Veil Of Incorporation Essay

The House of Lords unanimously held that the company had been validly constituted, since the Act only required seven members holding at least one share each and that Salomon is separate from Salomon & Co. The entity of the corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are distinct and separate from those of its members; it can sue and be sued exclusively for its purpose; liability of the members are limited to the capital invested by them.[ii] Further in .[iii], it was held that there was a valid contract of service between Lee and the Company, and Lee was therefore a worker within the meaning of the Act.It was a logical consequence of the decision in Salomon’s case that one person may function in the dual capacity both as director and employee of the same company.A company or corporation can only act through human agents that compose it.

The shareholders are not liable to creditors for the debts of the company.

There are two existing theories for the lifting of the corporate veil.

The first is the “alter-ego” or other self theory, and the other is the “instrumentality” theory.

A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company’s debts and other obligations.

At times it may happen that the corporate personality of the company is used to commit frauds and improper or illegal acts.


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