The ‘corporate veil’ surrounds the company of Murphy & Co Ltd and prevents outsiders challenging the operation of the company.
Only the company, and not Macaura, could insure its property against loss or damage.
The liquidator and the other creditors objected to this, claiming that it was unfair for the person who formed and ran the company to get paid first.
However, the House of Lords held that the company was a different legal person from the shareholders, and thus Mr Salomon, as a shareholder and creditor, was totally separate in law from the company A Salomon & Co Ltd.
These are the exceptions to the rule in Salomon’s Case, when the corporate veil is lifted and the reality of the situation is examined.
It was held that As soon as citizens form a company, the rights guaranteed to them by article 19(1)c has been exercised and no restraint has been placed on the right and no infringement of that right is made.
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Separate personality means that the artificial legal person, the company, can do almost everything a human person can do; it can make contracts, employ people, borrow and pay money, sue and be sued, among other things.