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Separate personality means that the artificial legal person, the company, can do almost everything a human person can do; it can make contracts, employ people, borrow and pay money, sue and be sued, among other things.The ‘veil of incorporation’ is the rather poetic term given to this separation of the company from its shareholders or members.The result was that Mr Salomon was entitled to be repaid the debt as the first secured creditor.In this case, Mr Salomon was the major shareholder, a director, an employee and a creditor of the company he created.This separation of a company from its members was established in the House of Lords in the famous case. Salomon had a boot manufacturing business which he decided to incorporate into a private limited company.He sold his business to the newly formed company, A Salomon & Co Ltd, and took his payment by shares and a debenture or debt of £10,000.He had not transferred the insurance policy to the company. After the sale, Macaura continued to insure the plantation in his own name. When Macaura attempted to claim on the policy, the company refused to pay.

The court held that while a human person can represent him or herself in court, a legal person such as a company can only be represented by a solicitor or barrister.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.These are the exceptions to the rule in Salomon’s Case, when the corporate veil is lifted and the reality of the situation is examined.It was held that As soon as citizens form a company, the rights guaranteed to them by article 19(1)c has been exercised and no restraint has been placed on the right and no infringement of that right is made.

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