Separate legal personality and the corporate veil

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Separate legal personality and the corporate veil
  • Corporate legal personality—the Salomon principle
  • Some key distinctions
  • Piercing v circumventing the veil (evasion v concealment)?
  • Peeping behind the corporate veil
  • Subsidiary companies—separate legal personality or alter ego of the parent?
  • Ancillary relief in family proceedings—distinction between concealment and evasion in Prest v Petrodel Resources
  • Circumventing or piercing the corporate veil—statutory basis
  • Wrongful and fraudulent trading
  • Disqualified directors and phoenix companies
  • More...

Separate legal personality and the corporate veil

Corporate legal personality—the Salomon principle

A properly formed registered company is a separate legal entity from its shareholders and has separate rights and liabilities as a separate legal person. This principle is colloquially described as the corporate veil or the Salomon principle, being most famously stated by Lord MacNaghten in the case of Salomon v Salomon:

The company is at law a different person altogether from the subscribers to the memorandum; and, though it may be that after incorporation the business is precisely the same as it was before, and the same persons are managers, and the same hands receive the profits, the company is not in law the agent of the subscribers or trustee for them. Nor are the subscribers as members liable, in any shape or form, except to the extent and in the manner provided by the Act.

A company, as a separate legal entity, continues to exist irrespective of changes to its membership. It owns its assets and is responsible for its own liabilities. A company's separate legal personality exists for so long as it is registered. The continuing existence of a company may be terminated by its liquidation and subsequent removal from the register.

Therefore, in the normal course of events, a company’s assets would not constitute the realisable property of any individual defendant. In order for the company’s

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