Company Law cannot be understood without knowing what does the principle of separate legal personality. Separate legal personality is a fundamental principle that can be found in one way or another in all or almost all company laws around the word. This principle states that a company is a legal entity with rights and duties and a different existence from the one of the members that are part of it. What is meant by members of a company is any person or organization related to it: shareholders, employees, employers, directors or any other stakeholder. Therefore, in the case of the shareholders, they are only liable for the unpaid amount of their shares and for any other investment in the company and in the case of the directors, they may be
Without entering into the contents of the case, the separate legal personality can be understood as the word held by Lord Halsbury at the House of Lords “once the company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself” or in a simpler way as “to take the profits without running the risk of debts and expenses” idea which was stated by Vaughan William J. at the High Court. Salomon’s case also let the opportunity to everyone to organise their business using any corporate legal form according to the law, even if this organization would mean a risk of default to
There are some examples of how a parent company may have an obligation due to direct duty of care. One of these examples is the ones related to the employees of the subsidiary ‘in appropriate circumstances’ a parent company may owe a duty to safeguard the health of a subsidiary’s employees” . The cases where the parent company might be liable for the subsidiaries duties were stated by Arden LJ: “(1) the businesses of the parent and subsidiary are in a relevant respect the same; (2) the parent has, or ought to have, superior knowledge on some relevant aspect of health and safety in the particular industry; (3) the subsidiary’s system of work is unsafe as the parent company knew, or ought to have known; and (4) the parent knew or ought to have foreseen that the subsidiary or its employees would rely on its using that superior knowledge for the employees’