Corporate Personality & Veil of Incorp
Foundation of Company Law
Corporate (legal) personality - A properly formed company is considered to be a distinct legal e
the law.
Can be sued and can sue others.
Agents working on companies behalf - within authority that has been granted - exempted fr
Legal persons
Natural Persons - Humans.
Artificial/Juristic Persons - Companies.
Limited Liability vs Separate Legal Personality
Limited Liability - Extent Investors/Shareholders can be held liable if company enters liquidation
Only accountable for what they've put in; personal assets are safe.
Separate Legal Personality - Company considered their own person and can sue and be sued
shouldering the burden.
Salomon v Salomon & Co Ltd [1897] AC 22 (HL).
Salomon was sole trader engaged in business of boot-making.
Created new company and sold boot-making business to it.
Companies Act 1862 required 7 people in order to register a company - Registers with wife
In return - Received shares and £10,000 worth of debentures, secured by floating charge.
Held 20,001 shares and six members of family held 1 share each at £1 each.
Business failed and entered liquidation.
Salomon used floating charge to recover £10,000 owed to him but no remaining assets to
creditors.
Liquidator argued that Salomon should be personally liable for company's debts, as compa
HELD: Not personally liable.
Salomon and his company are two different persons - Salomon's debt outranked debts of o
owed to him.
💡 Salomon did not invent corporate personality.
Significance:
Foundation of Company Law
Corporate (legal) personality - A properly formed company is considered to be a distinct legal e
the law.
Can be sued and can sue others.
Agents working on companies behalf - within authority that has been granted - exempted fr
Legal persons
Natural Persons - Humans.
Artificial/Juristic Persons - Companies.
Limited Liability vs Separate Legal Personality
Limited Liability - Extent Investors/Shareholders can be held liable if company enters liquidation
Only accountable for what they've put in; personal assets are safe.
Separate Legal Personality - Company considered their own person and can sue and be sued
shouldering the burden.
Salomon v Salomon & Co Ltd [1897] AC 22 (HL).
Salomon was sole trader engaged in business of boot-making.
Created new company and sold boot-making business to it.
Companies Act 1862 required 7 people in order to register a company - Registers with wife
In return - Received shares and £10,000 worth of debentures, secured by floating charge.
Held 20,001 shares and six members of family held 1 share each at £1 each.
Business failed and entered liquidation.
Salomon used floating charge to recover £10,000 owed to him but no remaining assets to
creditors.
Liquidator argued that Salomon should be personally liable for company's debts, as compa
HELD: Not personally liable.
Salomon and his company are two different persons - Salomon's debt outranked debts of o
owed to him.
💡 Salomon did not invent corporate personality.
Significance:
