Does Salomon v. Salomon Still Reign? A Disquisition on Recent Case Law on Corporate Legal Personality and Lifting the Veil

Abstract

The principle established in the UK House of Lords` case of Salomon v Salomon (1897) AC 22 is universally known as the concept of Corporate Legal Personality. The implications of the concept include that the liability of members of a company is limited to the amount of their unpaid shares. While the principle is placed on a broad foundation, useful and convenient, it ought to, like many other rules, be received with some qualifications, especially in view of the fact that it has sometimes been relied upon to defraud creditors, to evade existing obligations, to circumvent statutes, or to protect knavery or crime. Occasional piercing of the veil of incorporation is thus considered both desirable and necessary with a view to ensuring that the concept is not used successfully for such negative ends. This paper discusses the concept of Corporate Legal Personality, its implications and continued usefulness in the light of the negative ends to which it is sometimes deployed. The paper's suggestion that the concept remains indispensable for the overall preservation of the sanctity of the corporate world, is followed by a dispassionate discussion of current case law on Corporate Legal Personality and Lifting of Corporate Veil. Then follow a brief analysis of the circumstances that may justify lifting of the veil, conclusion and recommendations.