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05-Feb-2020 01:53

The liquidator and the other creditors objected to this, claiming that it was unfair for the person who formed and ran the company to get paid first.

However, the House of Lords held that the company was a different legal person from the shareholders, and thus Mr Salomon, as a shareholder and creditor, was totally separate in law from the company A Salomon & Co Ltd.

In this case, a separate corporate entity was brought into existence outside the taxable territory with the ulterior motive of evading the tax obligation by the assessee mills.

The Supreme Court observed: "It is true that from the juristic point of view, the company is a legal personality entirely distinct from its members and the company is capable of enjoying rights and being subjected to duties which are not the same as those enjoyed or borne by its members.

This is how corporations may sue and be sued, and their assets are tracked separately.

Mr Salomon owned 20,000 £1 shares, and his wife and five children owned one share each.

Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder.

The principle in Salomon’s Case that a company is a legally different person from those who control it represents the current law in Ireland.

For example, if I form a company called ‘Murphy & Co Ltd’ in which I own one hundred per cent of the shares and am a director and employee, legally speaking the company and myself are two distinct people.

This is how corporations may sue and be sued, and their assets are tracked separately.

Mr Salomon owned 20,000 £1 shares, and his wife and five children owned one share each.

Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder.

The principle in Salomon’s Case that a company is a legally different person from those who control it represents the current law in Ireland.

For example, if I form a company called ‘Murphy & Co Ltd’ in which I own one hundred per cent of the shares and am a director and employee, legally speaking the company and myself are two distinct people.

But in certain exceptional cases the Court is entitled to lift the veil of corporate entity and to pay regard to the economic realities behind the legal facade.