A company has a separate legal personality from its members. However, courts may lift the corporate veil in exceptional circumstances to look at the persons behind the company.
Companies Act 2012, Sections 4-5
The House of Lords established that a properly incorporated company is a separate legal entity from its members, even where one person holds virtually all the shares.
The court lifted the corporate veil where a company was incorporated as a sham to evade a restrictive covenant.
When advising on business structures, explain to clients that incorporation creates a separate entity — their personal assets are generally protected from company debts.
Salomon v Salomon is the starting point for ALL corporate veil questions. State the principle first, then discuss exceptions. Never skip the Salomon principle.
