Critically analyse as to what extent the corporate veil has maintained a separate legal identity between a corporation and its incorporators and critically assess as to whether t ‘piercing of the veil’ doctrine has served its purpose.
The case of Saloman v Saloman established the principle that the company is a separate legal identity from its share holders or owners. This simply means at law the company is viewed as a separate being from its incorporators. A company may incur a debt and only the company will be liable for that debt its incorporators will not have to reach into their personal assets to relieve the company of that debt even if they are in sole control of that company. This principle has coined the term “the veil of corporation”. The veil of corporation has been a strict rule in company law, however there have been instances where the courts are willing to pierce this veil and view a company and its incorporators as a single entity. The extent to which the courts will uphold the principle in Salomon will be discussed below.
In Macaura v Macaura Macaura exchanged his timber and estate for shares in a company, the timber was insured in his name and subsequently got burnt, Macaura neglected to have the timber insured in the company’s name hence the insurers said he had no claim to the timber. Macura followed the decision in Soloman however my point of focus is on Lord Wrenburys statement “The corporator even if he holds all the shares is not the corporation”. This statement shows that strictness at which the courts uphold the corporate veil, In reality if Macura held all the shares in the company it would be unjust to deny him the insurance as despite the legal implications the reality of the situation is, Macuara acted to his detriment when insuring the timber and Macura would reap the profits from the timber. Lord Wrenbury is out rightly stating