Separate Legal personality and Group Companies
Groups of companies are also useful for operational reasons. If a large company would like to branch
out into another field but does not want to carry the risk of liability falling onto the large company, a
subsidiary will be made to ensure the liability is only with the subsidiary companies.
Salomon v Salomon Established separate legal personality
Company is separate legal entity and thus directors
have limited liability
Macaura v Northern Insurance Substantiates that separate legal personality stems to
property ownership, all property is owned by the
company
Re Lewis’s Will Trust Cannot gift someone property that is owned by the
company
If you own shares in the company- you do not own the
actual compant
One-man company
Expressly permitted under s.7(1)CA 2006
Salomon confirmed that separate legal personality exists
There are other mechanisms for ensuring directors face consequences such as breach of
duties, WT or FT to ensure they become liable for some wrongdoings
Lifting or piercing the corporate veil
Adams v Cape
Argued that parent and subsidiary company are a single economic unit and should be jointly
liable- established that separate legal personality exists between parent and subsidiaries=
benefit of being in group company
Prest v Petrodel
Presented argument of concealment and evasion principle to escape liability
Concluded that court only seek to pierce the corporate veil to find directors liable as a remedy
of last resort. And conduct that would be of severity and beyond what previous case law has
seen= v unlikely to pierce
Groups of companies are also useful for operational reasons. If a large company would like to branch
out into another field but does not want to carry the risk of liability falling onto the large company, a
subsidiary will be made to ensure the liability is only with the subsidiary companies.
Salomon v Salomon Established separate legal personality
Company is separate legal entity and thus directors
have limited liability
Macaura v Northern Insurance Substantiates that separate legal personality stems to
property ownership, all property is owned by the
company
Re Lewis’s Will Trust Cannot gift someone property that is owned by the
company
If you own shares in the company- you do not own the
actual compant
One-man company
Expressly permitted under s.7(1)CA 2006
Salomon confirmed that separate legal personality exists
There are other mechanisms for ensuring directors face consequences such as breach of
duties, WT or FT to ensure they become liable for some wrongdoings
Lifting or piercing the corporate veil
Adams v Cape
Argued that parent and subsidiary company are a single economic unit and should be jointly
liable- established that separate legal personality exists between parent and subsidiaries=
benefit of being in group company
Prest v Petrodel
Presented argument of concealment and evasion principle to escape liability
Concluded that court only seek to pierce the corporate veil to find directors liable as a remedy
of last resort. And conduct that would be of severity and beyond what previous case law has
seen= v unlikely to pierce
