The notion of separate legal entity and limited liability first created by the case Salomon v. Salomon & Co Ltd  AC 22 had generated debates on whether an artificially formed entity should be granted the rights analogous to a natural person and, more importantly, permit those who own and control it to be immune from liability.
I evaluate and discuss the legal position regarding the above statement with reference to the Corporations Act 2001 and relevant cases.
1. The decision of the House of Lords in Salomon v Salomon & Co Ltd evinces the accuracy of Gooley's observation that the separate legal entity doctrine was a "two-edged sword". At a general level, it was a good decision. By establishing that corporations are separate legal
entities, Salomon's case endowed the company with all the requisite
attributes with which to become the powerhouse of capitalism. At a
particular level, however, it was a bad decision.
By extending the
benefits of incorporation to small private enterprises, Salomon's case
has promoted fraud and the evasion of legal obligations. Nonetheless,
this article will argue that the overall balance is positive.
Salomon v Salomon.
2. At its most general level, the decision of the House of Lords in
Salomon v Salomon & Co Ltd was a good decision. Salomon's case is
universally recognised as authority for the principle that a
corporation is a separate legal entity.
3. The case firmly established that upon incorporation, a new and
separate artificial entity comes into existence. At law, a corporation
is a distinct person with its own personality separate from and
independent of the persons who formed it, who invest money in it, and
who direct and manage its operations. It follows that the rights
and duties of a corporation are not the rights and duties of...