Company Law

: Company Law language Answer

Owing to Salomon principle , a company is a separate legal entity different from its members and it can therefore sue and be sued in its own name . The first problem arises from the nature of legal personality that is from Salomon principle , the second problem arises from lifting the veil of incorporation and last problem arise from promoters and pre-incorporation contracts 1 . According to Salomon principle , Prontoprint Ltd can claim the insurance and Danielle as shareholder can not sue though the policy only cover Alexander and

Sandra 's names . However , the principle in Salomon is best illustrated by examining some of the key cases that followed after In Macaura v Northern Assurance Co . Mr Macaura owned an estate and some timber insured in his own name . Two weeks later a fire destroyed all the timber on the estate . He tried to claim under the insurance policy . The insurance company refused to pay out arguing that he had no insurable interest in the timber as the timber belonged to the company Allegations of fraud were also made against him but never proven Eventually in 1925 the issue arrived before the House of Lords who found that

the timber belonged to the company and not Mr Macaura

Mr Macaura , even though he owned all the shares in the company , had no insurable interest in the property of the company

Just as corporate personality facilitates limited liability by having the debts belong to the corporation and not the members , it also means that the company 's assets belong to it and not to the shareholders

Share is in no way a representation of the fractional value of the company 's property . The company as a separate legal entity owns its own property and there is no legal connection between a share in the company and the company 's property . That is the case even where (as in Macaura and Lee ) the shareholder owns all the shares . Shareholders generally benefit from this (although not Mr Macaura ) because it facilitates limited liability as the company also owns its own

Another good illustration is Lee v Lee 's Air Farming Mr Lee incorporated a company and `Governing Director ' for life . Mr Lee was also employed as chief pilot of the company . He was killed in the plane crash leaving a widow and four infant children . The company as part of its statutory obligations had been paying an insurance policy to cover claims brought under the Workers ' Compensation Act . The widow claimed she was entitled to compensation under the Act as the widow of a `worker . The Privy Council in London held that

the company and Mr Lee were distinct legal entities and therefore capable of entering into legal relations with one another

as such they had entered into a contractual relationship for him to be employed as the chief pilot of the company

he could in his role of Governing Director give himself s as chief pilot . It was therefore...