Company Law (Corporate Law) case laws

The House of Lords held that a validly registered company is a separate legal person from its members, even when one person holds almost all its shares. So Aron Salomon was not personally liable for the company's debts, and as a secured debenture holder he was paid before the unsecured creditors. The case is the foundation of modern company law and the leading authority on corporate personality.

The House of Lords held that Macaura, who held almost all the shares of a company and was also its large unsecured creditor, had no insurable interest in timber owned by that company. The case matters because it shows clearly that the property of a company is not the property of its shareholders.

Lipman agreed to sell a property to Jones, changed his mind, and transferred the property to a company he had acquired so that he could not be forced to complete the sale. The court ordered specific performance against both Lipman and the company, calling the company a device, a sham and a mask. The case shows that a company used to evade an existing legal obligation will be ignored, which is one of the grounds for lifting the corporate veil.

During the First World War, the House of Lords held that a company registered in England may acquire an enemy character if the persons in real control of its affairs are enemies. The case matters because it shows that in wartime the court may look behind a company's separate legal personality to see who really controls it. It is the leading example of the 'enemy character' ground for lifting the corporate veil.

Two shareholders sued the directors of their company for selling their own land to the company at an excessive price and misapplying its property. The court dismissed the suit because a wrong done to the company must be remedied by the company itself, and the majority could decide whether to sue or could approve what had been done. The case is the foundation of the majority rule in company law and gave rise to the proper plaintiff rule and the rule of internal management.

Horne, a former managing director bound by a promise not to solicit his old employer's customers, set up a new company and solicited those customers through it. The Court of Appeal held that the new company was a mere cloak or sham formed to escape his promise, and granted an injunction against both Horne and the company. The case is a leading example of lifting the corporate veil where a company is used to escape a legal obligation.

The company was held bound by a bond its directors gave to the Royal British Bank, even though the general resolution required by the company's deed of settlement had not been passed. The bank was taken to know the deed, but it was entitled to assume that internal formalities like passing the resolution had been completed. The case gave the doctrine of indoor management its other name, 'the rule in Turquand's case'.