distinction.pdf Retrieved on 31st March, 2012
20 See (Mark Lunney, Ken Oliphant, 2008) Retrieved on 31st March, 2012.
 See http://answers.bloglines.com/Finance/how_does_tort_law_impact_businesses_and_consumers Retrieved on 1st April, 2012.
 See http://www.legalserviceindia.com/article/l228-Minors-In-Torts.html Retrieved on 1st April, 2012.
 See http://www.reevesjournal.com/Articles/Column/643f7cef62248010VgnVCM100000f932a8c0 Retrieved on 1st April, 2012.
 See http://www.jud.ct.gov/lawlib/Notebooks/Pathfinders/TortsofMinors.pdf Retrieved on 1st April, 2012.
 (Carol Harlow, 1995)