Business law corporate personality, Essay Example | Topics and Well Written Essays - 1500 words

Business law corporate personality, - Essay ExampleThe most important conception that flows from the incorporation of a company is that of limited liability whereby the shareholders tend to be liable only to the unpaid amounts of shares and so the company as a take apart legal entity is held accountable for its own debts.Corporate personality has been in use for a long period of time but the area of law essential when small business organisationes used the notion so as to create limited liability. The turning point of corporate personality was the decision of Salomon v Salomon1. In Salomon, a leather merchant incorporated a company and completed the formalities by appointing his family members as shareholders which was a requirement of the Companies Acts at that point in time. In his personal capacity, he appointed himself as managing director and subsequently purchased the sole trading business. The main concern was the over valuation of the business placed by him, but this was mainly due to his confidence in the success of the business. The company subsequently went in to liquidation and a liquidator was appointed by the tribunal who in turn evaluated that the company was a sham and had been used as an instrument to defraud creditors. The Court of Appeal accepted the evaluation of the liquidator, however, the House of Lords converse the decision stated that the Court of Appeal had used a moralistic approach and went on to say it was irrelevant that some of the shareholders were used merely to implement a technicality and so the use of corporate personality could be made by any person who intended to pursue what was his own business and thus the company set up in this case found to be a separate legal entity and not an agent or legal guardian of the person controlling it.2The case set a cornerstone for the doctrine of separate legal entity and separated the company from its shareholders. This concept has