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 issue was whether Macaura had an insurable interest at the time of the loss.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.A corporation is a separate legal entity from its owners.In other words, if a corporation, in the course of doing business, is involved in any legal action, then the corporation, for legal purposes, is its own person.
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.
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.
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 plaintiff, who was the major shareholder and managing director of the company, sought to conduct the company’s defence.