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.
The ‘veil of incorporation’ is the rather poetic term given to this separation of the company from its shareholders or members.
Mr Salomon owned 20,000 £1 shares, and his wife and five children owned one share each.
Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder.
This separation of a company from its members was established in the House of Lords in the famous case. Salomon had a boot manufacturing business which he decided to incorporate into a private limited company.
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.
The plaintiff, who was the major shareholder and managing director of the company, sought to conduct the company’s defence.
The court held that while a human person can represent him or herself in court, a legal person such as a company can only be represented by a solicitor or barrister.
In this case, a separate corporate entity was brought into existence outside the taxable territory with the ulterior motive of evading the tax obligation by the assessee mills.
The Supreme Court observed: "It is true that from the juristic point of view, the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members.
The ‘corporate veil’ surrounds the company of Murphy & Co Ltd and prevents outsiders challenging the operation of the company.