Business law Essay Example | Topics and Well Written Essays - 1500 words - 19

Business law - Essay Example volve around arguing the fact about considering ‘veil of incorporation’ as one of the decisive notions in the field of Company Law with a focus on the case of Salomon v A Salomon & Co Ltd [1897] AC 22 as well as the practical consequences that are derived from being a separate legal entity. Moreover, the lifting of ‘veil of incorporation’, which ignores the doctrine of separate legal entity, will also be discussed in this essay. According to the doctrine of ‘veil of incorporation’, a company is considered as a separate lawful body, thereby possessing its own rights, duties and obligations. However, by considering the case of Salomon v A Salomon & Co Ltd [1897] AC 22, the concept of ‘veil of incorporation’ can be understood in a clear manner. In relation to the case, Salomon had a leather boot business and acquired the maximum share by incorporating a company (Palma, 1897). A few days later, the company suffered from financial crisis and thus a third party named Mr. Broderip decided to provide a loan to the company. The amount realised from liquidation was allocated to Mr. Salomon and thus Mr. Broderip was to be repaid. However, after repaying him, it was found that a minimal amount is left to be distributed amid the unsecured creditors and the external shareholders. The Court of Appeal was in favour of the liquidators but the House of Lords argued that Mr. Salomon was not responsib le personally even though he was the sole owner of the company (Palma, 1897). There lay certain practical consequences of separate lawful personality. A company is completely liable to pay the liabilities and the debts to the creditors and the preference shareholders, as it is a separate lawful unit. They tend to lose their money in case the company fails to repay their amounts. Thus, if a shareholder dies, his/her share is transferred to someone else, but the business still continues to conduct its activities. A company may be closed only if the partners of a company