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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.It is quite common in Ireland for one person to have such a variety of roles and still be a different legal entity from the company. Lee formed his crop spraying business into a limited company in which he was director, shareholder and employee. Lee was self-employed and thus not covered by the legislation. Lee and the company he had formed were separate entities, and it was possible for Mr. The following case is similar to Salomon and Lee, but the principle of separate personality worked to the disadvantage of the plaintiff.When he was killed in a flying accident, his widow sought social welfare compensation from the State, arguing that Mr. The defendant company was involved in legal proceedings but did not have enough money for legal representation.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.He sold the land and timber to a company he formed and received as consideration all the fully paid shares.

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.

The ‘corporate veil’ surrounds the company of Murphy & Co Ltd and prevents outsiders challenging the operation of the company.

However, although the principle of separation is central to company law, there are a number of situations when the company and its members can be identified together and treated as the same.

Mr Salomon owned 20,000 £1 shares, and his wife and five children owned one share each.

Some years later the company went into liquidation, and Mr Salomon claimed to be entitled to be paid first as a secured debenture holder.

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