Salomon v Salomon: Its Impact on Modern Laws on Corporations

Abstract

Corporate personality has been considered to be the most fundamental principle in company law. It constitutes the pedestal upon which company is viewed as an entity distinct from the shareholders who subscribe its memorandum. When a company is incorporated, it is treated as a separate “legal entity distinct” from its shareholders, promoters, directors, members, and employees; and the concept of the corporate veil, separating those parties from the corporate body, has arisen. The issue of “lifting the corporate veil” has been considered by courts and commentators for many years and there are instances in which the courts have negated from the strict application of this doctrine.

In this essay, I am going to discuss the genesis of “principle of corporate personality” under English Law and how subsequently, the courts and commentators have departed or agreed with this principle. In this process, it is necessary to introduce the concept of “lifting/piercing of corporate veil” as it is to a certain extent a departure from the “principle of corporate personality”. I begin the essay by tracing the origin of corporate personality under famous English case law Salomon v Salomon & Co. Ltd. [1897] AC 22 (herein after referred as “Salomon”) and conclude it by looking at subsequent legal developments under English and American case laws. In conclusion, I would also point to a definite legal position with respect to Salomon and the significance of the case law even today in the modern globalized business world.

Keywords: Salomon, Salomon v. Salomon, Company Law, Law on Corporation, Limited Liability, Corporate Personality

JEL Classification: K22