Lifting the Veil Essay
According to Salomon v Salomon& Co Ltd , the fundamental attribute of separate legal entity is that the company is regarded as a legal person distinct from any and all of the individuals involved in the company by incorporation of a projected or existing enterprise. Under s15(1) of the Companies Act 2006, companies which are registered become incorporated and separate legal persons on registration. As a consequence of the existence of a distinct legal entity, a company has the capacity to be a party to a contract, sue or being sued, commit a crime, be the victim of a crime, hold property, and rationally, thus, make profits and losses that are its own rather than those of the shareholders of the company.
The Principle of …show more content…
The Decision at First Instance, the Court of Appeal and the House of Lords in the Salomon case
In these unhappy situations, the liquidator argued that the debentures issued by the company as security for the debt were invalid as well as fraudulent and that the company was simply the agent for Salomon. The issue for the courts was whether Salomon was liable for the debts incurred by the company. The first instance judge, Vaughan Williams J decided that the theory of fraud was not established on the facts of the case. Instead, he used the agency principles to decide that the company was in reality the agent of Salomon and so he as the principal shareholder and the managing director of the company was liable to indemnify the company against the unpaid debts.
The Court of