Case Analysis : Salomon V Salomon Ltd

1862 Words Nov 4th, 2015 8 Pages
“The separate legal personality of the company means that shareholders of the company and directors of the company are not responsible for any of the liabilities that arise as a result of the actions of the company.”
(i) explain what this statement means
(ii) critically discuss this statement
(iii) indicate whether or not you agree with this statement

Salomon v Salomon Ltd, 1986, introduced the foundational principle of English company law, the separate legal personality of a company. Up until this time the relations of a company had mainly been transactional and wide scale investment was dissuaded as shareholders were liable for any debts that a company accumulated. The concept created a ‘veil’ of incorporation, separating the debts, assets, obligations and rights of the company from its shareholders and directors. However there are cases where courts (through the judiciary or legislature) have ‘lifted the veil’ of incorporation and identified members or directors as having personal liability for actions of the company. This essay will examine the extent to which the separate legal personality of a company equates to shareholders and directors not being responsible for liabilities that arise from the actions of the company.

The separate legal personality of a company delineates directors & shareholders from the liabilities that arise due to the company’s actions. This is notably defined in Salomon v Salomon Ltd, 1896, where the House of Lords (HoL) held that Mr.…
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