29. Introduction

30. The decision of the House of Lords in Salomon v Salomon & Co Ltd [1] evinces the accuracy of Gooley's observation that the separate legal entity doctrine was a "two-edged sword".[2] 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

31. At its most …show more content…

In other words, the corporation is a legal entity distinct from its members. This is the fundamental attribute of corporate personality, from which all the other practical consequences flow.[24]
39. First, as a separate legal person, a registered company is capable of suing and being sued: Foss v Harbottle.[25] Second, a corporation has perpetual succession: Regal (Hastings) Ltd v Gulliver.[26] Third, a corporation can enter into contracts in its own name. Fourth, a corporation has power to acquire, hold and dispose of property: Macaura v Northern Assurance Co Ltd. However, this statutory list of attributes is not exhaustive. There are others.[27]
40. A corporation, for example, can contract with its controlling member (Lee v Lee's Air Farming Ltd) and can be the debtor, creditor or surety of a member (Salomon's case). Similarly, shares are transferable and transmissible. Likewise, corporations benefit from tax minimising through income splitting (encouraged by dividend imputation): Hobart Bridge Co Ltd v FCT.[28] Moreover, a corporation can enter into flexible financing arrangements by creating a floating charge. Finally, and "although it is not perhaps a logically necessary attribute of separate legal personality in modern law",[29] the liability of a limited company is limited: Salomon's case. A company is exclusively liable for obligations