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The Principle Of Separate Corporate Personality

3723 words - 15 pages

The Principle of Separate Corporate Personality

The principle of separate corporate personality has been firmly
established in the common law since the decision in the case of
Salomon v Salomon & Co Ltd[1], whereby a corporation has a separate
legal personality, rights and obligations totally distinct from those
of its shareholders. Legislation and courts nevertheless sometimes
"pierce the corporate veil" so as to hold the shareholders personally
liable for the liabilities of the corporation. Courts may also "lift
the corporate veil", in the conflict of laws in order to determine who
actually controls the corporation, and thus to ascertain the
corporation's true contacts, and closest and most real connection.

Throughout the course of this assignment I will begin by explaining
the concept of legal personality and describe the veil of
incorporation. I will give examples of when the veil of incorporation
can be lifted by the courts and statuary provisions such as s.24 CA
1985 and incorporate the varying views of judges as to when the veil
can be lifted. Finally I will state whether or not I agree with the
given statement.cobd bdr sebdbdw orbd bdk inbd fobd bd.

When a company receives a certificate of incorporation it has a
'separate legal personality'. In law the company becomes a legal
person it its own right. The fundamental concept to become familiar
with when starting up a business is the idea that the business has a
legal personality in its own right, particularly when it assumes the
form of a limited liability company. This essentially means that if
one commences business as a limited liability company, then the
corporation or company is a legal entity with distinct legal
personality separate to that of the owners, members, or shareholders.[2]
This is known as the concept of legal personality.

The 'veil of incorporation' can be described as being the separation
between a company and its members. Due to the separate legal status of
a company from its members this is usually very strictly maintained.
However, there are certain circumstances when the courts will deny the
people who run the company the advantage of hiding behind the
corporate veil. In these instances the veil of incorporation is said
to be 'pierced' or 'lifted', i.e. the barrier between a company and
its members is removed so there is no legal separation between them.
There instances are however, difficult to predict as the reasons
depend on the judges interpretation of "fairness" or "policy" or of
how a particular statute should be interpreted.

In the leading case of Salomon v Salomon & Co Ltd, Salomon
incorporated his boot and shoe repair business, transferring it to a
company. He took all the shares of the company except six, which were
held by his wife, daughter and four sons. Part of the payment for...

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