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Corporate Personality and Lifting of Corporate Veil

Salomon v. Salomon [1897] A.C. 22

ISSUE:

Whether regardless of the separate legal identity of a company, a shareholder could be held responsible for its debt, over and above the capital contribution, so as to make such member personally liable for the company’s debt or not?

RULE:

“The motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are” and the legal fiction of a “Corporate Veil” between the company and its owners and controllers was created firmly.

The appellant was the Principal and earned excessive money by this business thus he owed to indemnify the company’s debt

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